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How do I [build credit]?

KrikeeKrikee Registered User
edited August 2009 in Help / Advice Forum
It's pretty much all in the title. I've tried buying a new car, not enough credit history; new motorcycle, same story. I'm contemplating financing a new TV + stereo but, will that send me in the right direction?

Krikee on

Posts

  • MushroomStickMushroomStick Registered User regular
    edited August 2009
    Get someone to cosign on something for you.

  • VisionOfClarityVisionOfClarity Registered User
    edited August 2009
    Do you have any credit?

  • GoodOmensGoodOmens Registered User regular
    edited August 2009
    This all depends on your age and financial situation, but the general formula is something like this: get a low-limit credit card (which might itself be tricky these days). Use it to make small purchases that you were going to buy anyway...gasoline, groceries, stuff like that.

    Then, and I cannot emphasize this enough, pay the full balance every month. At this stage, there is no reason to carry a balance unless there's some emergency.

    Once you show Visa or whatever that you are a responsible person, your credit rating will improve.

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  • KrikeeKrikee Registered User
    edited August 2009
    Get someone to cosign on something for you.
    Did this (got a ridiculous laptop) and I'm paying it off this month.

    I have a credit card I got in the past month (had a co-signer, couldn't get one without... damn economy) so it looks like that will fix me up shortly. Thanks for the input everybody; this part of finances kind of blind sided me and it sure does make everything a pain.

  • DVGDVG Registered User regular
    edited August 2009
    Get someone to cosign on something for you.

    This is the way to go. Financing a car is one thing, buying a TV or stereo is the kind of thing you should buy with real money, not credit.

    Diablo 3 - DVG#1857
  • I'd Fuck Chuck Lidell UpI'd Fuck Chuck Lidell Up Registered User regular
    edited August 2009
    GoodOmens wrote: »
    This all depends on your age and financial situation, but the general formula is something like this: get a low-limit credit card (which might itself be tricky these days). Use it to make small purchases that you were going to buy anyway...gasoline, groceries, stuff like that.

    Then, and I cannot emphasize this enough, pay the full balance every month. At this stage, there is no reason to carry a balance unless there's some emergency.

    Once you show Visa or whatever that you are a responsible person, your credit rating will improve.
    actually don't do this. depending on how this one is done your credit will either rise very slowly or not at all/fall.

    TVs and Computers are a great way to do it.

    save up your money until you have more than you need for a computer (say 1300 on a 1000 dollar computer) put the computer on your card. after the cycle rolls around pay 600, then the remainder the month afterwards.

    I did this the moment I was eligible for credit (my card had a cosigner then as well) and I am only 21 and was told by the bank earlier this month that I had spectacular credit.

    it pings your credit every time so if you charge a bunch of small things it takes a bunch of hits. I was able to sign up for my own cell phone plan with $0 deposit and unlimited spending amount with ATT when I was 19 (something most people my age have to pay a $300 deposit or more for) because I charged a computer, paid it off, then upgraded my computer and paid it off.

    In the words of the ancients, one should make his decision within the space of seven breaths. It is a matter of being determined and having the spirit to break through to the other side
  • QuothQuoth the Raven Miami, FL FOR REALRegistered User regular
    edited August 2009
    Chuck, are you advising that he NOT pay the full balance on his card every month or am I misreading what you are saying?

    I charge almost everything to my credit cards and I have amazing credit. Over 800 on two out of three agencies, the third being the one with which I have no cards (or one that I don't use). I have no clue what you mean about your credit getting pinged by small charges.

    I second the "get a card and use it for stuff you would normally buy then pay it off every month" advice. If you're too nervous to do that, get a card and stick it in your sock drawer and never use it; you will still build credit this way.

    “Hic non defectus est, sed cattus minxit desuper nocte quadam. Confundatur pessimus cattus qui minxit super librum istum in nocte Daventrie, et consimiliter omnes alii propter illum. Et cavendum valde ne permittantur libri aperti per noctem ubi cattie venire possunt.”
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  • I'd Fuck Chuck Lidell UpI'd Fuck Chuck Lidell Up Registered User regular
    edited August 2009
    Quoth wrote: »
    Chuck, are you advising that he NOT pay the full balance on his card every month or am I misreading what you are saying?

    I charge almost everything to my credit cards and I have amazing credit. Over 800 on two out of three agencies, the third being the one with which I have no cards (or one that I don't use). I have no clue what you mean about your credit getting pinged by small charges.

    I second the "get a card and use it for stuff you would normally buy then pay it off every month" advice. If you're too nervous to do that, get a card and stick it in your sock drawer and never use it; you will still build credit this way.
    pay it off over 2 months. it builds the credit faster

    In the words of the ancients, one should make his decision within the space of seven breaths. It is a matter of being determined and having the spirit to break through to the other side
  • VisionOfClarityVisionOfClarity Registered User
    edited August 2009
    If you get a card and never use it it will probably be canceled. Don't get the card if you don't plan on using it at least once a month or it won't really do anything. My bf doesn't have a lot of credit so I'm adding him to my credit card so he can improve his credit that way.

  • KrikeeKrikee Registered User
    edited August 2009
    DVG wrote: »
    Get someone to cosign on something for you.

    This is the way to go. Financing a car is one thing, buying a TV or stereo is the kind of thing you should buy with real money, not credit.
    Income is not the issue. The issue is I have limited credit history and that's why I was thinking of a stereo and/or TV: it's only a few thousand dollars.

    Paying off a loan quicker than scheduled does in fact have a better beneficial impact on your credit than paying it off on the payment schedule? Didn't know that. This is good stuff. I've even looked on the internet for a better description of the mechanics of credit and have come up short.

  • ShogunShogun Hair long; money long; me and broke wizards we don't get along Registered User regular
    edited August 2009
    Pay your bills on time.

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  • CauldCauld Registered User regular
    edited August 2009
    My credit card website has an entire section devoted to what things improve your credit and what things hurt your credit. Things that help your credit include paying more than the minimum amount and not missing payments. I don't think its necessary to carry a balance from one month to the next as that will make you pay some interest amounts.

    I use my credit card every month for bills, groceries, gas, etc. and pay it off in full every month. My credit is excellent. I would recommend you try to do something similar. If you can't get any credit cards, ask your bank about a secured credit card, that might help. Getting a co-signer on a big purchase will also help. Having bills in your name that you pay on time every month will help

  • MushroomStickMushroomStick Registered User regular
    edited August 2009
    Fact of the matter is that if you pay off your credit card balance in full every month, the credit card companies are never going to make any money off of you. So if you want to build credit fast you buy something big and carry the debt for a few months at the least and never make a late or minimum payment. Then they should have nothing but gold to report about you.

  • CauldCauld Registered User regular
    edited August 2009
    Fact of the matter is that if you pay off your credit card balance in full every month, the credit card companies are never going to make any money off of you. So if you want to build credit fast you buy something big and carry the debt for a few months at the least and never make a late or minimum payment. Then they should have nothing but gold to report about you.

    I see your logic, but I've never encountered any actual evidence of this. Whether or not you make them money they will still report to the credit agencies that you were not late/missing payments and that you paid greater than the minimum amount required.

  • MushroomStickMushroomStick Registered User regular
    edited August 2009
    Cauld wrote: »

    I see your logic, but I've never encountered any actual evidence of this. Whether or not you make them money they will still report to the credit agencies that you were not late/missing payments and that you paid greater than the minimum amount required.

    The thing is that you're also going to need the credit card companies to up your limit to get a higher credit rating. If you keep a $500 - $1000 balance on a credit card for a year or two without ever going delinquent, you should be able to get your credit limit to jump from around $1000 to the over $10000 mark pretty easy. Then pay it off every month and now you have a large amount of available credit available to give you a high credit rating. Keep in mind that this advice is intended to go from no credit to good credit in a hurry.

  • The Crowing OneThe Crowing One Registered User regular
    edited August 2009
    Cauld wrote: »
    Fact of the matter is that if you pay off your credit card balance in full every month, the credit card companies are never going to make any money off of you. So if you want to build credit fast you buy something big and carry the debt for a few months at the least and never make a late or minimum payment. Then they should have nothing but gold to report about you.

    I see your logic, but I've never encountered any actual evidence of this. Whether or not you make them money they will still report to the credit agencies that you were not late/missing payments and that you paid greater than the minimum amount required.

    I'm fairly certain that this isn't the best way to build credit. Actually, I'm 100% certain that this isn't the case.

    You won't build credit "better" or "faster" by leaving a balance. In fact, the less credit you use, the better your credit will be. The "core" factors in building credit are 1) having multiple tradeline accounts (that is, having multiple credit sources) usually around 3; 2) paying your balance in full every month; 3) keeping your total balance at under 10-30% of your total credit limit.

    Here's a quick MSN Money link.

    What you don't want to hear is that building credit takes time. Open a Checking and Savings account, then get 3 credit cards. Start charging just one thing on each, ensuring that you pay your small balance every month in full. The banks want to see that you 1) take on reasonable debts, and 2) are financially able to meet your credit obligations in full. Having a good credit score has zero to do with how much money the finance companies make off you.

    If you want to fast-track it have a family member co-sign an auto loan for you. If you have no credit, you'll probably need them to so-sign those credit cards, too. As soon as you do have credit, close those accounts or otherwise remove that co-signer from the account.

    Co-signing is serious business, and you need to have a co-signer understand that. A co-signer isn't only to get you the loan in the first place, but to be held accountable if you can't pay the bill, as well. Don't put someone else (even family) in that situation if you can help it.

    Best of luck.

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  • Dunadan019Dunadan019 Registered User regular
    edited August 2009
    one of the best things you can do in order to build credit is keeping your student loans unconsolidated. I personally have 7 different open loan accounts for my student loans. yes writing out 4 different checks a month is tedious.... until you get a bank with automatic bill pay. the only problem is if your interest rate on any of your loans is too high, you may be better served by consolidating than by getting better credit.

    also, I put all big purchases on my credit card and pay them off immediately. heck, I put the down payment of my new car on my credit card (which the dealer looked at me wierd for because I was puting 1000 on a 9.9% credit card instead of a 0% car loan....) and then paid it off. just make sure that you never have more than 50% of your total credit used at any time as that can effect your credit as well.

    If you really want to increase your accounts you can also get some 'store credit cards' (like a sears card or a bestbuy card) and use them whenever you go to that store. make sure you pay them off IMMEDIATELY as those things usually have a 20-25% interest rate)

    Other than that, you can wait. time will increase your credit score so long as you don't do anything bad to it. I suggest going to annualcreditreport.com and checking your credit first. get the experian report and see whats poorly effecting it.

  • QuothQuoth the Raven Miami, FL FOR REALRegistered User regular
    edited August 2009
    Someone sort of mentioned it but I just wanted to emphasize that you can also get a card on someone else's account, say a credit card linked to your dad's credit card, and build credit that way whether you use the card or not because HE will presumably be using it.

    And don't go overboard with getting cards, because the immediate effect of opening a new line of credit, to my knowledge, is to slightly lower your credit score. I believe this is because your credit score can be affected by the number of inquiries as to said score.

    “Hic non defectus est, sed cattus minxit desuper nocte quadam. Confundatur pessimus cattus qui minxit super librum istum in nocte Daventrie, et consimiliter omnes alii propter illum. Et cavendum valde ne permittantur libri aperti per noctem ubi cattie venire possunt.”
    Site | The Miami Grindstone | Twitter | Dropbox
  • Dunadan019Dunadan019 Registered User regular
    edited August 2009
    Quoth wrote: »
    Someone sort of mentioned it but I just wanted to emphasize that you can also get a card on someone else's account, say a credit card linked to your dad's credit card, and build credit that way whether you use the card or not because HE will presumably be using it.

    And don't go overboard with getting cards, because the immediate effect of opening a new line of credit, to my knowledge, is to slightly lower your credit score. I believe this is because your credit score can be affected by the number of inquiries as to said score.

    thats only if you solicit the request for a credit card.

    those credit card offers that you recieve by mail for example are unsolicited but the company still ends up checking your credit before they send you the offer. these don't affect your credit score if you accept them.

    I believe store credit cards work the same way since the 2 in store credit cards didn't show up on my credit report as negative inquiries.

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