Rebuilding bad credit - first steps?

Drez

I mentioned in anoher thread that my credit rating is pretty bad. I'm not sure how bad because I haven't looked at my score in a while, but I'm sure it is shit.

I'm trying to fix this. My debt is almost zero - I owe a few thousand and I have a plan to knock that out in the next 4-6 weeks.

I don't have any credit cards or loans or anything. Well, I have the remnants of a college loan but I just want to pay that off now.

So, what can I do? A quick google search brought up trying to get an Orchard Bank card. If my credit is as bad as I think, I would get a secured card meaning I would have to put down a deposit but otherwise the rates are pretty fair.

Any thoughts or other advice in this regard?

Also, I'm afraid to look but I can get a free copy of my credit report, right? Without it affecting my score? How do I go about doing that?

edit: Okay, on tat last point, I just checked the FTC site which recommends AnnualCreditReport.com as the only authorized means of getting your credit report. Ideally, I would like to request one now and another one in the middle of the year. And the last at the end of the year. Any recommendations on which to look at first?

Deebaser

Orchard bank is exactly what I was going to recommend. There's an annual fee, but it isn't nearly as rape-y as all the other "shit credit" credit card.

Capital One also seems to give anyone a credit card.

As for the credit reports, if all the bad shit is behind you, id get all of them and find out exactly what you're up against. Annual credit report won't give you a score, but it will let you know all the bad shit you done did, and enable you to put an expiration date on your sins.

bowen

If you're about to pay off a student loan, your credit is about to get a big boost.

What caused the credit shittiness in the first place? It's likely not as bad as you think it is. I had been casually tardy on a single bill for almost 3 years and my credit was just below 650 at that point.

AnnualCreditReport.com will give you your credit report (so you can check the legitimacy of claims like defaults, late payments, so on), but I don't think it'll give you the numbers for free. Credit cards are good, don't get a secured one, but try to get a non-secured one through your bank, and if you can, one without an annual fee.

Loans are the 2nd best way. Take out a small loan for furniture in your apartment and pay it off. The problem with loans is they only give your credit a boost if they're in your name (not a cosigner) and only once it's paid in full.

Drez

Last time I got a free credit thingie was like 3 years ago but i thought i got an actual score from Experian or whatever. But it may have been another site. Do some sites provide a score? How can I get one?

Also, the FTC recommends breaking out the reports, but maybe you are right. It will probably take me a year or so to really improve my situation anyway. So I can re-evaluate in a year.

Drez

bowen wrote:

If you're about to pay off a student loan, your credit is about to get a big boost.

What caused the credit shittiness in the first place? It's likely not as bad as you think it is. I had been casually tardy on a single bill for almost 3 years and my credit was just below 650 at that point.

AnnualCreditReport.com will give you your credit report (so you can check the legitimacy of claims like defaults, late payments, so on), but I don't think it'll give you the numbers for free. Credit cards are good, don't get a secured one, but try to get a non-secured one through your bank, and if you can, one without an annual fee.

Loans are the 2nd best way. Take out a small loan for furniture in your apartment and pay it off. The problem with loans is they only give your credit a boost if they're in your name (not a cosigner) and only once it's paid in full.

Will secured not help my credit? I mean, it's clearly not ideal, but it actually features the best APR of all the Orchard Bank cards (for instance).

Cincitucky

If you're looking to use a credit card to establish some credit, you could simply go to your bank and speak with someone there about obtaining a credit card with a low limit. That's assuming you have some form of banking you use.

Banks also have ways of getting your credit score.

Understanding that everyone approaches credit cards differently, I've used mine a majority of the time for commodities: fueling the car's tank and food. Essentially, my monthly budget for gasoline and groceries involves saving a specific amount that's intended for paying off necessities (gas and food) purchased with my credit card at the end of the month. Its a simple approach to keeping your credit card paid off and still continuing normal purchases. I'd imagine more people do this with prices going up or not wanting to keep that much cash on them.

bowen

I've heard it both ways. Just have to make sure the card is reporting to all 3 credit agencies.

Drez

Well I just opened a bank account yesterday and I am planning on dumping money into now at I have it. So maybe I can do that.

Drez

bowen wrote:

I've heard it both ways. Just have to make sure the card is reporting to all 3 credit agencies.

A lot of sites recommend Orchard Bank and their secured card in particular as a viable method of someone with shit credit starting their rebuild process. I'm guessing they do.

Also, I just checked Experian's site and they are offering a free credit score for $1. They enroll you in some dumb trial which you can immediately cancel but I think I will dot hat once I get to work because now I am curious.

bowen

Yeah I'm wagering your credit score probably isn't 800 but I bet it's not lower than 550. Without knowing your history I'd say yours is probably 600-675.

a5ehren

You can get a free score and report from TransUnion at CreditKarma.com as well. It's also good for telling you what is dragging your score down and giving you tools to simulate your score in various scenarios.

Drez

Okay it's basically at the lower end of what you suggested Bowen, but you're right - it is above 550. According to Experian, at least. I'm still listed as poor, though.

Drez

Also thank you to everyone - I am reading everyone's posts but I'm at work and I can only post from my giant iPad so it's hard to respond to everyone.

bowen

So the other 2 are probably around that give or take 50 pts. That's not too bad. You will likely need a secured card. Credit cards are the absolute best way to build your credit fast, also the best way to ruin you financially.

Drez

Orchard Bank is asking me for my annual income. Is that Hourly Rate x 40 x 52 or what?

bowen

Net or gross?

Drez

It just says annual income but that's a good point. The only footnote is that you do not have to factor in alimony or child support if you don't want.

bowen

Probably gross then, yeah just do that.

Deebaser

Drez, I thought your new gig was salary.
But yeah, definitely gross that shit.

Also, if you're contract, make sure they're paying you for lunch else it's rate * 35 *52

Essee

Yeah, my basic understanding of building credit from reading several threads about it here over the years is to get credit cards, buy a little bit on them, wait for the bill to come around (do not pay them immediately after the charge appears in your history, assuming you can view that stuff online with your bank), and pay them off in full each month (so no interest). If my understanding is incorrect, please feel free to correct me because that's how I've been doing it and it seemed to be in line with what other people said (have yet to check my credit score for the first time, but I have no debt anywhere). :P I do know I should open an extra card for better results because I've only got one card right now, with a low limit, and I've been having to put way more on it than I should; my understanding from reading similar threads here is that using most of your available credit in a month is a bad thing even if you never accrue interest (again, please tell me if I'm wrong). I think I also read that this basically has to do with the idea that if you act like somebody who's a bad credit risk, your score goes down, and if you don't, your score goes up. So using basically all your credit every month LOOKS somewhat bad to them even if you always pay it off.

If I'm right about this, that's a quick way to explain what to do when you get your card(s), and if I'm wrong about this... well, we both learn! Right?

LaOs

Deebaser wrote:

Drez, I thought your new gig was salary.
But yeah, definitely gross that shit.

Also, if you're contract, make sure they're paying you for lunch else it's rate * 35 *52

Unless he actually works 9 hours with the unpaid lunch. (and so on and so on--just make sure you actually multiply your hourly rate by the weekly hours they are actually paying you for)

Drez

Deebaser wrote:

Drez, I thought your new gig was salary.
But yeah, definitely gross that shit.

Also, if you're contract, make sure they're paying you for lunch else it's rate * 35 *52

They aren't paying for my lunch, but I'm never working less than 40 hours and I usually work overtime which I also get paid for, if I factor average potential overtime in, my gross would be way higher. Should I include that?

Drez

LaOs wrote:

Deebaser wrote:

Drez, I thought your new gig was salary.
But yeah, definitely gross that shit.

Also, if you're contract, make sure they're paying you for lunch else it's rate * 35 *52

Unless he actually works 9 hours with the unpaid lunch. (and so on and so on--just make sure you actually multiply your hourly rate by the weekly hours they are actually paying you for)

I left out OT because I don't know how much it will be week to week.

bowen

Nah, factor in 40 hours. They're just getting a basis of how much credit to offer you. I'd be surprised if it was more than $500.

LaOs

Yeah, I would have left out spontaneous OT as well.