I don’t understand all this credit and credit card business. I’m a 23 year old with no credit. I never really understood the whole credit thing. I call dell in hopes of getting a computer so I can finish recording my album, but they said I have ‘insufficient credit.’ How can I get sufficient credit fast, or a laptop or desktop computer that I can pay monthly for with no credit to my name? (since I can’t lump 1,000 dollars together out of nowhere on my budget)
Building credit takes time.
In order to get started, get a credit card. Because you are young and have no credit, banks will be happy to offer you a card with very high interest and a low limit. You can apply for these on the various major banks’ websites. Pay off the full balance every month. If you don’t, you’ll get ridiculous interest charges. This will help you build a good credit rating, which will let you get better credit cards (much lower interest, higher limit) and loans for things like computers.
Check your credit rating once every six months ago. According to the Fair Credit Reporting Act, any time you are denied credit, you ere entitled to a free copy of your credit report from whichever credit bureau(s) were used in the decision. The lender (whatever bank Dell uses to issue their loans) should send you a letter with this information.
First, a checking account
second, as a co-holder of another credit card, sometimes a parent’s
third, a secured card through your bank (you should have ‘a bank’ with which you do biz…have checking account)
fourth, a student loan
fifth, an income that can be verified and you have had for at leat a year
…or try for a gas credit card, or credit card from a dept store, which are sometimes easier to nab.
This is the type of advice you should get. Keeping a relationship with a bank where you have a checking account can help you secure your first credit card if you never had a student loan or been a coholder of a credit card with a spouse or parent.
If you are curious about credit scores, by the way, you can check your scores out at www.myfico.com
It’ll cost you about $12.95 per bureau, and there are 3 bureaus you could check, but if you’ve got a major credit application coming up it can be enlightening.
Whatever you do, never buy a credit score except for ones issued by Fair, Isaac and Co (FICO). All the others are scams… leaving aside the fact that someone will come along and say FICO is a scam too, but it is what banks use.
If you are employed by someplace that allows you to join an employee credit union, or are eligible to join any other credit union, you might want to look into it. You may be able to get a credit union loan without a credit history, particularly if it’s an employee or labor organization based one. Paying that loan off helps establish a credit record. I had zero credit history at one point, and took out a car loan through an employee credit union.
I heard that the more ‘credit checks’ are done on your credit, you can actually get red flagged. or ‘negative points’… any truth to that?
Yes, if you have several credit inquiries within a short period of time, that can negatively affect your score. So don’t go and apply for a dozen credit cards all at once. Apply for one or two cards at the most. (Stuff marketed as “student cards” and such are designed for folks with little to no credit history.)
Good recommendations here…
The problem is that the credit history that they are looking for is proof that you pay off your bills to those to whom you owe money. You can’t really ‘kick start’ your credit history other than the ways described above.
Basically you have to be able to afford to buy something, and then prove that you can by not paying for it up front. When you send a cheque to a retailer or pay cash you don’t get the acknowledgement that you pay your bills. To establish credit, you need to have some sort of agreement to pay money to someone else. That agreement is tracked and if you pay according to the terms of the agreement, then you are deemed a ‘good risk’ for paying any debts that you incur. The agreements that are tracked are credit cards, bank loans, mortgages, utility bills, etc.
The tricky thing is to apply for the credit when you don’t need it, so when you do need it (if money gets tight) then you already have it set up.
Confusing and backwards, no?
Credit people want to establish that you will pay your bills. They want to see you have the income to pay and the desire to pay. That is, some rich people don’t pay their bills because they don’t want to. Some poor people don’t pay becuase they cannot.
The rules and numbers and hoops are designed to show ability and desire to pay. I’m as puzzled as anyone about the arbitrary application of the rules.
Recent and frequent inquiries into your credit report indicate that you may have taken on new/undetermined levels of debt.
Say you come to XYZ dealership for a car… and you want to get a loan to pay for a new 28k car… and the dealership checks your credit report… if they see that you were at Sparkle Jewelers yesterday, Best Buy the day before and ABC Furniture store earlier that week, then it is is very likely that you have some new debts and might be overextending yourself. Those new debts will take 30-60 days to be reported as accounts, so the true nature if them is unknown.
If you car shop one day, hitting 3-4 dealers and working out leases and buying options, and they’ve all pulled your credit report, scoring models will ignore all but one inquiry. Same goes for shopping for a home equity loan, or mortage, etc. You don’t have to worry about shopping for a deal on these things.
It’s not that complicated, and usually makes sense. Whoever is lending the money needs to balance the risk, and seeing lots of potential debt just lining up makes them unsure of the level of risk.
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- I had this problem also, because when I wanted to get a first credit card I had no-one who would co-sign for me.
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- When considering your credit, companies consider how long you have held your present job and what it pays, how long you have had your current bank accounts and what other financial responsibilities (regular bills) you have had. The best way for you (as far as you’re concerned) to get started on credit is to get a savings account at a bank or credit union, then get a secured credit card through that same business. There is no easy or quick way, but if thre’s a problem you know where to go to complain. You can’t do that with a mail-order company. The places that do mail-order secured credit cards almost always offer far worse deals (with far higher fees and charges and lower credit lines) than your own local bank will. After a year of regular charges and payments, ask the bank to change your secured card to a non-secured one.
- I heard it the other way, and from my credit union manager no less: when you are starting out on credit, carrying a -reasonable- balance is better. The justification is that if you can always afford to pay off the card every month, it shows that you are only using it as a substitute for transactions you had cash for anyway --you didn’t really “need” the credit, and didn’t have to “manage” it. The balance should be perhaps a week’s pay, but not very much because the amount of transactions on your credit card should be in fair proportion to your income level. And be certain to make payments every month–it looks really bad if you miss payments on your first line of credit. If you have to miss a payment, call your bank before the payment is due and explain it to the person in charge of such accounts-- if they get paid quickly and it’s not a regular occurrance, they may hesitate to note it on your records.
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I went the secured card route, and think it is a good way to start. For years I always paid the entire balance off every month…my credit hardly increased…even though I paid off apersonal loan a year early,too.
Now that I put myself in debt, my limit gets raised all the time…they want to see revolving credit…put some on, and pay it off overtime…ALWAYS make the payment
Start out SLOW…if you get a card, and put that pc on it…don’t put anything else on it until you pay it off
Forget about the “minimum payment”…it will take forever to pay the balance off, send what you can …BUT it is not necessarily better to have NO balance All the time
No balance = no credit. Everything in moderation, including debt.
That is actually a factor in scoring models: carrying modest amounts of debt relative to the max amount you could have carried.
At or over max limits = bad
no balances, little credit history = bad
Mortgages are the most powerful enhancers to a score, fixed loans - such as for a car - are powerful too…provided all are paid on time.
As far as I can tell from personal experience, having NO credit is worse than having some poor, or even bad, credit.
Can those of you who are wise in the way of credit tell me if this is so?