So, after a long and sordid financial history, I am in a relatively firm and stable position. A number of years back I did a number on my credit, and would like to start rebuilding.
This may be a very ignorant question, but where does a person go to get a credit card? I don’t want/need one with a large limit, just one I can spend a bit on and start developing a good credit history with.
I get crap in the mail all the time with credit card offers, but is that the way to go?
What should I do?
There’s lots of places online to compare credit card offers. Really, you can choose any one you like and just see what you can get.
My friend just got an offer for “PRE APPROVED!!” in the mail, for up to like $10k. When he actually filled out the application online, he ended up with a $500 limit. Woohoo! :rolleyes:
But, that’s an ok limit for someone who’s wanting to build their credit. Get the card, use it, pay it off, and the limit will rise on its own.
Here’s the credit card tool at bankrate.com. It helps you choose a good card.
That’s the key, 100%: Buy one small thing and pay it off immediately, every month.
If possible join a credit union. Most of them have credit cards with good rates. CUs are much better to deal with than banks.
If he’s rebuilding credit and paying off the full bill each month, the rate won’t matter.
Yes but if something comes up and you can’t pay the bill off like you want then the rate matters. CUs have better rates for car loans too and in some cases mortgages. Most CUs are small so that’s why they are better to deal with than a mega bank.
Two things I was told as a young man trying to build credit in the early 90s: First, you can go to your bank and apply for a personal loan instead of getting a credit card. A line of credit is an open amount of credit you can draw from and pay back repeatedly. Credit cards are convenient forms of LOC, but not the only ones and if you have no credit you may actually have to make a deposit equal to the size of the credit limit in order to get one. If you are trying to build credit, it might be better to go to your bank and take out a small loan (say $500) and pay it back over six months. My credit union at the time (Fairwinds in Orlando) actually offered a loan specific for credit building since a large percentage of their customers were sailors just out of boot camp. You will probably get a lower rate than a credit card right now. Second, for establishing credit you need a payment history, so it is better to get a loan and pay it off over 3 or more months than to have a card that carries no balance.
Jonathan – Not a financial advisor
I got a credit card through my bank.
I haven’t used it in going on two years, though and I don’t plan to. I’d rather pay me money (401k, Roth) rather than pay a credit card company. Ivylad and I had a green (all cash) Christmas and when we need something, we save up for it.
The thing you’re missing out on, ivylass, is that using a credit card doesn’t necessarily mean going into debt. Buying something on a credit card and then paying the bill in full when it comes (with your saved-up cash) will actually help your credit rating, where not using the card at all will not.
Go to the movies or something once a month and put it on the plastic, and you’ll actually do something good for yourself. As long as you pay it in full.
Presuming this is a query about credit in the US, a good way to build credit is to get a secured credit card through your bank. Generally you deposit in a special savings account a certain amount of money. They then give you a card with a credit limit equal to the amount in that account. After a certain amount of time, if you’ve used the card appropriately (not overcharged, paid regularly and never got behind), they give you a real credit card and give you back the amount you deposited. This is a great way to (re-)establish your credit rating.
I’m not interested in preserving my credit rating. I’m interested in building a healthy emergency fund and not buying stuff until I have the money for it.
That’s fine as long as you never plan to purchase a house or car on time, or don’t mind paying more in interest.
Even your insurance rates are likely tied to your credit score these days, meaning the lower your score, the higher the rate you pay.
You might find too, in the current credit environment, that your card will be be cancelled for inactivity.
[ol]
[li]Establish the real baseline for your credit history. You could go to the official web site and obtain a free credit report. But if you want to do it correctly, go to this Fair Issacs web site and buy your complete set of credit scores from all three credit reporting sites and your FICO rating.[/li][li]Do not obtain a credit card via any mail request. Go to your financial institution and obtain a credit card from them. After you’ve read through all your credit details, go to your bank or credit union and talk to a financial counselor. Ask about their credit card options. Complete an application and if asked, put down a reasonable credit limit suggestion (some banks allow you to do this). [/li][li]Got a spare $500 or $1,000 you can part with for the next year, no ifs, ands or buts? If you can, open an ordinary savings account where you just asked for a credit card. This is not a mad money account. You must be disciplined to not touch it. Period.[/li][li]Once your credit card arrives, use only to buy things where you already have the cash to buy it outright. When the bill arrives, pay it in full. Every month. For the next year. No ifs, ands or buts.[/li][li]No impulse buying for the next year. Period. Even if you have the cash, forget it. Limit yourself to the necessities of life, with an occasional feel good purchase.[/li][/ol]
Rebuilding your credit is easy, once you discipline yourself.
Go to a credit union, and PRE-PAY a line of credit. You’ll get a “credt” card that’s worth whatever you put down. It does wonders for restoring bad credit!
Not all insurance companies tie rates to FICO. I plan on paying cash for any future cars, and as for buying a house, if you have 20% down and find a mortgage company who will do manual underwriting, you can get a mortgage.