[ Establishing Credit ]

[Chexley]

I've got a lovely bunch of coconuts.
There they are a'standing in a row!

My mom, in a random spurt of wisdom, brought to my attention while shopping at the mall yesterday, that I should have begun establishing credit at one of the department stores.

Because my mom has a lot of our local department stores sending her bills in order for her to pay off her cards, I'd rather not have that stress. Then again, I shouldn't have stress if I pay off the card, right? If I don't get crazy with it, right?

As my mom and I were walking through the mall, she told me that I would have trouble buying a house or a car if I don't have a history because the businesses won't have an idea on whether or not I'll be able to make the payments, blah blah blah.

I just want to know what you guys have done in order to establish your credit. I'm doing my research right now, seeing if I want to take that step right now.

What to talk about:
-Establishing credit
-Credit score
-Credit problems
-Possible credit lures/traps
-Debt
-Whatever comes to mind as you're discussing

"Give them a twist, a flick of the wrist!"
That's what the showman said!

 

[Taeryyn]

I have had a credit card through my bank since I was 19. My phone bill goes on it automatically each month, and anything I buy online as well. I pay it off (or nearly so) on the 1st of each month.

Makes it easier for me to keep track of everything, since I just pay off everything on the first, and then don't think about it for a month.

I've also been paying off my student line of credit (also through my bank) for two years, and have less than $1000 left. ^^  

[Chexley]

I've got a lovely bunch of coconuts.
There they are a'standing in a row!

I'm just scared because I don't want to run up debt at my age. It'd turn into a train wreck by the time I tried moving out on my own.

I mean, if I make little purchases and make them right away, I could pay it off right away, right?

"Give them a twist, a flick of the wrist!"
That's what the showman said!

 

[Taeryyn]

Don't buy anything you can't afford. If you don't have the money to pay for it, then don't put it on your credit card.

Just don't spend what you don't have.  

[Arcanas]

Give yourself a monthly limit that you can pay off, regardless of the limit given to you on the card.

When I had my first credit card, the limit was $750, and out of that, I usually spent about $50-$60 from that on gas for the month.

Or, it could go towards food.

Just needs to be something that you know you're able to pay back with your current salary.  

[Xikrai the Risen]

When you get a credit card, do not get the department store ones. Get one through your bank instead. Those do more for your credit than the department store ones. Plus, you can use them everywhere. The benefits are how they get you with the department stores ones.

Also, if you've had any loans under your name at all they help you build credit even better than credit cards if you keep up with the payment. Like student loans and such.

I read online that as long as you keep your credit card debt 1/3rd and below your limit that ti won't negatively affect your credit as long as you pay the minimum each month. I also read that it even helps to let some of the debt rollover and get a little bit of interest, just lets them see you can manage debt and not just stay out of it by playing safe. Never close your first credit card account either, that plays a big role in your credit as it's the first thing on your score. You don't have to use it, just don't close it. And...don't just use a credit card once and pay it off and never use it again.

That's all things I kinda live by.  

[Chexley]

I've got a lovely bunch of coconuts.
There they are a'standing in a row!

@Xik: So, like... I can use the credit card on small purchases, almost like how I use my debit on day-to-day purchases (lunch at work, a pack of gum before getting on the bus, etc)?

Also, you're going to have to explain to me what you mean by letting debt rollover. I'm deathly afraid of that word and it scares me that I might not have the money for it. eek

Lastly, I can seriously open a credit account and not use the amount in it?

"Give them a twist, a flick of the wrist!"
That's what the showman said!

 

[wakusei]

I first used my credit card solely for gas. Then I would get online and pay it off immediately.

I never didn't have the money to pay for gas, but only keeping the card for that one thing helped me not go overboard.

Student loans and paying my car payment are now helping my credit, so I don't use a credit card anymore.

If you get a credit card, do what Xik said and get one through your bank... 3nodding  

[Chexley]

I've got a lovely bunch of coconuts.
There they are a'standing in a row!

I just got off the phone with a friend and he said my best shot would be to get a student credit card from my bank and put a minimum amount on there.

In order to use it regularly, I could buy books with it. He made sure to tell me that I should keep a minimum amount on the card and not pay it off immediately. He said it'd help my score more if I continuously used it.

"Give them a twist, a flick of the wrist!"
That's what the showman said!

 

[God-Raped-Me]

When we first had a credit card we used it solely for online purchases. We had a $500 limit and we were able to keep up with it quite well. We paid it off every time we used it and only used it when we had the money to pay it off again. After only 3 months they upped the limit to $3500. we thought "hey we have been paying it off quite well so lets buy a computer, it's only $300". Then I wanted a new camera, we though that was was cool because it was only $150, then we needed food and what not and after about 5 months we had gone over the limit and we had no money because we were just putting all of my pay cheques right on to the card. It's still overdue.

I got a card, not through a bank, and it still only has a $500 limit on it. I owe $450 on it now because the I needed to get the car done. I find that $500 limits are MUCH easier to keep control of! Oh and minimum payments keep them off your back if you ever owe them money.

Sadly you do need to have some sort of line of credit to but the big important things in life, like a car. Tried to get one once and we were denied because we had no credit at all. It sucked.

I DO NOT SUGGEST GETTING A CARD THROUGH YOUR BANK!!! I had one and when I went over due they took the money out of my accounts, both chequing and savings! I couldn't cover rent the first month then the next month they took my insurance money for my car. That sucked too! DON'T GO THROUGH A BANK!  

[Kalstolyn]

Kals is questing again!

Here's what I did: My parents insisted that I get a low-limit Mastercard through a local gas station as soon as I was 18. I was to use the card only for things that my parents would have given me money to pay for anyways, like picking up groceries and running errands for my mom, and putting gas in the car. They paid off the balance in full every month. Then when I had a job, I started paying the bill myself. As long as I never spent more than I could afford and I payed the card off in full every month, it was not a problem.

The problem came when I was on a medication that amplified the negative symptoms of my ADHD (impulsiveness, lack of self-discipline, inability to delay gratification, not connecting actions to consequences, etc) to the point where I was basically manic for about 8 months straight. During that time, I was offered three more credit cards, and I took them all. Then I got kicked out of school and my parents withdrew their financial support (they had been helping me with my rent while I was a student) AND all five of my roommates moved out, leaving me with $700/month rent, plus utilities on top of that, for a three-bedroom townhome and several months left on the lease. Between the impulse buying, the delusional schemes (like entering a vanity poetry "contest" and being invited to the poet's conference in Hollywood... and thinking I could go), the lack of planning ahead, loosing track of how much money I had available where, and the financial burdens of being a grownup, I maxed out all four credit cards. All four of them. In less than a year. Actually, it was less than six months. That was somewhere around $5000 of debt, plus the landlords were going after me for another $3000 (and they evicted me), and I already had $10,000 of student loan debt. I was 22 years old, and owed no less than $18,000 to various companies and/or people.

I have actually had very good experiences with the credit card I got through my bank. It's actually the only card I ever paid off. The only time I had a problem was when they froze all my accounts because my credit card bill was overdue, but a quick call to the bank with an explanation that I was on social assistance and attending a full-time medical treatment program, and I just needed $20 for groceries, along with a promise to make a payment with my next deposit, cleared that up. The other companies just sent my file to the meanest, nastiest collection agencies around, who started leaving threatening and abusive messages on my voicemail.

Needless to say, although I started out on the right path to establishing a good credit rating, my own foolishness and stupidity has made it so I cannot have a credit card now, and I will probably never get a car loan or a mortgage without someone reliable to cosign. I probably ought to declare bankruptcy and start over with a clean slate.

Also, renting and paying utility bills on time improves/affects your credit rating. Not helpful if oyu live at home, I know, but it's a good thing to keep in mind when you're on your own. I would use a credit card for groceries and stuff rather than books, as long as I could keep my spending within my means to pay it off, and never carry a balance. That way there's no interest fees, and the credit card company is happy. Books are a twice-a-year expense, and will not demonstrate your ability to maintain a monthly bill. Buying groceries every couple of weeks will. The key is to never spend more than you are able to pay back right away.

I disagree with Xik about letting a balance carry forward -- interest costs money, and to a university or college student, every penny counts! Also, student credit cards have horrifically high interest rates. Banks LOOOOOVE to give credit cards to students.

Check sig for details!

 

[Chexley]

I've got a lovely bunch of coconuts.
There they are a'standing in a row!

The only other thing I can do is get a student loan and even then, that won't start affecting my credit score until I'm DONE with college. I'll be... what? 24? 25?

I'll be the laughing stock of the city!

This whole thing was my mom's idea and I'm just trying to find an easy and simple way for me to start building it. Eventually, I'll want to get a car and start running my own errands without my folks grumbling at me.

I have a paper in front of me that tells me how much interest I'll be charged if I decide to get a credit card with my bank: 17.24%-21.24% only when they decide my "creditworthiness." I'm assuming that if I have good standing with the bank, I won't be charged an annual fee (or so the card brags). It's the same interest rate for Balance Transfers, 24.24% for Cash Advances and the same for any overdrafts. I'll be charged 29.99% "if you fail to make any minimum payment by the date and time due (late payment); exceed your credit line; make a payment to us that is returned unpaid; or do any of the above on another account or loan you have with us or any of our related companies."

And then it proceeds to tell me how I can avoid interest.

"Give them a twist, a flick of the wrist!"
That's what the showman said!

 

[Taeryyn]

I don't know about banks in the US, but everything in my experience here (as well as observing what my roommates and friends have gone through) has taught me that it's much better to deal with your bank than with a department store.

GRM, I get that you had a bad experience, but that doesn't mean she should avoid having a credit card or line of credit through her bank. For every bad experience with a bank, I'm pretty sure most people can name 10 horrible experiences from dealing with other companies that offered them credit....  

[Xikrai the Risen]

Chexley

I've got a lovely bunch of coconuts.
There they are a'standing in a row!

He made sure to tell me that I should keep a minimum amount on the card and not pay it off immediately. He said it'd help my score more if I continuously used it.

"Give them a twist, a flick of the wrist!"
That's what the showman said!

That last part is exactly what I meant about the rolling over. Like when you get the bill, don't pay it all off. Let it go to the next bill, just don't let it go crazy. And keep it to 1/3rd or less if you're gonna let it get interest.  

[Chexley]

I've got a lovely bunch of coconuts.
There they are a'standing in a row!

Now that I have a better understanding of what credit is and what a credit card is, what do I use a credit card ON?

My dad told me not to waste it on groceries, but to use the card on clothes for myself or clothes for work. I don't do the things many kids my age do, so making payments on a car or paying my own cell phone bill is a no go. confused

"Give them a twist, a flick of the wrist!"
That's what the showman said!