Building Credit

[Molly Meow]

I'm not sure if this belongs here, but after reading the threads on "why would you charge if you can't pay it off each month", I have a couple of questions, and noticed there seemed to be quite a lot of knowledgeable people here.

How do you build credit in the first place? DH and I have no debt - I have 1 credit card I just got (Capital One - will NEVER do business with them again), and he has none. We rent, his truck is paid off, my car is in my dad's name.

We don't have enough credit to get even a store card. The one credit card I do have, I had to pay out the nose to get, and it only has a $200 limit. I pay all of my utility bills with it, then pay it off each month, hoping that in a year or so, they'll increase my limit and my credit score will go up. If we had to move, we don't have enough credit to get into an apartment.

Does anyone have any suggestions on what we can do to build up that credit so we can eventually buy a home? We're scared we'll never be able to, or if his truck dies, we won't be able to get a new one (which is why he had to buy used in the first place, couldn't get a loan.) Any advice would be most appreciated.

 

[SWVA BGSU Fan]

Here's and idea that you can try. If you have a savings account, go to your bank and obtain a loan using your savings account as collateral. You will be borrowing against your own funds and shouldn't have a problem obtaining approval.

You could also start using your credit card for small purchases and paying off the balance each month.

Both of the ideas listed above will help you to build a credit reference base.

Good luck.

 

[Molly Meow]

Thanks for the advice! Unfortunately, we've already tried using our savings account as collateral, and got denied. We've been customers of our bank for about 5 years now, never been overdrawn...

I really appreicate the advice, and I don't mean to be a downer!

 

[oogieboogie]

start by going to http://www.creditboards.com

It's a forum for people with credit questions. They can give you great insight on how to build your credit, which credit cards to open, which credit card companies won't scam you to death, and also what would be the good mix of credit to have.

This is an excellent forum for credit questions. In fact, my DH (picantel) is a member there except he helps consumers deal with credit problems & scum collection agencies.

 

[Molly Meow]

Oogieboogie - thanks so much! I'm headed there now!

 

[Miss Kelly]

I'm interested in this question too.

I am college student. I have a very part time job in between classes. At the end of the year, I'll have approximately 5500 in student loans. I have one credit card from Capital One ( I have no complaints with them, they've been great) with a $3000 credit limit and annual fee. I charge my monthly expenses on that card and then pay it off monthly. Sometimes I leave a balance for a month or two(some people say this is good?!?). That's it, though! I want to apply for a car loan in the near future and then maybe even a mortgage in the long, distance future. I feel that I don't have enough credit though. What else can I do? Thanks!

 

[Lisa loves Pooh]

Unfortunately--paying off a credit card monthly does not a good credit score make. You may have to sacrifice a little bit of interest and make the minimum payment for a few months (or more than--just not the entire balance)..to show that you can make timely payments. Stinks--but you gotta deal with it just a little bit and then you can pay it off.

I had to get a secured credit card as my first credit card using my savings account (basically, part of my balance was frozen and I was not allowed to use it--though I was allowed to earn interest on it)...this was about 10 years ago. Not sure what they do now.

 

[Lucky4me]

The best thing you both can do is pay your monthly bills, all of them, on time when they are due.

Things like cell phone contracts and apartment rent will count towards your credit rating.

18 months ago my son, then 21, had zero credit. He got a cell phone first and paid that on time for a few months. Then he got a store department charge card and paid that off in full each month. He also began paying a student loan during this time.

All of that is now on his credit record and it was good enough after a year to buy his first home.

He just moved in today. We never thought he could do this 18 months ago, but it can be done! Good luck to you both!

 

[peacefulgirl]

There are banks out there that help build credit. You deposit say, 500.00, and that is your credit limit. It works great!

I forget the bank, but look online and you should find something.
Also go to MSN.com and go to money and do a search on "building credit". I am sure you can find something there.


good luck PG

 

[SWVA BGSU Fan]

You need to look at using another bank if the one that you bank with will not allow you to use your savings account as collateral for a loan. I KNOW that there are banks that will allow you to do this.

No flames please but your rent payments and paying your phone bill on time doesn't build up your credit. These items will not show up on a credit report unless you don't pay and someone obtains judgement against you. I've been a lender for a long time and revolving items such as credit cards (or a credit account with a major retailers are reflected on your credit report. Installment loans are also reported. The revolving and installment debts are the only credit building features that show up on the credit report. It's a shame that other areas like the phone bill aren't shown unless it's something negative.

Paying your credit card balance off each month will contribute to a positive credit score.

I know that you WILL be able to establish credit. It may take some time but you you have the desire and that is the most important factor. Good luck !

 

[firetaz]

Not all installment loans are reported to the credit bureau. My credit union is small and is only open to my co-workers and their families. I have several loans there. When we applied for a home loan, they wen't listed (that I had the loans, or that I paid them on time).

 

[SWVA BGSU Fan]

I should have stated that most installment loans are reported to the credit bureaus. Many credit unions do report this information.

Ironically, one of the most common agencies not reporting payments is the government. Rural Economic Development and Housing, a branch of the USDA, doesn't report payments. This agency assists many people with the purchase of residences. Most folks pay on time and any agency not reporting timely payments hurts those with limited credit experiences.

I still believe that Molly Meow will be able to find a lender who will allow her to use her savings (her funds) to loan against.

One other area of clarification about rent payment building credit. I have seen on a very limited basis where conforming lenders, loans made under Fannie Mae guidelines, may examine cancelled rent checks as supporting documentation for people with limited credit experience. The lender is still looking for payment information shown in a credit report and rent payments will not be reflected in a credit report.

 

[mudnuri]

Try a sears card.....they are generally pretty easy to get. You can start out with a regular sears card- then move to a permier, then a sears visa..

I also agree- rental and phone/utilitys dont report unless you are default...

A car loan is pretty easy to get- even with very little credit. you might want to start there, if thats your next purchase. I'll guarantee once you get a car loan - you'll be OVERWHELMED with credit offers

Chrysler financial is a very leniant lender for cars. And it doesnt have to be a chrysler(dodge) product to use them. As is Ford motor Credit. GMAC is the one of the big 3 that isnt as easy.

Brandy

 

[peacefulgirl]

Try a sears card.....they are generally pretty easy to get. You can start out with a regular sears card- then move to a permier, then a sears visa..

I disagree ... Sears is HARD core, they do not work with the customer at all.... and they are 21% are they not ? The new Sears suits made a messs out of that Company! i remeber the good ole days! When Sears had great maintenance plans on their items.. now they over charge for the plan AND it covers nothing !!!! Ick to Sears!!!!

JMHO !!

PG

 

[MyGoofy26]

I'll have to second with the poster who gave you the link to creditboards - great great place for information.

I've been trying to "fix" my credit over the past year and what has worked for me so far is getting a couple low limit cards (a few look good, but you don't want TOO much revolving credit) Paying off monthly helps - but your Fico will raise even more if you keep your utilization at 30%. So basically if you don't pay off 1/3rd of what you charge in a month, your score will go up. You can either go 1/3rd total, or keep that 1/3rd spread out among your lowest interest.

Go to www.privacyguard.com and sign up for a trial. It's $1 for 2 months and you can pull your credit report daily if you wanted to (be sure to actually order the credit report rather than just bringing up the report you've already pulled when you opened with them) If you select the option to show all 3 bureaus listed at once, at the very bottom of the page it'll break down each section and explain what the "norm" is, what you have, and what lenders like to see. Even further down there will be a breakdown of all of your accounts, all of the inquiries (each time someone checked your report), any judgements, etc. It'll list all of those and rate their effect on your credit score. You can see which things have the biggest effects and try and fix them (again, look around creditboards for the best ways to fix your credit reports)

If your problem is a lack of history, just keep good on the card you have, maybe try to get another card or two (I know a lot of people apply for Exxon, Chevron, or the Target Guest Card when building credit) and after about a year of good history they'll start having a positive impact on your rating.

Carrie

 

[mudnuri]

I disagree ... Sears is HARD core, they do not work with the customer at all.... and they are 21% are they not ? The new Sears suits made a messs out of that Company! i remeber the good ole days! When Sears had great maintenance plans on their items.. now they over charge for the plan AND it covers nothing !!!! Ick to Sears!!!!

I'm not sure maybe it's different where you are.

My sears visa is 4.8%... most of my purchases made on it are 0% for X months...we only carry a balance on sears if it's a purchase with 0% (like my dryer as an example)

by maintenance plan do you mean like an extended warranty? I'm not familiar with them, as they are really never a good financial move, never purchased one from any retailer

its funny- we love sears, and other dont- same with just about everything I suppose!...Sorry to hear you dont have as much good luck with them as we do.

just an FYI- every credit card, be it a store, or bank, has the option of lowering your interest rate. If your credit warrants it- theres no reason anyone should be paying 21% interest on anything!

Brandy

 

[tink2dw]

Home loans can be structered in a number of ways with over 400 lenders offering programs for every kind of borrower.

What credit scores do is suggest what type of rate you Qualify for.
One day out of a bankruptcy some lenders will qualify you. BUT don't except the lowest rate going. And you should expect your loan to be fixed for 2 to 3 years and then to refinance in 2 to 3 years to lower the rate.

What HURTS Credit Scores MOST is to have it looked at!!!! Everytime someone requests a look at your credit, your score drops. Now if you are looking at it everyday,everytime you make that request it counts against your score!!

When you are looking for the best Credit Card,and you apply for 3 different ones, it lowers your credit score. And too many looks will stop companies from giving you credit.

So if you look at a car and they pull your credit report
and your apply for a sears card and they pull your credit report and you get a cell phone and they pull your credit report and then you go look at a house and they pull your credit report
your credit scores go down with each time they pulled your credit report!! AND with YOU looking at it every day...........you will never build the kind of credit you want.

The only reason to look at your Credit Report is to make sure everything on it IS yours. If not you should have a note put on your file stating why it isn't yours. And if you think you are the victom of identity theft.

After that just pay your all bills on time with no lates on rent and mortgages is the most important thing you can do.

 

[FreeTime]

I work for a company that finances private label credit cards and DH and I work hard to keep our credit as close to perfect as you can get. FICO scores range from 300-850 and that national average is around 710, I believe. Most companies will give you lower rates or approve you once you pass the 650 range. To help build your credit you should not pay your cards off every month. If you get a new credit card and you immediately pay it off the lender may NEVER report the card because their system may not recognize activity on the account. We always let our credit cards revolve once or twice a year to make sure that they report. Definately visit creditboards.

 

[Lucky4me]

Wow. Now I'm wondering how my son built up such a good credit score in a years time. He only had one dept store card, bought one thing each month and paid the bill in full each month. It was definitely on the report. He was able to get a Suny Mae fixed rate mortgage at 4.50% and a $5,000 credit at closing. Maybe it's different here in NY?

 

[MyGoofy26]

What HURTS Credit Scores MOST is to have it looked at!!!! Everytime someone requests a look at your credit, your score drops. Now if you are looking at it everyday,everytime you make that request it counts against your score!!

Actually pulling your own credit report has zero effect on your score. It's a soft inquiry - the hard inquiries are what drop your score (usually a couple of points) Lenders never see the list of soft inquiries - I pulled almost daily for 2 months and those inquiries never appeared on my credit report except in the soft inquiry section of the "official" reports from the bureaus. THe drop is temporary too - iquiries only stay on for 2 years, and they lose their "effect" on your score even sooner. But yeah, too many of those hards within a short period of time send up red flags.

Wow. Now I'm wondering how my son built up such a good credit score in a years time. He only had one dept store card, bought one thing each month and paid the bill in full each month. It was definitely on the report.

It depends on each company when they report - it's very likely that the day they report each month fell before his payment due date therefore showing a balance before it was paid off.

Carrie