Credit score question

[disneymom3]

Actually Anne, this lender did lend at prime rates. I know for sure that one of my buyers in the summer of 2004 got a loan at 6.18% which was what my other buyers were getting. Dont' remember the other rates exactly, but they all were comparable to what my other buyers were getting at the same time. Not trying to argue, but there ARE companies out there who specialize in this area.

OP--forgot to mention that you should also look into first time home buyer assistance through the federal goverment and also check into your state programs. There are grants as well as no interest loans available in some areas. Several of my buyers also qualified for these. In MN we found them through the Minnesota Housing and Finance Agency. I would imagine other states have similar departments.

 

[merekc]

I have no background in credit, so take this as you want, but....

I believe I saw a post mentioning getting a loan to build your credit. Do not take out a loan for this purpose!!!!! It is too easy to get this money and then spend it, then you are stuck paying it back when you didn't need it in the first place.

I would think if you are trying to build your credit, you are much better off gettting a credit card, charging some of your essentials each month and then paying that off. Although, I have heard, you do need to carry a balance occassionally don't just pay it off each month.

 

[ducklite]

I have no background in credit, so take this as you want, but....

I believe I saw a post mentioning getting a loan to build your credit. Do not take out a loan for this purpose!!!!! It is too easy to get this money and then spend it, then you are stuck paying it back when you didn't need it in the first place.

I disagree. The OP sounds like someone who is very responsible with their money and already lives well within their means. I have over $250K in available credit lines (some of it is a HELOC with a zero balance). It doesn't mean I use them, or ever will. I find it insulting that you would insinuate that anyone who has credit available to them would run it up.

I would think if you are trying to build your credit, you are much better off gettting a credit card, charging some of your essentials each month and then paying that off. Although, I have heard, you do need to carry a balance occassionally don't just pay it off each month.

Mortgage lenders like to see two different types of tradelines--installment (loan) and revolving (credit card). And you do NOT need to EVER carry a balance on a credit card to maintain a high credit rating.

Anne

 

[ducklite]

Actually Anne, this lender did lend at prime rates. I know for sure that one of my buyers in the summer of 2004 got a loan at 6.18% which was what my other buyers were getting. Dont' remember the other rates exactly, but they all were comparable to what my other buyers were getting at the same time. Not trying to argue, but there ARE companies out there who specialize in this area.

There might be, but they are few and far between. And there have to be a lot of compensating factors. I closed on my mortgage for my home at that same time (August, 2004) and in all honesty I got 5.875% on my 30 year fixed. So your buyer didn't get the best rate.

OP--forgot to mention that you should also look into first time home buyer assistance through the federal goverment and also check into your state programs. There are grants as well as no interest loans available in some areas. Several of my buyers also qualified for these. In MN we found them through the Minnesota Housing and Finance Agency. I would imagine other states have similar departments.

This is very good advice. If the OP is in a rural area they can look into the USDA program as well. Just be careful with the no interest loans, they often have retroactive interest if the home isn't owner occupied for a minimum time. They are also often not in the best areas.

Anne

 

[Minnie's Mate]

If you do get a rewards credit card, make sure it is something you will use. Frequent flier miles are only good if you can earn them quick and use them often. It is pretty much the consensus in most travel circles that with airline competition what it is today the programs will be so restrictive in the near future that it will be difficult for ordinary travelers to earn the perks (free upgrades or free flights) they thought they would.

I haven't had a Discover card so I can't speak to their cash back program, but my mom thinks their customer service is pretty good. No matter what card you go with, if you pay off the balance every month, you have not established credit, you have established charging habits. There is a difference. In time the issuer will decide that it cost them too much to give you a free charge card and cancel you even though you have been prompt with your payments. They are in business to make money off of the interest they charge, not providing you a freebie.

 

[Jalva22]

I haven't had a Discover card so I can't speak to their cash back program, but my mom thinks their customer service is pretty good. No matter what card you go with, if you pay off the balance every month, you have not established credit, you have established charging habits. There is a difference. In time the issuer will decide that it cost them too much to give you a free charge card and cancel you even though you have been prompt with your payments. They are in business to make money off of the interest they charge, not providing you a freebie.

Is that really true? I pay in full every month, am now 40 years old, and have never had that happen to me. My father is 74 and has never carried a balance and he's never had that happen to him either. Maybe we're just lucky. These were on a variety of banks as well, including MBNA (now Bank of America), whoever the GM Card uses, Discover, and Chase.

On Discover, I think it's a really good card for the cashback deals they offer. They do give you a high interest rate, but I never carry a balance so could care less about that. They have their normal cashback plan but have lately been offering 5% back on certain purchases. It was on restaurants during the Christmas season and is on hotel and travel through March 31 (I assume those are open to anyone). I'm planning to pay off our room reservations at WL and AKL during that time. That will get me almost $100 cash back that I can deduct from the cost of my trip.

 

[Barbers2005]

I've never had a cc company cxl my account for not having carry over balance. In fact, I have one cc that has been active for 5 years that I've never used. I only opened it to get a discount coupon and forgot to cxl it. By the time I saw it on my credit report (about 3 years later) it was the longest standing revolving credit account that I had and was actually improving my score. I still haven't cxld it b/c dh and I don't have any credit cards to speak of (to avoid the temptation to overspend) and I don't want to eliminate a positive mark on my credit.

 

[Minnie's Mate]

Well, I'm basing this on the advise of our nationally syndicated consumer advocate/reporter, Clark Howard. He says banks call us "Dead Beat Accounts" because they can't get any money out of us! All banks may not do this, but I assume enough do or he would not have reported this a year or so back.

I don't think Discover does because my mom has one and she doesn't believe in buying anything she can't afford to pay for. She just uses hers like we do so we don't have to carry cash for incidentals like gas, meals on the road, or other things that we can use a credit card for and not carry cash or traveler's checks.

 

[ducklite]

I've never had a cc company cxl my account for not having carry over balance. In fact, I have one cc that has been active for 5 years that I've never used. I only opened it to get a discount coupon and forgot to cxl it. By the time I saw it on my credit report (about 3 years later) it was the longest standing revolving credit account that I had and was actually improving my score. I still haven't cxld it b/c dh and I don't have any credit cards to speak of (to avoid the temptation to overspend) and I don't want to eliminate a positive mark on my credit.

I agree, I've got a visa with my credit union that I've had for 13 years now, and make one charge a year to keep it active. It's my emergency card. Having a trade line that old looks really good on my credit report, and helps my score.

Anne

 

[Minnie's Mate]

I agree, I've got a visa with my credit union that I've had for 13 years now, and make one charge a year to keep it active. It's my emergency card. Having a trade line that old looks really good on my credit report, and helps my score.

Anne

A credit union is a totally different animal than a bank. One is a blood bank (place to store valuables) the other is a blood sucker (nuff said).

On a serious note, we haven't had a card canceled for lack of use yet, but we have the Disney Rewards Visa and we pay it off every month except when we take trips to WDW. Christmas '05 we stayed at the Swan because we couldn't get an AP rate at the AKL and we carried the balance over to February. In February we had a balance of $715 and I received a letter from Chase saying that they were raising our interest rate to 24.99%!!!! Holy Cow. That's the last time we carry a balance with Chase!!!

Since Chase took over the Disney Visa, we have been very disappointed with the customer service. I would get rid of the card altogether but we charge everything to the card and pay it off with electronic bank transfers twice a month and earned over $750 in '05 and I just ordered our new rewards card and transfered $807 onto it (full balance of Disney rewards from '06) so we do actually get something of value to us and as long as we don't carry a balance, it is free money.

 

[nowellsl]

One thing I've heard Suze Orman suggest is to have someone (parent?) who has an excellent score add you as an authorized user on one of their accounts. It will show up on your credit report and you will have their credit history. You never have to use their card or even have a card.

 

[Minnie's Mate]

One thing I've heard Suze Orman suggest is to have someone (parent?) who has an excellent score add you as an authorized user on one of their accounts. It will show up on your credit report and you will have their credit history. You never have to use their card or even have a card.

Maybe this is why college kids start getting huge credit limit credit card offers as soon as they go off to college...plus the banks know that Mom and Dad will cover the charges rather than have son/daughter start off in life with a poor credit record because of missed bills, etc. Such a racket any way.

 

[luvthatdisney]

I would not run out and get alot of credit cards or loans that you do not need that is really silly. Like Ducklite said the mortgage companies that provide loans to people with no credit history are few and far between, but they are out there. You might have to do some research and find one that will work with you, and you also might get a little higher interest rate, but I would think a little more interest would be well worth not going into more debt than you need to.

Maybe the reason you have not gone into debt so far is that you do not have the credit cards sitting there tempting you. Who knows?? But why chance it. If you can live without any credit cards - do it! Many people do! Once you get a mortgage, you will then start your credit history with the reporting companies. This may take some work on your part, but I think it will be well worth it! If you can then pay down your mortgage early you would not be paying that extra interest anyway!

 

[dcfromva]

I was wondering if the OP purchased an item on an installment plan with a zero percentage interest rate, would that qualify to establish the credit?

Also, I was wondering about mortgages offered by credit unions since they have some pretty competitive rates. If the OP established a relationship with a CU, perhaps that would be an entree into getting a good mortgage rate? CU seemed to be pretty generous in loaning $$ at very competitive rates.

-DC

 

[nowellsl]

Maybe this is why college kids start getting huge credit limit credit card offers as soon as they go off to college...plus the banks know that Mom and Dad will cover the charges rather than have son/daughter start off in life with a poor credit record because of missed bills, etc. Such a racket any way.

Nah - my daughter isn't on any of my accounts and she's been getting the offers for a few years now.

 

[Minnie's Mate]

If you do decide to open a credit card account to establish credit, please read this article first. It may help you decide which companies to apply to and which ones not to apply to.

http://articles.moneycentral.msn.co...rts/CreditCardCompaniesEvilTricks.aspx?page=1

 

[ducklite]

I was wondering if the OP purchased an item on an installment plan with a zero percentage interest rate, would that qualify to establish the credit?

Yes, but those are not installment, they are revolving. I'm assuming you mean like Home Depot or Best Buy? You have to apply for thier credit card and pay it off before a certain date to get the interest free deal. A zero interest car loan would on the other hand be an installment loan, and that is perfectly acceptable. There is no way on a credit report to delineate between a zero interest and a 24% interest loan or card.

Also, I was wondering about mortgages offered by credit unions since they have some pretty competitive rates. If the OP established a relationship with a CU, perhaps that would be an entree into getting a good mortgage rate? CU seemed to be pretty generous in loaning $$ at very competitive rates.

-DC

Credit unions sell the loans to the same outlets that banks and mortgage companies do, and have to follow the same rules. The difference is that they can make less on the loan, so they don't have to mark up the rates as much. That said, smaller credit unions don't get the best pricing to begin with because they do'nt ahve the volume, so a CU isn't always the best place to get a mortgage.

Anne

 

[Ragnrok23]

If you do open a CC- make sure they report the credit limit. some credit cards only report the balance each month, so if you spend $300 every month, your credit score is going to look like you use 100% of you credit limit each month.(even if you have a $10K limit)

My mom also put me on her CC when I got out of college. It was a huge help to have a 15 yr open credit on my score

The last thing is the down payment you have. If you have a good size down payment, that will sometime offset an average credit score

 

[dcfromva]

Yes, but those are not installment, they are revolving. I'm assuming you mean like Home Depot or Best Buy? You have to apply for thier credit card and pay it off before a certain date to get the interest free deal. A zero interest car loan would on the other hand be an installment loan, and that is perfectly acceptable. There is no way on a credit report to delineate between a zero interest and a 24% interest loan or card.
Anne

I was thinking about some of those car deals they are currently offering might be an option for the OP as it seems to be a shame to pay interest when the money has been saved in advance. A zero (or close to zero) % interest rate might not be a bad compromise...

-DC

 

[ducklite]

I was thinking about some of those car deals they are currently offering might be an option for the OP as it seems to be a shame to pay interest when the money has been saved in advance. A zero (or close to zero) % interest rate might not be a bad compromise...

-DC

Agreed! A zero percent car loan would be a GREAT way to develop credit without paying a dime of interest. The problem is that they usually will only give those zero percent loans to the most qualified buyers, which means a credit score of 720 and above.

Anne