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Establishing Credit...

Discussion in 'The Lounge' started by Avery4jc, Mar 15, 2007.

  1. Avery4jc

    Avery4jc 1 ton status Premium Member GMOTM Winner

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    So over the years I always hear about people establishing their credit and I was thinking...when is a good time to even bother thinking about this? Obviously down the road when I go to buy a house...get a "real" vehicle...etc. they will want to see that in previous credit situations I made my payments on time yadda yadda yadda...

    Is there a good way to do this or does it just come naturally over time? I've heard that if you don't do anything it can sometimes be just as hard down the road as if you had established credit and had some issues...I don't know if thats true though...so what's your opinion?
     
  2. jekbrown

    jekbrown I am CK5 Premium Member GMOTM Winner Author

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    get a store credit card... make a few purchases (ie less than $100) and always pay a little bit more than the minimum and always pay on time.

    later, get a real credit card and repeat.

    later still, get a small car loan. Buy some POS $1000 3/4 ton truck for parts or something... and again, always pay on time (automatic payments set up with the bank would be a great idea) and always pay a little more than the minimum.

    Credit peeps like to see a) that you pay your bills on time, b) that you have used a range of credit options (a credit history that was entirely a Sears card isn't optimal) and c) that you have been a good boy over a loooong period of time. If ya got those bases covered, credit will take care of itself... it just takes time. I was a moron and disputed a bill / procrastinated until it went to collections back in my dumb/college days (2001 or so). Ever since, I have been a 'good boy'. I have a 750-ish score now, which is good enough to get good interest rates with most types of major loans (the only good reason to care about your credit score!). 850 is a perfect score... which would be cool to have... but frankly once you get past 750 or so, you don't really get better rates/deals on most types of loans so its kind of a "great, you have 845, want a cookie?" type thing. ;)

    j
     
  3. 79k20350

    79k20350 3/4 ton status

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    I got myself a credit card with a low limit, and bought a dirtbike (with my dad as the cosigner) By making the payments everymonth on time and maing out and paying off the credit card every month i have excellent credit. In just over a year my score was 733. I havent checked it since then (about 4 monhs ago) but its only getting better now:D
     
  4. 4by4bygod

    4by4bygod 1/2 ton status

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    Excellent advice thus far..

    Avery, if you ever have a chance, join a credit union.. they have nice deals on credit cards, and they're a good source for car loans.

    I joined a community credit union back in 1987, when I started working at a foundry..(the credit union was open to anyone working for a company located in said community ).. I still have the visa card issued through them, and they gave us a nice loan for my wife's durango, and I haven't worked in that town since 1995..

    Something else to think about if / when you become disciplined with credit.. as you get older and you have your own car insurance policy ( or even if you are buying your own health insurance ), you can lower your premiums if you choose a high deductible, and keep a clean ( unused ) credit card in your sock drawer, and only use it to pay for said deductible if you ever need it.. lots of people go for the low deductible, not realizing that they're strangling themselves with a higher monthly payment than needed..

    a couple of caveats - this strategy works best if you are a careful driver, and / or rarely get sick, and if you are financially disciplined..

    credit is just like any other tool.. if you use it properly, you won't hurt yourself..
     
  5. 84k5

    84k5 1/2 ton status

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    I'm at 781 currently. Got a credit card at 18, used it infrequently (books, school supplies, gas) and always paid it off in FULL at the end of the month. Never paid a bill late and always pay them in full. I had no problem getting a car loan at 22.
     
  6. tomford

    tomford 1/2 ton status Premium Member

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    i was told that a car loan is the fastest way to build up credit ( as im leaving to pick up my new truck:eek1: ) ill post some pics later today

    tom ford
     
  7. MattK

    MattK 1/2 ton status

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    I just picked up a student Visa from Bank of America. I plan to use it mainly for daily BS purchases like gas, lunch, small part runs, etc.
     
  8. Avery4jc

    Avery4jc 1 ton status Premium Member GMOTM Winner

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    this is good info...thanks guys.
     
  9. Leper

    Leper 1/2 ton status

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    When you get the card, don't pay it off every month. At least not a first. Keep a small balance on it. That way when they look at your credit they will see that you are good to carry credit. As stated above, always pay more than the minimum and always be on time. Auto bill pay is the greatest thing since sliced bread. No stamps, no forgetting, always on time. My mortages, credit cards, insurance are all on auto billpay. I even have it transfer fifty bucks into my savings account every month. Just be sure there is enough money in your checking account to cover the auto pay stuff. A real car loan will help with credit. It is treated differently than others. Tote-the-note lots do nothing for credit.
     
  10. rjfguitar

    rjfguitar 3/4 ton status GMOTM Winner

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    Auto loans are a great way to get credit started for three reasons....

    1. If you have ZIPPO for credit you will find it difficult to get even a gas card, with an auto loan you can get mom or dad to co-sign with you so you can get started.

    2. Car loan payments are pretty easy to keep track of, you drive the vehicle everyday and it will remind you to not be late on that payment.

    3. They go a long way towards your credit because they are a major credit loan.


    I had zero credit and my dad helped me by co-signing on a $26K 3/4ton diesel pickup.... not bad for a 19 year old huh...:haha: :doah:. 3 years later I have made every payment on time and am in the high 700's on my score.

    You will also find that once you have even just a little bit of good credit, it's now pretty easy to get credit.

    MOST IMPORTANT! Don't wait to build your credit! Don't wait when you want a house, or a nice car to decide "hey this is a good time to build some credit!" You want good credit already established when you shoot for that big house loan.
     
  11. 79k20350

    79k20350 3/4 ton status

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    I forgot to mention, but it was said above, leaving 5-10 dollars on the card every month is good because it will show your carrying some balance...

    Also yuo cant ruch anything. So long as your payments are on time, in full or above you'll be all set. Hell im 19 and approved for a $225,000 home loan:D
     
  12. 76zimmer

    76zimmer Flyin Rat Premium Member GMOTM Winner

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    Just save your money, then buy, instead of buying on credit...Credit cards have ruined thousands of people. Thats what the credit cards want, is for you to think you need credit to purchase. The mindset has become "I got to have it now". That gets the majority in trouble credit wise.
     
  13. CDA 455

    CDA 455 3/4 ton status

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    You mean millions of lives.

    We have one credit card for emergencies only, blown waterheater at 0200HRS on a Sunday morning, transmission goes out on the Blazer :D , etc, etc.


    Like an ugly gal at 0205HRS during closing time, it's very tempting to hit it or in this case use the credit card. It's also very easy to get into trouble with it so use it wisely.
     
  14. 79k20350

    79k20350 3/4 ton status

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    A few thoughts to that

    1. YOU NEED CREDIT to buy anything. A low limit credit card is an excellent way to do this. Hell my limit is only $400... I make a hell of alot more than that in a week... not going to ruin me...

    2. The wait and buy approach is nice, but not realistic... Yeah you can wait and buy something once you have the cash but what happens when in 5-10 years you want to buy a house and have no credit? No credit is JUST AS BAD as no credit...

    3. Credit cards are only as bad as the people who use them... They are a tool. A power saw can easily cut your hand off if used irresponibly... Same thing with credit cards, they are only as safe as the person using them

    Of cousre many people think they are evil but imo... your stupid

    Im not saving my money for 30 years to buy a house while paying rent (rent = throwing money away) so one day i can own my own home. Im building my credit responsibly so i can buy a house and have it paid off by the time i retire... Evry mortgage payment is an investment in your future as opposed to a rent payment which is an investment in your landlords future:crazy:
     
  15. shewheeler

    shewheeler 1/2 ton status

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    I got my credit started with an auto loan.

    Some finance companies offer a first time buyer program. The interest is a little higher, but I did it because I didn't need a co-signer. The one thing about credit is that you want to do as much as possible not to screw it up once it's established. I try to make sure ALL my bills are paid before I spend on anything else... including groceries.

    Just make sure that once you have a credit history that you don't go all nutso buying a bunch of crap on credit. Some people think that by buying stuff on credit, they're not actually paying for it somehow.:doah:
     
  16. 76zimmer

    76zimmer Flyin Rat Premium Member GMOTM Winner

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    1. No you don't that is what the financial network wants you to think.

    2. by waiting, your money is working for you, and not the other way around.

    3. I could by 2 of the house that I'm presently in by saving for the last 20 years. Thats in addition to making my house payment every month.

    But bottom line is, when used sparingly and wisely credit can be a useful tool, as you said, but there are just to many people that unwisely get caught up in the "I want it now trap", and pay for it many times over, and end up ruining their marriage, credit, etc.

    I pretty much agree with this guys' philosophy on handling money.
    http://www.daveramsey.com/

    And its a lot easier to earn it then spend it, than it is to spend it then earn it.
     
  17. 79k20350

    79k20350 3/4 ton status

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    So care to explain how you would buy a home with no credit?

    Why save for a house while renting? The money you'd spend in rent = way more than youd ever pay in interest...
     
  18. IGOR

    IGOR 1/2 ton status Premium Member

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    I am taking a very interesting money management class right now sponsored by my company. It is put on by Dave Ramsey http://www.daveramsey.com/


    He disputes almost all of your points you made above. The only debt he views as acceptable is a mortgage - and he advocates doing a 15 year mortgage rather than 30 year.

    Might be worth taking a look at. A few more interesting facts from a credit card show I saw on PBS:

    http://www.pbs.org/wgbh/pages/frontline/shows/credit/eight/
     
  19. 79k20350

    79k20350 3/4 ton status

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    I looked at the ramsey page quick but not too hard...

    As for the second link its what I said... Pay on time and more than, on all your bills and youll be fine....

    But still you need credit to get better interest rates, insurance rates, etc. A credit card is a great way to build credit, I stand by that.

    In the end its not the credit cards that are the problem... Its the consumer, plain and simple
     
  20. iwaxmyjimmy

    iwaxmyjimmy College web wheeler Premium Member

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    Avery, do you have teacher in your family?? anyone that works for the state? if so,http://stateemployeescreditunion.com/, they offer a first time buyers program. To obtain a loan all you have to do is have $25 in a savings account. This is how I bought my K5. I pay 10 bucks over the minimum balance (not nemore since I moved back home to pay off my truck and save some money), and I was never late,even living on my own. I've gone wks living off nickles and dimes,literally, but I made sure all my bills are paid. Take out a small $1000 loan to get your transmission rebuilt. Not a bad idea in my opinon. You have to have proof of income, and show that you can afford this in your budget.
     

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