19 to be 20 and want to start building credit

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OK so I had an opportunity to start buildidng my credit when I got my civic, but for some reason I overlooked the opportunity. I should have borrowed money from the bank and then paid them back (considering that I had enough money for the car it would have been a very easy way).

I am going to community college now, and working as well. I have this semester left, and 2 more next year to get my associates. Obviously when the time comes to go to temple (university, not a church lol), my tuition is going to be a bit higher (currently its 16k a year for my major), so I will have to take out loans regardless, and I want to build some kind of credit score now so I can get these loans in my name under a not so rape-like percentage. ive been pondering this for a few weeks and here is what I came up with.


1. When my parents go to buy something big, like a TV or something of the expensive likes, I will buy it under my name and they will just pay me to pay the bills..pretty easy way to start on my score..problem is we have no big purchases in the future.

2. Work for a bit, save the money, sell the civic, and get a new car, use the money from work and the car sale for a downpayment, finance the rest, and start building that way. The only problem is that at the end, I will spend a LOT of money for this.

3. Buy a second car for like 4000 bux, and just pay for that through a loan, and my credit should start growing. This seems to be the best of the routes because I will have a toy, I already got an insurance quote for a car in mind and its only another 38 a month, and in the end I have 2 cars, and a credit score.

4. (not sure if this will work or if its legal someone fill me in). Get a loan from the bank for example for 5000, and get the money. Then use that same money to pay back the loan, and just pay the intrest out of my pocket.


Any other suggestions??

posted by  newyorker

Of course it's legal, but silly.... You're effectively giving the bank money for nothing. You'd be better off without the credit rating and paying slightly more interest later on.

posted by  windsonian

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Credit cards are a dime a dozen these days. Just get one...even a secured one if it's the only one you can get and start using it for purchases you'd normally just pay for with cash/check or your atm card.

Credit has more to do with paying on time rather than the amounts you are using and paying back.

If you do/can borrow some money from a bank...put it back in another bank or a cd to earn interest and pay the monthly bill...at least you'll make a little or not lose as much for gaining credit.
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posted by  BavarianWheels

That sounds illegal.

posted by  jedimario

What? Not.
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posted by  BavarianWheels

Just start a credit card. I started a student's VISA card (limit blows so you're probably going to need to work around it probably) and with ON TIME payments, my score has risen REALLY well until now and it's only been like 8-9 months. If you open up more than one credit card, it'll be faster. This is all assuming:

1) You use the credit (not debit) cards intelligently.
2) You make your payments ON TIME.

This works two ways. Miss your payment a couple of times and you're going to get raped.

posted by  Nissan_Altima

Yea I heard that if i open a bunch of cards with a total limit of like 10k (generally the highher the better) and if I use a lower percentage, my credit will grow quick.

Example. Get credit cards for 10k but only purchase on a monthly basis 1k and always pay it off on time

I heard thats a quick way

posted by  newyorker

taking out many cards at once could negatively effect your score. Just start with one or two cards, your bank should offer one if you have a checking account, use it for most of your purchases, and pay your bills on time. Don't go and buy something that you don't need, invest the money instead. When looking for cards though, see if you can find how they report to the credit agencies, some only report available balances or something strange, maybe someone else knows better.
Your credit limit will probably start around $200 on your typical card, so use it wisely. keep track of your balances, and never go over your limit. To be sure you can pay it on time, never spend money you don't have. Don't count on paychecks clearing the day before your payment is due.
A card that offers cash back is nice, but most offer some kind of points for airline miles and such, some of which are completely useless. shop around.

posted by  dvdrose18

I think two cards is a good place to start. Any more than that will just make things very confusing and will not positively affect your credit score anyway. One would ideally be with a checking account you have. However, sometimes they don't provide people with bad or no credit a good credit card.

In either case, you can always open up a student's credit card. Temple might even have one of its own. Penn does and I know some other schools do too so look around. Your limit will probably be closer to $500 when you start out but you'd be surprised how fast your credit score will be built, provided you pay your bills on time.

posted by  Nissan_Altima

Maybe, I have no clue...but it sounds fraudulent.

posted by  jedimario

No more fraudulant than going to Subway and buying co-workers lunch then having them pay you back.

I've also got to stress that having too many credit cards will negatvely affect your score. I got one when I was 18, the credit limit was at least $4,000. Now I think it's about $5,500 on that card.

It may sound dumb/obvious, but when you do get one keep track of everything you buy with it. You tend to forget that you spent $150 on gas, $50 on food, etc, until your bill comes at the end of the month.

posted by  giant016

Yep..I dont spend that much on gas..gas for me is only like 80 a month TOPPS, but I was thinkin about getting a shell card, you get money back, and I think its through mastercard or someone big like that so that might help, and I can use it for gas only, wont do much but still should help

posted by  newyorker

Not sure if this has been said, so appologies if it has, but you might want to bear in mind that by taking out a loan and paying it all back at once would probably have no effect on your credit rating...It might even have an adverse effect because the companies wany you to pay back a little at a time due to interest etc...and because they want as much of your hard earned cash bas possible!

posted by  Cliffy

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One last time.

Credit is more about paying ON TIME rather than how much you're paying or paying off. Consistency in paying = more credit.
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posted by  BavarianWheels

that is very true, as i had a credit card for about 1.5 years before i got my car loan, and had always paid it off on time and never gone over my limit. ofter i got my loan, which i paid off a couple months ago, after about 2.5 years, my credit score went up by like 10 points max.

ok, what i just said doesn't realy make sense but you get the point

posted by  dvdrose18

In an overall look, you should almost NEVER borrow money. In order to build your credit for your future house, though, take a credit card, spend money on your usual purchases, and set up an auto-pay system. Also NEVER spend more money than you have. Credit Cards are set up to suck you in and steal your money.

DO NOT get swallowed up into the corporate credit America. This is most important part of getting credit. Hardly ever should you spend money that you don't have.

In my reading, experience through job and talking to others, I've come to my personal conclusion that in my lifetime, presuming that I don't do something like open a business, I should only take out a loan (spend money I don't have) four times:

1. Student loans for undergraduate and graduate college. (This is more of an investment than a loan)
2. Credit card to start building credit.
3. First car, which should ideally be after college when you get your first solid, stable job. It's important to get this at as low of an APR as possible, through the Motor Company, Dealership, Credit Union, or Bank. Also, it's important to stress that I should only take it out for the first car.
4. A Home. And I say a home, because when I buy a house, it'll be to settle down for a family. That requires investing in your future, but not with a money return.

In your lifetime, you will earn a set amount of money. You just don't know what it is yet. Because of this, you can't waste money on things like interest on loans for cars and TVs and Computers. On an average car loan for a $30,000 car, you're spending $7,380 more than you should. Think about what you could do with all of that extra money! You should only take out a car loan for the first car you ever buy, and NEVER be late on a payment.


So, in conclusion, I'll respond to each to your ideas:

1) It's not illegal, it's just that the TV's yours and not your parent's. Not a good idea, because you're wasting money through financing on something you can buy for cash.
2) Not a good idea. Wasting money through financing, and you don't really need a car right now.
3) More wasting of money through financing. Why buy something you don't need and only kinda of want?
4) That's like throwing your money away. Don't do it.

posted by  Godlaus

^^great info there, thanks man

posted by  newyorker

Your credit rating is an evaluation of the risk a lender accepts when you borrow money - the risk you will spend more money than you have income, default on your credit card or loan thus cause the bank to lose money.

About what credit ratings is - Banks (even on credit card loans) look @ your income vs amount of debt you already owe and your payment history when evaluating their risk. Your credit score only reflects, the number of times a business asks for a credit report (are you trying to borrow money and getting turned down), identifies your potential debt load (credit limit on your credit cars, loans, etc) and payment history (do you pay on time?). On any credit card application or loan application, you are almost always asked for your employer and income level (do you make enough money and have a potentially steady income source for the life of your loan?), bank account information (assets) and outstanding judgments/other legal issues (do you owe someone money as a result of a lawsuit or do you have a pending case where you have the potential of owing someone money or going to jail -you have no income to pay bills in jail)

The best way to build credit is to
1. Set a budget, write it down on paper and stick to it - DO NOT spend more than you are earning. Include your ALL of your anticipated expenses including fuel, rent, clothing, school tuition/student loan payments, car insurance, utilities, date money for that good looking gal you to post pics of etc.
2. Pay your bills on time
3. Use one card for fuel and pay it in full each month - if you carry a balance forward, you not only get charged interest (21%/yr-25%/yr based on average daily balance - a true APR of 35%/yr) but it is also a good indication you are spending more money than you are earning. You don't have to use the card for all of your purchases - more spending is not always better.
4. Get a good education or vocational training and have a good steady job.
5. Try to save 10% of your money each paycheck

posted by  tbaxleyjr

Very well put!

posted by  SyntheticTrust

Thanks
I hope some folks read what I said and try to follow my suggestions - this the same type of advice I give my daughters

The reason I think the economy is screwed up in America is
1. rising fuel costs - Unfortunatley, fuel costs and the resulting cost increases has outpaced most people's pay raises thus they have little excess money to spend
2. The average American is up to their armpits in debt thus has no money to spend to pull the economy out of the slowdown if they can deal with item 1.

posted by  tbaxleyjr

I wonder if it's possible to convert your car to run on milk :laughing:.

This thread is great though...lots of useful info.

posted by  chris_knows

I wonder - I just saw my credit card bill (the card I use for fueling our 3 cars) for last month.........We are going to have to drive less in our household - fuel and tires are going out of sight.

I would think twice about running a car on milk - it was over $5.00 US/ gal the last time my wife sent me on a grocery store run.

posted by  tbaxleyjr

this is off topic, but it would be easier to run your car on the grass before the cow processed it and released all the methane, rather than on milk.

posted by  dvdrose18

Could always run cars on the other sort of grass....I'll bet people would moan about intoxicating fumes alot less...:laughing:

posted by  Cliffy

price might be a little bit of an issue though...

posted by  dvdrose18

on purchases such as tv's, couches, lawnmowers, etc...try and find one year same as cash. each month put back the amount you will need and pay it off when the year is up.
i also did the parent deal where they bought something and put it in my name.
make sure you pay all your bills on time.
dont borrow money from a bank just to pay it back.
if you get a credit card make sure you pay off the bill.

posted by  adamc44

I honestly hate the smell of that grass, but love the smell of gasoline.

posted by  giant016

Cows are apparently very inefficient. Seven kilograms of grain are required to produce 1 kilogram of beef; the conversion is 4-to-1 for pork and 2-to-1 for poultry.

EDIT: I read your post as a question. My bad.

posted by  chris_knows

I am sure the grass dvdrose18 is talking about grows in lawns and ball fields...... The names for marijuana changes from generation to generation but the odor (or stink) remains the same.

posted by  tbaxleyjr

you really couldn't run a car on milk or grass. at least without some type of extraction. you ever hear of jatropha though? apparently you can press the seed and get biodiesel without any type of purification. too bad it doesn't grow up here in central new york. would help the ecomony too.

posted by  carls47807

I agree. What gets me though is how some people openly smoke it and don't seem to realise it stinks....:screwy:

posted by  Cliffy

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