CREDIT... Learn me...

OK guys, here goes...

I've always paid cash. My mom scared the crap out of me when I was young about credit cards. They're evil. That got engrained into my head and I've never had one. Never had bank loans, nothing. If I couldn't pay cash, I didn't need it.

I'm 33 now, married, have a house, 2 kids. Wife has an AWESOME credit score. I have a credit score of N/A. It really shows up as that... Depressing really. Anyway, how does one build up ones credit score without going into crazy debt doing so? What is the quickest and easiest way to do it?

Get a credit card. Use it responsibly. Don't spend more money than you do now; pay the balance off at the end of the month.

I'm 20, my credit rating was 760 the last time someone ran it. It's not a hard thing.

I have a credit card that I use to buy parts for my car projects and pay it off at the end of the month.

Go to your local bank or credit union and ask for a credit card. Charge few things and pay it off every month or several months.

Sears used to be the first place people wold get a credit card from. They would set up desk at the entrance. I got a new one from them when I bought a garage door opener and saved 10% on the price. Funny thing is, their interest rate borders on usery, so the card is tucked into my dresser drawer and almost never gets used.

E36 M3, talk about fast!!!

And once you have credit, if you need to buy something say a TV or appliance, even if you can pay out of pocket, if they offer 0% financing for X months, take them up on it, then pay it off within that time frame.

Its a free loan and helps your credit.

Dont be afraid to shuffle debts over to new cards with 0% interest rates either. With tax returns this year my wife and I paid off some cards, shuffled the remainder to a new 18 month 0% card that we wont need to use (because we knocked out a few re-occurring bills) and now have time to pay it down with no interest being added.

And ALWAYS pay on time or earlier. But I think thats a given. I didn't always have a great income/debt ratio, but I ALWAYS paid on time for all my bills, my credit score is really really high.

Dave Ramsey says, "Don't go into debt. Ever!"

scardeal wrote: Dave Ramsey says, "Don't go into debt. Ever!"

That dude is an asshat.

I have a few cards for various reasons. A couple I've had for a long time. My main one is a Discover (for the cash back) I've had since '94. Then I have a Mastercard (since '91) for stuff that gets auto-billed (EZ Pass and a monthly donation) and for occasional times when Discover isn't accepted. Then I have a card I use only for gas/diesel since I get 5% back automatically off each statement (saves me $8-10 ea month). I recently got a Lowes card since they give 5% off each purchase, right at the register. I also have a Sears card (since '92), although it hasn't been used in years. All are paid off each month and I still watch what I buy so that I don't buy more than I can afford.

I've also done a few 0 interest purchases for a nice ($2200) mattress and a Dell laptop. Yes, I could have bought them outright, but as mentioned, it's a free loan and I divide out the payments so the loan is paid off a month or two before the promotional period is up.

Between these, a number of completed car loans as well as my mortgage (almost finished), credit card companies beat a path to my door and my shredder gets a good work-out during the week...

Is the house paid off?
If yes, get a home equity line of credit. This would be like a $60,000 open loan. You do not have to use any of the money but rather you have the ability to use it.
Say it is time to buy a $10k car and you want to pay cash... Pull the $10k from the line of credit, buy the car and then pay-back the $10k quickly. This will show a paper trail of responsible credit use.

After all, a credit score is just that, a grade given to you by people who let you use their credit. If you are not using it (and therefore not taking the test) you are not getting a grade.
Play their game (and be good at it - payoff) so as to get a good grade.

Yo Momma wuz rite. Here's everything you'll ever need to know about credit: DON'T.

Ramsey may be a bit of an asshat. I disagree with some of his ideas, but he says "If you play with snakes, you're going to get bit."

Are you on the home loan? That will give you credit and simply owning a home gives you a higher credit score than if you are renting.

To get a good credit score you must USE credit. It's as simple as that, but nothing says you have to go deeply in debt.

1) keep you credit balances to below 50% of your credit limits and you'll develop a higher score quicker.

2) make payments consistently. In other words don't charge infrequently and pay it off instantly. You need to develop a payment history.

3) a $5 a month payment gets you almost as much credit score as a $500 monthly payment. I call it an activity unit. The credit bureaus see units of activity. The fact that you have a unit is more important than the price of that unit. BUT . . .

4) Your credit score will vary by usage and you can't can't get an accurate credit score yourself. The score will vary according to your history of your credit of the reason for the pull. In other words if you have great car history when they pull your score for a car loan you'll have a higher score. So if you only have credit cards then your credit score for a credit card pull will be high but lower for pulls for car loans, home loans, etc.

The generic score (the only one you can pull) in theory should be in the middle, but we find it can vary 50-60 points from a mortgage pull.

There is nothing nowhere that says you have to have huge amounts of credit to get a good credit score, but be aware that the more pieces of credit you have the higher your score will be.

To get a 620 score which is the typical minimum score needed for a home loan, you'll need at least 3 pieces of credit. If you want to develop and keep an 800 score you'll need 10-12 pieces of credit.

New good credit dilutes old bad credit so if you've ever had credit troubles don't stop using credit. Use more! You'll need that to overcome any bad credit. The older it gets the less impact it has.

Ramsey is right & wrong. You simply must have some credit in today's society - unless you are fabulously wealthy.

Wow, you guys are friggin fast. 3 responses in under a minute..

As for the house, no it's not paid off. We just had it built (had a build thread on it here) and moved in on Dec. 18th last year. Wife actually filed bankruptcy in 2005 and has gotten her credit back to over 760 in that period. She's smart and responsible, I'm not so much.

I've heard about putting $1k in a CD at the bank and borrowing against it and paying that off helps a lot and is relatively quick. Anyone done this? I really REALLY want to stay away from credit cards. I have a Visa check/bank card that works for everything I need it to.

Dr. Hess wrote: Yo Momma wuz rite. Here's everything you'll ever need to know about credit: DON'T. Ramsey may be a bit of an asshat. I disagree with some of his ideas, but he says "If you play with snakes, you're going to get bit."

I agree. He may be a bit of an asshat at times, but I know several families who followed his process to change their life around. His key thing is to run from debt.

Conquest351 wrote: I've heard about putting $1k in a CD at the bank and borrowing against it and paying that off helps a lot and is relatively quick. Anyone done this? I really REALLY want to stay away from credit cards. I have a Visa check/bank card that works for everything I need it to.

You make internet purchases with a check card?

93EXCivic wrote:

Conquest351 wrote: I've heard about putting $1k in a CD at the bank and borrowing against it and paying that off helps a lot and is relatively quick. Anyone done this? I really REALLY want to stay away from credit cards. I have a Visa check/bank card that works for everything I need it to.

You make internet purchases with a check card?

I really don't buy stuff on the internet. I've bought a couple of things from Amazon, but that's it. And by a couple, I really mean 2. Ever...

carguy123 wrote: 3) a $5 a month payment gets you almost as much credit score as a $500 monthly payment. I call it an activity unit. The credit bureaus see units of activity. The fact that you have a unit is more important than the price of that unit. BUT . . .

Maybe the Carguy can comment on this as far as units of activity...

I have two credit cards that have no balance. I still send these companies an automated $5 payment every month. When the positive balance gets to about $50, the credit car company sends me back a check for the amount ($50) thereby clearing out my positive balance.
I think (but can not prove) that this has greatly improved my credit score in this "activity unit" sort of way.
I think the card company sees me as having activity with them every month rather than no activity.
I loose no money and just pass $50 around for a while.

In reply to Conquest351:

Wait...

You are living in a paid for house.

No debt...

33yrs old...

Why in the hell do you think you need a credit score?

I am afraid I don't understand your situation... and no offense.. But your wife is 'smart' with money... and has the bankruptcy????

and you are the 'dumb' one?

I must be missing something here...

Johnboyjjb wrote:

Dr. Hess wrote: Yo Momma wuz rite. Here's everything you'll ever need to know about credit: DON'T. Ramsey may be a bit of an asshat. I disagree with some of his ideas, but he says "If you play with snakes, you're going to get bit."

I agree. He may be a bit of an asshat at times, but I know several families who followed his process to change their life around. His key thing is to run from debt.

Meh, rewards cards are great. Use them for stuff you'd usually use your check card for, groceries/gas/booking vacations, then pay them off at the end of the month.

Unfortunately the only way to build credit is to borrow money. The fact that you know you need to keep an eye on your spending when using plastic is a good thing and the first step towards responsible money management.

There's a school of thought that thinks you're better off with no credit score than a low one (which is where you would start) aka the Dave Ramsey school of thought. I can see his point, but I've also seen that some of his advice doesn't always work - my B-i-L has had an N/A credit score for a long time and as a result the house is in his wife's name (as is the mortgage) because even during boom times they had trouble getting a lender willing to lend them at a decent rate.

What I would do is to get a card from your local CU (you are a CU member, right? If not, become one) and use that for one expense that you are currently paying with your debit card - say, gas. Don't charge anything else on there, don't spend the gas money in the checking account. Every month, as the bill comes in, pay it with the money you have in the checking account.

According to Clark Howard and some additional "Internet wisdom", you want to keep the credit utilization under 33% at billing time and ideally under 10% - the latter will give your credit score a bigger boost. I'm currently trying the latter and it seems to work (but it's only been two months).

Also, after six months ask for a credit limit increase - the more "unused" credit you have on the card, the better. Just don't spend it.

ronholm wrote: In reply to Conquest351: Wait... You are living in a paid for house. No debt... 33yrs old... Why in the hell do you think you need a credit score? I am afraid I don't understand your situation... and no offense.. But your wife is 'smart' with money... and has the bankruptcy???? and you are the 'dumb' one? I must be missing something here...

ronholm wrote: In reply to Conquest351: Wait... You are living in a paid for house. No debt... 33yrs old... Why in the hell do you think you need a credit score? I am afraid I don't understand your situation... and no offense.. But your wife is 'smart' with money... and has the bankruptcy???? and you are the 'dumb' one? I must be missing something here...

Hahaha! No no no...

The house is FAR from paid for. It was just built, we've only been paying for it since January.

Wife's bankruptcy was due to a divorce and her ex leaving her with all the bills while he took all the stuff. She's smart with money and has been able to get her credit score back to very good in that little time. I think she had it back up to over 650 in 3 years.

Any more, you pretty much have to have a credit rating to do anything, even get a job. When I moved here, I had to let the electric co-op, the cable company, etc all run my credit before they would hook me up without a deposit. The water company (city water) did too, said my credit was great but STILL hit me for a deposit.

The way that used to be done: go to three or four of those dinky finance companies, borrow, say, $500 from each and stick the money in the bank. (Of course this was back in the days before 'fog a mirror' credit cards.) Then use the money to make the payments on time. Pay it off a little early. Yeah, you pay the interest but you would have anyway, right?

Now you have some credit history.

I thought paying off loans and stuff went on your credit score as well?

I have one card, I rarely use it, I think I bought the tires on my truck with it a few years back. Other than internet crap it's cash to pay for everything.

But yeah, it's stupid to me that having credit cards = good.

Hahaha! No no no... The house is FAR from paid for. It was just built, we've only been paying for it since January. Wife's bankruptcy was due to a divorce and her ex leaving her with all the bills while he took all the stuff. She's smart with money and has been able to get her credit score back to very good in that little time. I think she had it back up to over 650 in 3 years.

Ok.. That makes the situation a bit different..

But again..

Whatbis the need for a credit score? What are you currently struggling with?

Job app? car insurance? something like that? Or just personal emotion?