Get a credit card?

[veneratio]

Hey Caldus, I don't have too much advice to offer. What I did was use my credit cards for things I could afford, so that I stayed within my budget. So instead of going crazy and buying everything I could get my hands on, I bought a cd deck using my card, paid off the $300 monthly. Once I'm done I usually get something else in or around that price range so that my monthly payments are never more than $30. Helps keep me safe and increases my card limit.

[Honey Pumpkin]

I use a credit card to build up my credit rating, and also because I much prefer to use it to buy things online - never use my debit card online.

 

I pay off my credit card every month without fail. It's a way of demonstrating that you can manage money responsibly, and gives you a history of being reliable etc. Years ago I treated my credit card like a loan, and the interest rates are terrible. Owing money on a credit card is the most expensive way you can do it, and twice I have paid off my credit card by taking out a loan.

 

For the last five years though, I have been very responsible and just use a credit card as a safe and easy way to put my monthly purchases on, and then always pay if off before I pay any interest on it. I like having a credit card also for emergencies - if I had to make an unexpected trip etc, it's comforting to know that I have access to several thousand pounds straightaway. I wouldn't do it, but it's a good thing to have in an emergency.

[lost1607307474]

The best knowledge to have when you get a credit card is to remember not to spend more money than you actually have! If you can do this, you will be fine.

 

The most important things to look up with credit cards are interest rates and fees. I pay off my credit card every month without fail so I never have to pay any interest! This is the best way to go

 

There are also many credit cards today that offer an 'awards' system, where you get awarded points for spending money on your card. As these points accumulate, you can then buy things with them! I purchased quite a few large expenses on my credit card, got lots of awards points, and so far have gotten with them a juice machine, hair-dryer, and toaster!

[sidehop]

If you really want to build credit and with no or new credit, start with secure credit card. Credit card is a loan, unless you need it, you don't need it. Yes, good credit is essential when it comes to purchasing a big ticket investment like a new house or a car.

 

For new credit card holders with new or no credit:

- Keep the balance to 10% or below available credit (less than $100 for $1,000 credit limit)

- Always pay your bill on time (affects 35% of your FICO)

- If you use a large portion of your card, pay it BEFORE the statement cycle

- Do not get a new credit card or apply for one at least two years

- Don't pay off the card completely each time

- Get a credit monitoring service

 

Some explanation.

 

Balance

Most people will hear the 35% or below balance for credit cards. It's not always true for new credit card holders with new or no credit. Utilizing more than 10% of the credit card balance CAN hurt your score. You're building credit, make small purchases and don't rely on your credit.

 

Paying on Time

Do not miss any payment. Ever. This is another reason why keeping the 10% or below target is a good idea so you can most likely afford to make the payment. 35% of your credit score is how you've been paying on time. Your FICO can drop as much as 60~100 points if you miss one payment.

 

Large Debt on a Card

If you end up using the card for an emergency and say you used $500 of the $1,000 that's available. It's a red flag for FICO if the balance shows at the statement cycle as 50% utilization. Even if you paid the $500 off and have zero balance, FICO will still see the $500 balance until the next cycle. So, if you want the credit report to reflect a lower balance, always pay BEFORE the cycle ends. Credit card company will automatically report that low balance = low utilization = FICO score stays or goes up with time.

 

Apply for One Card

Each time you apply, for 24 months FICO will deduct 2 points. You need to be patient for the first two years at least when building a credit, it takes many years for anyone to get in the 800 FICO range. If you get approved for one, don't apply for at least another two years unless you have to (then you shouldn't be using your credit card).

 

Don't Pay Off the Balance for New Credit

It's actually been proven that if your credit is new, you want to show the FICO system you are utilizing your credit wisely. This means if you have $1,000 available credit and spend $300, pay down to say $10 and leave the balance. Sure, there may be some interest added but by paying down the credit card completely (especially before statement cycle) it can hurt your credit because the system will think you're not using the credit which can be a bad thing.

 

Get a Credit Monitoring Service

For about $12~$15 a month services like Trans Union's TrueCredit as well as Chase Identitiy credit monitoring service allow you to see your updated credit report every 24 hrs. FICO score must always be purchase no matter what (TU, EX & EQ have their own scoring system but don't get them mixed up with FICO, FICO is NEVER free). It's worth it as you can see any mistakes or if for any reason you have any type of fradulent activity that takes place within your credit.

 

Cash is King

If you don't need credit, cash is king. Credit cards can be good for an emergency but you should be saving your money instead for those hard times. It should be the last resort to whip out a plastic to pay for something (unless it's debit of course).

 

Good resources are forum like link removed as well as reading up on FDCPA and FCRA (big big thick manual).

 

You can talk about credit forever...especially when it comes to fixing.

[McLovin oo7]

I think that is the problem though... people think, "Oh I make xxx amount" thereforee i can afford xxxx amount of debt.

 

Then something happens where they have a sum of something to pay unexpected. Thats where the danger is, people don't account for extra things that come along... and they always do.

 

I am assuming that whenever you buy a car or a house you pay the whole amount in cash upfront.....

 

I wonder how many people can do that in this world.

 

If there is no finance available, majority of us would always be renting instead of owning a house.

[shikashika]

I am assuming that whenever you buy a car or a house you pay the whole amount in cash upfront.....

 

I wonder how many people can do that in this world.

 

If there is no finance available, majority of us would always be renting instead of owning a house.

 

Cars yes... house no... I did say education and mortages are one thing...credit card debt is another.

 

I drive around an old beater... and yes I did 'save up' the $2000 ... i'm not even driving it at the moment.

 

My parents never bought new cars, we always had old ones, so i guess i never gave much thought to having a nice car.

 

And, I think sometimes renting is better than owning for many people. Too many people have taken on mortgages they can't afford.

 

It seems like now, everyone wants the perfect job, car, house, investment before they are 30!

 

Why do people spend half of their yearly salary on a car?

[McLovin oo7]

Cars yes... house no... I did say education and mortages are one thing...credit card debt is another.

 

I drive around an old beater... and yes I did 'save up' the $2000 ... i'm not even driving it at the moment.

 

My parents never bought new cars, we always had old ones, so i guess i never gave much thought to having a nice car.

 

And, I think sometimes renting is better than owning for many people. Too many people have taken on mortgages they can't afford.

 

It seems like now, everyone wants the perfect job, car, house, investment before they are 30!

 

Why do people spend half of their yearly salary on a car?

 

Even after reading all the argument for and against credit cards, I still love them. However, one must not have a credit card if they can not use it responsibly.

 

I put everything on credit card and pay it before the due date. It saves me time from those unnecessary bank / ATM visits and also less transactions in my bank account.

[shikashika]

Even after reading all the argument for and against credit cards, I still love them. However, one must not have a credit card if they can not use it responsibly.

 

I put everything on credit card and pay it before the due date. It saves me time from those unnecessary bank / ATM visits and also less transactions in my bank account.

 

 

I have no problem with credit cards either... it's the credit card debt... and when people have a $10 000 limit, they think that means they have $10 000 to spend.

 

problem is, most people don't pay off the entire amount before the due date... they only pay the minimum.

[Valina]

We seem to be the same age so I thought I'd chime in...

 

I have had a debit card since I was 17 and opened up 1 credit card at 20 which I used once a month just to keep active and to build credit. About 6 months ago, I was looking at buying a townhome and in talking with mortgage companies and banks, it was recommended to me that I open a 2nd credit card purely to build more substantial credit. So I opened a card that I use for gas, pay off in full every month, and get rewards back on. I will echo what most people have said though, and don't put it on your credit card if you can't pay it off by the 30th.

[greywolf]

I don't think you should use the excuse of "ohh i'm building up my credit history" that's why i'm spending more than is in my bank account.

 

I call bull on that.

 

Sorry, but if you do not have the money then don't buy it. People lived before without credit cards and can live now. If your car dies and you are 2 weeks away from pay day with no money in your bank acccount then its your fault for not living with in your means. It's not an emergency. You shouldn't be using a credit card to bail you out... that's what got everyone into this mess in the first place.

 

 

Building up a credit history doesn't mean you spend more than what you have. Before we had credit cards they didn't check credit history. Now you can hardly get anything without people checking your credit history.

[Cassie]

Now you can hardly get anything without people checking your credit history.

 

You're absolutely right, Greywolf. But does anyone else see the irony in this - that you can hardly get anything nowadays without first going into debt? (even if going into small amounts of debt each month to immediately pay off to build a good credit score)

 

This may all change in the coming years as easy credit evaporates. I believe credit will be cheap but also very difficult to obtain. I've started hearing stories from friends with excellent payment histories and credit scores who are getting their credit limit balances drastically reduced and they are not pleased.

[Cassie]

Interesting article I came accross, thought I'd share.

 

 

Credit Card Companies Adjusting Credit Limits

For some, lowering based on where they shop

 

From the Atlanta-Journal Constitution:

December 21, 2008

 

Kevin D. Johnson returned from a dreamy Jamaican honeymoon in October eager to check out wedding photos and help his new wife open stacks of beautifully wrapped wedding gifts.

Before getting distracted by the fun stuff, the 29-year-old entrepreneur opened the mail. Johnson’s mood soured when he got to a letter from American Express, saying it had slashed the credit limit on his account.

 

Johnson was surprised, since he has a perfect payment history and a high credit score. And he was floored by one of the reasons American Express cited: It didn’t like where he shopped.

 

“Other customers who have used their card at establishments where you recently shopped have a poor repayment history with American Express,” the letter said. Johnson complained to American Express by phone and letter.

 

“That doesn’t have anything to do with whether I’m a paying customer or not,” he said in an interview.

 

Johnson checked his charges to try to figure out what might have raised a red flag in the American Express data-mining model. He didn’t see anything but typical transactions, including purchases at Amazon, Ruby Tuesday, Wal-Mart, Starbucks and Federal Express.

 

“I understand the need for and the power of predictive analytics,” Johnson said, “But I think they have crossed the line.”

 

American Express declined to discuss Johnson’s account. But it confirmed that it examines spending patterns. It’s just one of many tactics that credit card companies are using to try to keep default rates from growing higher. Along with studying shopping habits, American Express considers which mortgage lender a customer uses and whether the customer owns a home in an area where housing prices are declining.

 

These factors are combined with a review of other details to decide whether to adjust a credit limit.

 

“We’re just doing this to manage risk,” said Lisa A. Gonzalez, an American Express spokeswoman. She declined to say which retailers or mortgage companies are associated with consumers with higher default rates. She said it makes sense to examine these factors because “customers who have loans outstanding with certain lenders or customers who make transactions with certain merchants tend to have a higher proportion of credit issues or a higher probability of default.”

 

“It’s not a fair practice,” said Travis Plunkett, legislative director at Consumer Federation of America, a consumer advocacy group. “I imagine this person feels this is guilt by association. It doesn’t work in the justice system, and it shouldn’t work when it comes to credit card charges.”

 

Ed Mierzwinski, consumer program director at U.S. PIRG, a Washington-based consumer organization, said companies are telling consumers that “everything you have known for years is no longer true.”

 

The companies no longer guarantee customers will be considered low risk if they pay their bills on time and never exceed their credit limits.

 

“Now you have to watch where you shop, because if you shop where deadbeats shop or live where deadbeats live, we’re going to use that as a reason to lower your limits or increase your rates,” Mierzwinski said. He also questions whether the models are valid. “I just am not convinced that it’s a legitimate use of data mining,” he said.

Full article:

link removed

[Anthropic]

No one twists anyone's arm to get into debt, so I don't buy your "some people don't have a choice" argument. There are always choices. There was a girl who had so much debt, she was almost forced to declare bankruptcy. Instead she chose to give up her apartment and go homeless while sleeping in her car and working two jobs until she could afford a gym membership. She would then shower at the gym every morning and eat at the restaurant she worked at before continuing to her next job. This went on for months until every cent owed was paid back. Today she is now highly successful in her field and also very comfortably wealthy.

 

The girl in this story writes the violent acres blog (pretty sure we're thinking of the same person). I thought it was a pretty inventive way to get out of debt, worth a link to the original story removed[/i]

 

I use my credit card for just about everything. The way I see it, I get to keep my own money for longer, meaning it can collect interest for me until the end of the month. It also makes it easier to track where all my money is going.

[FortunateOne]

Folks, here's the truth about buying a home; simply, you need credit to qualify for a mortgage. FHA/HUD and Fannie Mae/Freddie Mac require at least 24 continues months with three (3) trade lines of credit of which two (2) trade lines must come from revolving lines of credit. Once again, two (2) credit report trade lines must come from revolving lines of credit which is from the evil credit card companies. Without these lines of credit you can never buy a home and thereforee relegate yourself to a life as a tenant and no federal income tax reduction benefits. How can I write this with so much confidence? Because I'm a banker and there's no way to convince me of your credit worthiness without these trade lines on your credit history. So, to the OP, go ahead and start to build a positive credit future with great prudence towards credit management.

[shikashika]

Is the OP American? Things are a little different in different places in regards to getting a mortgage.

 

Same with a lot of threads, people need to realise it's an international forum and the same advice cannot apply to everyone.

[sidehop]

Fortunate, what's the minimum FICO there for mortgage or any loan these days? I've heard minimum 700 and most requiring 720 (aside from other factors). I remember working for a mortgage company years ago before the market inflated, FICO 680 was good enough to get a decent rate.

[renaissancewoman101]

That's sad about how credit is tightening so much, and just at a time when people may TRULY need it.

[sidehop]

It goes both ways, credit card companies should not be able to take advantage of people especially the ones with bad credit with horrible interest rates, rate jacking with only one missed payments and other games they play which they've been getting away with for so long.

 

In this economy it's a good thing for borrowers. People will be wise with their money and will be more careful as far as spending goes. If you don't need it even if you want it, don't charge it. There's too much 'buy now, pay later' or the 'American dream' that make people think being in debt is a normal thing. It is, especially with student loans and things most people cannot afford paying in cash often times but it's when people start to want something and pile themselves with credit card debts. Such a brutal cycle.

[renaissancewoman101]

Sidehop, I do agree with you, credit card companies have been taking advantage of people for the longest time. It's just sad that nowadays, esp when people are suffering reduced pay, loss of equity in housing, that their only lifeline, the credit card is being taken away from them, esp for people who need to find ways to pay for meds, college educations, housing, food, etc.

[sidehop]

Very good point, there are credit cards that should be available for the masses such as medical bills (without interest rates), pet bills (they do but one card from GE's interest rates are absolutely horrible) and emergency options that people need to have.