Credit questions

[iBroken]

Hmm...my first credit card was when I was 19, I got an RBC student visa classic II with no deposit (though I wasn't a student, buahahaha!). It had a $1000 limit with 19.99% interest...youch that's high. I did have to pay for the card though, $25 I think.

 

Maybe things have changed in the past few years but I never had to put down a deposit.

 

 

No, this rule is an exception to a first credit card. If you are a student, you can get a card often without a security requirement. But you usually have to provide proof of student status to your institution (but I know of branch reps who found ways to get around it).

[Cheetarah]

I screwed up my credit when I was 19. I eventually payed off the debts and was able to negotiate with some creditors to remove it from my credit file upon full payment. I still had 2 negative revolving accounts and one in collections(paid charge-offs), and needless to say no one was about to give me credit.

 

I had to get a secured card(my bank is the only one who would offer it. Can you believe you can get turned down for a secured card?). I put down a 300 limit, used it sparingly and paid it off everytime I used it. Within a year, they refunded the deposit and upped my limit to $500 - And I got credit card offers in the mail a few months after making timely payments on the secured card. I'll say doing it that way, I was far more careful as I didn't view it as "free money"

 

I put EVERYTHING, and I mean everything, on my CCs. I only use what I have, if I have to go over my means, I pay off as large a chunk as possible.

 

Beware of the fine print, though. Crazy annual fees, and these bizarre banks that charge unheard of fees for the oddest things.

 

link removed is safe. We use this at work. I've used it many a time, I've found that happened if I answered one of the security questions wrong(by accident) or was off a digit in my social and didn't realize it.

[george237]

No, this rule is an exception to a first credit card. If you are a student, you can get a card often without a security requirement. But you usually have to provide proof of student status to your institution (but I know of branch reps who found ways to get around it).

 

Is this a rule for just canada maybe? I never heard of that.

[annie24]

I don't know. i am sure that there are plenty of ways to get a credit card, depending on the annual rate, and APR.

[shes2smart]

Don't overlook the fact that a credit score is not only used if you go to take out a mortgage or car loan.

 

Many potential employers pull your credit and use that to screen out potentially poor employees (the thinking is if you're irresponsible with money management you may be irresponsible in general).

 

Many insurance companies also pull your credit when they review your rates...and a higher credit score may mean you pay a lower premium (again with the thinking that if you've engaged in risky financial behavior, you may engage in other risky behaviors when you drive and so forth).

 

No credit score means you're an unknown risk factor. That's a scary proposition in many situations. I work in the office at a car dealership. The finance guys find "no credit score" scarier than "low credit score."

 

So, it's not just about being able to buy stuff you may or may not need or may not be able to afford -- your credit score is increasingly being used by other companies/entities as a predictor of your overall behavior. You may not like it, but its what we have to work with now.

[Cheeks18]

You can do it with 20k a year, live like crap for a couple years and save your money. Go rent a little apartment for dirt cheap. If you dont have kids and are on your own your way ahead of everyone else and can pack away money like it's your job. That means you CANT be going out and buying a 52" HDTV and buying a new car, buy a P.O.S. car and deal with it for a few years and before you know it you'll be sitting on a hefty some. I read a book that said "If you live like NO ONE else now, you can live like NO ONE else later. FYI Age discrimination is pretty lame.

 

Sorry about the age thing....Anyways, I would much rather live my life when I am young than have money when I cant do the fun things I can and do, do now.

[WockaWocka]

Credit history is also something many employers look at these days as part of their background check. Even to rent an apartment in a major city most landlords require a credit score or report. They want to see evidence that you can be trusted to make regular on-time payments and treat liabilities fairly. Read Suzie Ormann or one of the other financial writers if you doubt the importance of a credit score.

 

Fudgie, your plan sounds good. You might think about a cosigner with your first credit card to get a low interest rate. But I understand if you want to do it on your own. However I believe in order to build up a credit history they want to see your highest-to-date balance, so if you only charge $100 a month and pay it off they will only see that you can be trusted with $100. I wouldn't encourage you to be reckless, but over time you might want to charge bigger purchases.

 

Credit card transactions also tend to have better fraud protections than debit cards (at least this was true a few years ago. I know two people who've had their identity stolen and in both cases credit cards reversed the transactions right away whereas bank debit cards refused to do so). Also credit cards will take on merchant disputes more readily (if you are dissatisfied with product/service). And if I rent a car my credit card automatically pays the collision insurance. Just perks to consider.

 

Good luck.

[annie24]

That is an excellent point. Credit cards do have better fraud protection than debit cards. If your credit card gets stolen, you are only on the hook for $50 typically. Whereas with debit cards, you could wind up paying much much more!

[OptomisticGirl]

^ Thats the worst advice EVAR. Sorry to say. But you can get away with that since you are only 18

 

No credit equals no car, no mortgage, no lending. That also makes for a boring relationship with your financial institution. They like an exciting, jam packed relationship with lots of accounts and business!

 

I'm 22 and I would have given the same advice that poster did.

 

OP I have had my run in with credit cards. And while they are nice to have on a rainy day if you see something you want and don't have the cash right then, there are easier and better ways to build your credit up.

 

When I moved out I had no credit whatsoever to my name. I was 18 for crying out loud. I build mine up by paying rent (the land people reported it to the credit people, so that was a huge plus in getting me started) plus I put bills in my name. Yeah on some of them I had to put a deposit down or have a co-signer) but after about 6 months to a year and paying the bills on time, my credit score was great.

 

And then I got credit cards.

 

Like I said, while they are nice, you REALLY have to be careful with them. It's easy to go overboard. And while yeah, you need credit to get a house or car one day, having BAD credit because of a credit card is worse.

 

I would suggust looking at other ways to get credit before going into a credit card situation IMO.

[annie24]

the problem with people saying you should have no mortgage is this: you have to live somewhere. So if i want to buy a home that costs $300,000, I need to save up that money WHILE paying rent to someone else?? that's a waste of money. Whereas if I save up enough of a down payment, I can buy the home and essentially, pay the rent to myself over time. Plus you get tax deductions for owning a home.

 

I love owning my own condo (I bought it at 25 and with a mortgage). it's nice to be able to have my own place, that i love, and when i pay my mortgage, i am reinvesting it in my own interest, as opposed to losing money paying rent.

[Sanesoul]

I would never recommend getting a credit card. The idea that you need credit is ridiculous.

 

If you don't have the money to buy something outright, don't buy it. The only thing you should need credit for is a house, and there are plenty of mortgage companies that will look at more than just your credit score to approve financing for you.

[OptomisticGirl]

I would never recommend getting a credit card. The idea that you need credit is ridiculous.

 

If you don't have the money to buy something outright, don't buy it. The only thing you should need credit for is a house, and there are plenty of mortgage companies that will look at more than just your credit score to approve financing for you.

 

I think you DO need some credit, even more than just owning a house.

 

Credit isn't a bad thing if you achieve it the right way and maintain it, I just don't think credit cards are the BEST way to do that. I mean yeah, you can do it the other ways and end up in the whole as well but credit card debt is outrageous.

[Sanesoul]

I agree. You don't need a credit score, at all.

[WockaWocka]

P.S. If you like to travel, the airline credit cards that offer 25,000 miles after your first puchase plus miles on every transaction are excellent. They tend to charge an annual fee and a higher interest rate, but I've used them to earn enough miles for two free domestic tickets.

 

But whatever credit card you first get, plan to stick with it for several years or more (which is why having a cosigner to get a lower interest rate can help. My parents cosigned on my first card and eventually took themselves off.)

[Sanesoul]

I think you DO need some credit, even more than just owning a house.

 

Credit isn't a bad thing if you achieve it the right way and maintain it, I just don't think credit cards are the BEST way to do that. I mean yeah, you can do it the other ways and end up in the whole as well but credit card debt is outrageous.

 

Nope, you really don't need credit. If you have zero debt, and even a poor income, you can save up to buy anything you need. Unless, of course, you live outside your means. My husband and I are living extremely frugally, but we will be debt free in 2 years. After that, all the money we were paying towards our debt will go into savings for a down payment on a house.

[Sanesoul]

I see you keep mentioning he is only 18, but if you do some research into Dave Ramsey's money management plan, you will find hundreds of cases of people who have done exactly what this "kid" is describing.

 

It works.

[OptomisticGirl]

Nope, you really don't need credit. If you have zero debt, and even a poor income, you can save up to buy anything you need. Unless, of course, you live outside your means. My husband and I are living extremely frugally, but we will be debt free in 2 years. After that, all the money we were paying towards our debt will go into savings for a down payment on a house.

 

While that is true, having credit can help.

 

As frugal as I am, I'd rather have a credit score that helped me get my dream house in 2.5 years, than me saving and saving for 5.5 years for that same house.

[Sanesoul]

While that is true, having credit can help.

 

As frugal as I am, I'd rather have a credit score that helped me get my dream house in 2.5 years, than me saving and saving for 5.5 years for that same house.

 

I guess it's just a matter of how long you want to have a house payment. I'd rather save up for a few years and have enough of a down payment that I would have a 15 year loan instead of a 30 year.

[annie24]

I guess it's just a matter of how long you want to have a house payment. I'd rather save up for a few years and have enough of a down payment that I would have a 15 year loan instead of a 30 year.

 

doesn't matter, you can still get a 30 year loan but pay it down faster. i know people who have done that. the good part is that you can pay off extra when you have the money, but you're not on the hook in case you have a big expense that month that needs to be taken care of. the APR on the 30 year mortgage will be slightly higher than the 15 year though.

[Sanesoul]

doesn't matter, you can still get a 30 year loan but pay it down faster. i know people who have done that. the good part is that you can pay off extra when you have the money, but you're not on the hook in case you have a big expense that month that needs to be taken care of. the APR on the 30 year mortgage will be slightly higher than the 15 year though.

 

I know people who have done that too, I was just stating what I prefer.

[Brittney2008]

Fudgie, I have three credit cards and I've had one since I was 17 and the two others since I was 18. No deposit or cosigner required. I have total of like $3000 of credit line.

 

I believe it is absolutely essential to have a good credit score. Like you mentioned you couldn't even get a cell phone without it. I am 1 point away from excellent credit this is from utility bills, the three cards, and an auto loan in my name. I pay high interest on my cards and car because I was so young.

 

A CC is a really good way to build your credit and you seem very responsible. I say go for it. One thing I learned in my Econ class is it's best to pay it off over a three month period, they said the companies want to see that you can make payments on time an such. Just throwing it out there I'm not sure if it's true.

[annie24]

The other thing about credit cards - I like to travel. I like having the security of knowing if anything goes wrong, that I have over $25,000 in a credit limit so that if I get into an accident overseas, I can pay for emergency surgery or whatnot. Even something more minor (like when I lost my plane tickets in Spain), I was able to get replacement tickets, and book extra days in a hotel which wound up being about $500 total. Credit cards are good for emergencies. You can't write a check when you are abroad and expect them to cash it.

[iBroken]

^ Or even better, if you lose your wallet while travelling (credit card included), most credit card issuers have emergency cash options while travelling abroad. They will courier funds to your destination within 24 hours or something like that. Credit cards arent all about just charge it and pay it off. There are alot of additional perks - the most notable have been listed in this thread.

[OptomisticGirl]

The other thing about credit cards - I like to travel. I like having the security of knowing if anything goes wrong, that I have over $25,000 in a credit limit so that if I get into an accident overseas, I can pay for emergency surgery or whatnot. Even something more minor (like when I lost my plane tickets in Spain), I was able to get replacement tickets, and book extra days in a hotel which wound up being about $500 total. Credit cards are good for emergencies. You can't write a check when you are abroad and expect them to cash it.

 

Yep, that's the only reason I plan on keeping the one major universal CC I have after I pay the others off. The others are like store CC that I got a few years back and while I love the stores, having that option to use them when I go in is not good.

[annie24]

store credit cards are a rip off with those 29.99% APRs. But yeah, a major credit card (master card or visa) which is accepted worldwide with a nice high available balance is good to have in case of emergency.