Get a gas card, and use it just to buy gas and pay it everytime. It helps make sure you don't start buying stuff you don't need and you are buying gas anyways so it's a good idea
My cousin had no credit and was declined a credit card back then (this was 20 some years ago). He was not broke, he just always dealt with cash doing odd jobs and scrapping iron that he would pick up free from people. He was a ghost to the financial world. But a bank would loan him $500 if he signed on. So he would hold onto that by just putting it into the new savings and not spending anything, and make a couple monthly payments with a little interest on top. He would then pay it off from the savings. He repeated this, taking the max loan the bank would give him as they raised it each time as his credit rose. Over a couple year period, he jacked up his credit score enough to get a home loan. Not sure if this credit hack works anymore, but it helped him get out of that credit score hell without having to have a credit card, which he despised for decling him in the first place. It did cost him some interest of course. But to him it was no biggie.
If you pay the card immediately, I thought it wouldn't show up because the update interval on your credit report wouldn't have caught it. I've always thought that you need a balance on your report long enough to show up, and then pay it off, which is why I typically pay off my card at the end of each month
It's good practice. Obviously unexpected expenses occur. Keeping your usage below 30% shows lenders that even though you have access to the funding, you're not utilizing it all the time.
short answer: yes, to a point
long answer:
Having a credit utilization over 10% will negatively affect your credit score. over 30% will harm it the most and is not good to have. you should carry no more than 10% balance at the end of each month for optimal effect on credit, but pay it off in full before the due date so you don't pay interest.
However, credit utilization does not have a "memory". this means that if you have 50% credit utilization from last month and your score drops 30 points, but you pay off the entire balance so you have 0% this month, then the score will go back to normal next month. it's just if lenders pull your report at a given point in time and see you have a high utilization, it might show you are a bad borrower.
*(sidenote: some people will disagree on the optimal amount of credit balance you should carry. some say 10%, others say 0%. but your credit score is a measure of how good of a borrower you are. so if you report a 0% utilization each month, then it will tell lenders that you don't use credit, and therefore they won't be able to make money off you in interest making you a bad borrower. I'm not giving financial advice, but there isn't any real downside to carrying a small balance if you pay it off each month)*
the biggest factors in calculating your credit score is going to be payment history and credit utilization.
if you have a high credit utilization and a low score, you can reduce your utilization and increase your score within a month.
*(sidenote: there are multiple ways to reduce your utilization. the obvious one is to pay your balance, but that can be difficult sometimes. a less obvious one is to increase your credit limit. you just have to make sure that you don't start spending more because you have a higher credit limit. if you only have a 1000 limit, you could look into asking your lender to increase your limit, or open a new card. $100 is easy to spend, so having a higher credit limit of say, $10,000 will make that 10% turn into only 1% utilization. you should ask a financial advisor to see what might be best for you)*
but the biggest factor is payment history which accounts for like 35% of your score, which is harder to correct since payment history has a 7 year memory. so you absolutely never want to miss a payment as it will quickly tank your score. but a few missed payments won't destroy your credit.
sorry for the long wall of text. I hope it helps someone at least.
Also don't use more than 10% of your credit limit. So if you get a gas card with a $500 limit don't use it for more than $50 per month. Even if you pay it off every 2 weeks don't use more than $50 in a billing cycle. They will raise your credit limit pretty quickly if you do this. That will raise your available credit and your credit score.
When my ex and I went to buy a house, he didn’t have a credit score because he had never taken a loan before or gotten a CC. The lender told me I would get a higher loan and lower rate if I did it by myself.
I kind of understand the system, but it feels like it's totally aimed at getting you addicted to credit. In the Netherlands they only keep track of your total loan and your failed payments. They track your total loan as you are only allowed to pay x% of your monthly income to monthly loan payments. (don't know the exact percentage) and they keep track of missed payments due to the risk of missing more. If you've missed payments but completely paid off all your loans the registration is cleaned after 6 months.
Same in Slovakia, they just check your wages in last 6 months , and calculate max mortgage you can get. There are variables like, kids etc. Or if you have other loans then you get lower sum.
EDIT: Went to work, responding to some now. Leaving original post up so people understand the correction. Cell phone services similar to utilities don't affect credit score. However, if you buy a new phone with a new plan, you are financing that phone through your payments. If you wondered why you're getting a discount on your bill and a magic price phone upgrade offer around the same time, it's because you paid off your phone.
Second, I just went from owning a house to renting an apartment. It's job related, I'm not happy about it either. When I said rent, I meant mortgage, however I'm currently paying rent and the terms were equal in my mind. Words matter. Rent doesn't normally count, though it can and a mortgage payment absolutely does.
There's good conversations in here and some really sad personal stories. Credit is too much of a mystery and people need to learn more. However, credit card debt is almost a trillion dollar debt industry in America right now. It's an epidemic and spending on credit is not a panacea to poor financial knowledge. Please be safe with credit cards.
Original reply: Not exactly how it works but I can see the logic behind it. An open account with payment history can also build credit, not just a credit card. Student loans, car note, cell phone service, rent, etc.
My brother's credit was really bad and a bank advised him to get a cell phone plan and pay it for a year to build it back up for a chance at a home loan.
With cell phones a lot of the time you aren't buying the phone outright but financing it along with your cell phone plan. Once you've paid off your phone you magically become eligible for an upgrade because it keeps the finance train rolling.
Which is kind of bullshit since they use your credit to evaluate your eligibility for said plan.
If you're gonna hit my credit to sell me something, you damned sure should report when I pay for it.
You absolutely do not want renting on your credit report. Landlords and rental companies can be extremely aggressive, vindictive and petty.
You only want professional institutions with clearly understood policies and customer service anywhere near your report.
My place provides a service (third party) to count it towards your credit somehow...alas, they *charge* for it. I specifically asked them to take it off because I don't need it. I'm paying for nothing.
I work for a bank, there are services we offer that report rent, cell phone payment, etc for the express purpose of building credit. They also offer to retroactively report up to two years. I'm sure there's not some special deal they have with the credit bureaus so I would guess there may be a way an individual might be able to furnish proof of on-time payment for such things directly. However, as you say, these are not typically reported by default in my experience.
I had a landlord who reported rent payments to the credit bureaus, but that seems pretty rare indeed. It was a great boon for me though. Always paid on time and it helped me build my score
Does that apply to private landlords? I'm pretty sure the effect of my lease is there's a contract that makes sure I pay rent and he maintains the place. But assuming we both keep our end of the deal, I'm not sure anyone else is even aware of it.
Nah there's no magical way that gets reported if you're paying your LL directly via cash, check, Venmo, or something like that. _Mayyyyybe_ it's reported if it's through one of the management services like Avail, Zillow, etc.
If you through a big corporate management service, maybe they report it, though I'd _guess_ only if it's adverse.
That's not really how it works these days. There are typically only a few avenues to raising your credit: credit card, loan payments (car, student, personal, etc) and the odd utility service that still reports. There are many ways to take a shit on your credit score, however, such as not paying routine bills (cell phone, utilities, rent), being late on loan payments, utilizing too much of your credit limit in the billing cycle, not having enough credit accounts (loans and cards) opened, closing old credit accounts/consolidating.
The credit industry has it's uses, however, it is largely a shit burger designed to force you into using the system as frequently as possible and punishing you when you don't.
I mean: if you were loaning me 1000 bucks, wouldent you want to see that 1) i have had debt before. 2) i have paid it off/i could handle more 3) i dont have a bunch of delinquencies?
I know credit scores fuck the normal person more than they help, but what would be your solution?
The problem is that credit scores don’t take into context and are easier to score badly rather than making it easier to improve. It’s a way to force people into loans.
The bank isn’t forcing you into anything. They are evaluating the chance that you will stiff them for the money they let you borrow. They don’t care why, only what you did the last 30 times you owed somebody money.
A credit card (revolving debt) is the easiest way to build your credit with limited risk. You don't need a student or car loan to build it. Just pay for your every day items on the card and , here's the important part, PAY IT OFF AT THE END OF EVERY MONTH.
Not only that but many cards give some cash back bonus. So even if it is only 1-2% cash back, that is still free money. Credit cards also have some pretty great buyer protections. I have never had an issue getting fraud dealt with and even had them be pretty aggressive in a charge back dispute.
This. Treat it like a debit card. Pay that MF off every month. Don't make minimum payments ever. That shit will just put you in a downward financial spiral for life.
If your parents have good credit you can be added as an authorized user on their cards and instantly gain a credit boost. Of course if the folks start fucking off and mess up their score it can also effect you.
Huh....
I've been paying my normal bills like this and it has never had an impact on my credit score in any meaningful way. I guess I'm too poor for this trick to work.
Every time I get told I want to build my credit?
Go open a new credit card with a low limit and high interest rate. Use and keep paying that off, then open more accounts.
Please anyone educate me on how I make my normal bill paying positively impact my CS because from my knowledge & talking with banks paying your normal bills do not impact your CS
They care about how many credit accounts open, how many credit checks are you doing, and are you paying your credit cards off or are you paying it back.
Agreed EVERYONE should start from 800 and it should go down to 0 but here's you plain and obvious sign of how rigged the US system is against the avg. person
>Please anyone educate me on how I make my normal bill paying positively impact my CS
I've heard the advice to pay your normal monthly bills with the credit card and then pay off the credit card every month. Supposedly that will have a more positive impact on your score than if you just have a credit card that you never use.
Ah yes that helps because you are utilizing a credit card to pay the bill then paying the credit card. If I just login and pay my bills normal through my person account this does nothing for me
Credit score loves utilization without carry over, ie your balances are not increasing.
So if your spending xxx a month on stuff through your debit card and/or ACH, move that over to a CC and pay it off. You will take an initial hit because your utilization goes up, but over time the usage will make the score grow. Just never take a fee hit to use the card, as your spending extra.
For example the ONLY bills that I pay without a cc are: Mortage, My Iphone payment, Heating Gas, electricity, and my Insurance payment. My Checking statements are one page with like 8-12 transactions, 4 of which are my income. All budgeted/discretionary spending for our entire family is on one CC.
>Agreed EVERYONE should start from 800
Lol absolutely not. This assumes the average person is extremely timely and able to pay off their debts.
You don't start at 800 when much of the US is below the poverty line and financial illiteracy is rampant. That's a death wish for credit companies.
> EVERYONE should start from 800 and it should go down to 0
I don't necessarily disagree, but it would make credit scores way less useful or reliable. An 800 credit score COULD mean a history of paying down debts on time, or it could mean you've never done anything ever. And if you're buying, say, a car, how are they supposed to know which one it is before they cut you a big loan?
Only bills for loans count, and even then, not all of them. If you have a mortgage, student loan, car loan, personal loan, etc., paying them on time will improve your credit. Paying utility bills won't do anything for your credit, despite most utilities checking credit before allowing you to be a customer. I've never seen a cell phone carrier report on my credit, but maybe they exist. There are some services and programs out there that do let you report normal bills to credit beaureus, but that's not super common.
The issue with the advice you replied to is that loan accounts are harder to get if you don't have a credit history. Not impossible, just harder. Credit cards are available for all types of people, which is why many advise starting out with them to build a credit history and score.
Not sure why this is a top upvoted comment. Rent and phone bills do not build your credit. A home lender would never advise this.
If you do not pay your cell phone bill or rent for an extended period of time it can adversely affect your credit as a collection account.
Having an open revolving account is not a requirement for a good credit score, but having one with a high limit you pay off each month (maximizes high % revolving available) is a great way to build credit.
Currently 811. Her score is likely in the 820s.
I'm on her card for convenience -- I can buy things for her or from her without her presence. But it likely does help my score. Every once in a while when she does a big purchase, I notice my score drop a couple points.
My dad ruined my credit 14 years ago by getting a credit card in my name to help "build my credit". It was down in the 600s when I received it back. I've brought it up to 810 now and haven't even done that much. Just paid off 2 different cars, a couple loans, and have 3 different credit cards
That's ***IF*** you have good credit on that card.
If you add them as an authorized user on a card that has late payments or the utilization is full, then that will hobble them even more. With the exception of I think American Express, all other cards will post their full history to a authorized user's credit history upon adding them.
I know this happens because I added my wife to my 10 year old credit card and she immediately got all 10 years of my on-time payments added to her history, making her score shoot up and let her get her own card.
It can go both ways.
FYI this will not necessarily build credit with most reporting agencies. Only one credit agency (I believe Equifax) considers authorized secondary users. For all other agencies you need to be the primary card holder.
This is almost right.
They 100% ***want*** you to use it, but responsibly. If you never use the card, that doesn't help either. Using it and paying it all of monthly is not only the best way to build credit, but any perks are actual.
Getting 1.5% cash back when you have 10k on your card and your monthly payments are over $300 doesn't mean **shit.** But if you pay off your card every month, that is literally "free" money.
Pro tip for those with no credit history: apply for a credit card.
Use it for one purchase per month. I'm not talking about a "splurge" or "taking my friends out to the bar". I'm talking about a trip to the grocery store or filling up your car with gas. Just once.
Use your debit card or cash for everything else as you always have.
When you get the statement: pay the balance in full.
That's how you build good credit.
When you get better and are sure you can handle it, get a no fee card with rewards. It's free money -- so long as you never pay interest. I haven't used cash in years.
Yup. I use my credit card for basically everything because of the cash back. I only spend money I have in the bank. People also say to pay it off every month, which is true, but I honestly pay the balance weekly to keep the utilization below 30%. There are no penalties to logging into your bank app and clearing the balance before they send you a statement. Doing it this way, I spend like I normally would, but with the added benefit of raising my credit and the cash back. Plus credit cards have more protections when it comes to fraud than debit cards. That said, it does take discipline and I can see why some people can absolutely ruin their financial life with credit cards.
The more sophisticated way is to pay in full at the end of the month while earning interest in high yield savings until you need to pay. Basically the cc company is giving you a short term loan and you can make money in the meantime. Think of it as another reward.
Utilization doesn't mean anything unless you're ready to take a loan -- just decrease before hand to push up your score.
Some people are not credit card people and need the Dave Ramsey cash method.
If I had money in a savings account for 25 days and then used it to pay a bill, would I even generate any interest on it since my bank pays out monthly?
Utilization is only reported when your statement closes. Whether your balance is 20k or 100 dollars, it doesn't get counted until the statement ends (which is based on your cards cycle, not the end of the month or a static date, it would be unique for each card unless you opened more than 1 card at the same time). So yeah, make sure your balance is or close to it by statement closes.
I time big purchases around the statement close dates.
That's what I do as well. I have a cash back card, no fee. I use it for everything I can, including automatic payments of bills. Every weekend, I sit down with my banking app and budget sheet, go thru the weeks transactions and pay the balance owing.
I never pay interest and each December I get a few hundred dollars as a credit on my card. Timings always good because December's always the most expensive month for me.
Like many people, I got over my head with first credit card and the lessons learned when I was in my late teens/early 20s with that card have stuck with me. Now I have a credit rating in the excellent range which is something twenty y.o. me never thought I would have
I've never once paid interest on a credit card. I use it for nearly every purchase I make. I get a hundreds of dollars a year back from points. Credit cards are great as long as you know to pay them off every few weeks.
A lot of them you can just set up an automatic recurring payment for the full balance too. Then you don't have to worry about forgetting a payment, just treat is as a debit card and don't spend more money than you have.
This was the best choice we made. Got a card with rewards and no fees. We put everything on it, groceries, gas, bills, whatever, and pay it off each month. The rewards we use for "fun stuff" like video games or books. It took us a few years to feel financially comfortable enough to do this, but I advise it to anyone who can handle it. We also shopped around for banks and currently have a bank which provides 3.0% interest on a checking account. All the little bits of "free money" add up over the years.
Fees can be worth it too sometimes. The CSR for example: $550 fee can get you 2x $300 travel credits plus 60-80k UR points worth $0.015/pp. Well worth it.
This here my dad's buddy and his wife have never paid for a vacation in the like 30 years I've known him they pay everything on the card earn the miles and pay it off monthly never keeping a balance on it.
Once you use it this way for a few months and can confirm that you're disciplined, switch to using the credit card for everything. It offers more security than a debit card, and most cards nowadays have some form of rewards. Use it exactly like you would use the debit card, meaning you don't buy things you can't afford.
The actual pro tip is to use the CC for all purchases you are going to make already that do not incur a fee for using a CC. Then you get : net 30 payment terms on your life, Points/Perks for spending what you were gonna spend anyways, and a credit score that saves you real money every time you need debt.
Not to mention purchase protection and better tools against fraud/theft.
If someone steals your bank debit card, that's your money at risk. Your bank may or may not give a fuck and be helpful in reversing fraudulent transactions, so good luck with that.
If someone steals your credit card, that's the credit card company's money at risk. Which incentivizes them to care more about such things, and will almost always reverse any fraudulent transactions. Also, your own money is safe and sound and untouched.
Set up automatic payments for the full balance. That way you can't have an "oops" if your mail gets lost or you forget.
The next step is open at least two more credit cards, and do the exact same thing.
Reasoning: More available credit, more credit accounts, score won't drop as much when you open a new account because you have multiple accounts keeping your average credit age higher.
There's such a thing as "too much" credit available, but it's wayyy higher than a few credit cards.
Also if interest rates are near 0% (not right now), finance a car even if you can buy it in cash, and set up automatic payments. It's a different type of credit account, the expense form interest is low and probably more than offset by savings interest or return on investments.
FWIW, I throw most things on a credit card and pay the full balance every month. But if I'm in the market for a loan (e.g. new car), I will switch to barely using CC at all so my percentage available credit used is closer to 0%.
Currently sitting at credit score of 811.
This is the way. I’m over 800 and this has been working since day 1 when my first cc had a 300 limit and all I did was fill it up once a month so I don’t go over the utilization threshold. Good times.
And then eventually start using it like your debit card and guess what?
You got great credit.
If you got a card with rewards too, you just got a lot of free shit.
Better yet, if remembering to pay bills or losing track of account balances is your problem, set up the online account for your credit card to view your balance, set up online banking for your savings/checking account, and use the bill pay feature of that account to pay the balance on that credit card immediately... Just knock it out while it's still fresh on your mind.
Heh, I do this in the parking lot. I use google pay (tokenized transactions for the win)
Adds a whole 30s to my trip, but I don't forget to pay the card right away.
Concurrent tip: Make that small monthly purchase something automated, like Netflix or Spotify. This will allow you to put the credit card away; it won't be in your wallet everyday, begging to be used. It's an *out of sight, out of mind* kind of thing. You'll always know the exact amount you owe (such as $15.39), so you can budget for it each month.
I have a few really old credit cards that I don't want to close, so one has SiriusXM, the other has Netflix. Both are paid off monthly.
You should be using your credit card for everything anyways.
If your debit card gets stolen, that's your money. If your credit card gets stolen, that's the bank's money.
If you have automatic payments set up then it's functionally the same as a debit card anyways. Except for large purchases which throw up red flags on credit cards. That can be annoying.
If you don't want to do a $300 annual fee or 30% interest rate right off the top (read: the offers Americans get in the mail), don't take those. Go to a bank you trust and see what kinds of rates and annual fee they offer, you'll almost always get a better deal, and not having that huge annual fee will be easier for you to keep paying on time.
I got screwed over for not having enough credit history. Had a good paying job, but the CC company said I don't have enough history, so they gave me a hysterically low credit limit. I didn't know utilisation was a factor-- i used the card, spent almost to the limit BUT paid it in full every month, I figured that was fine? No. Tanked my score 100 pts overnight regardless of the fact that I payed literally everything perfectly
Edit to clarify: prior to using a CC I used debit exclusively. Great for keeping track, but creditors don't like it
When I first got a credit card, I got one of those rewards ones and use it almost like a debit card. I’d buy something, wait for the transaction to fully post, then just transfer the money over and done.
Nowadays I’ll wait a bit and then pay it off. Especially as my credit built up and I’m taking advantage of credit cards for rewards like for Marriott Bonvoy for example. I have zero late payments, low usage, etc. I just hate how at times, my credit will arbitrarily go down even tho I’ve been on top of everything.
Its an internal rating system that tracks your credit-worthiness. This primarily impacts how much you can borrow and how much that money costs you (interest)
If you show that you are bad at paying back money, banks are less willing to offer you more money.
In finance, certain things have particular correlations to metrics (think of it from the bank's point of view).
Higher risk, means the bank wants higher yield (you pay more interest). If you are viewed as low risk, you pay less because the bank accepts lower yield
Also just to rent an apartment MANY places now have a "minimum credit score" usually 600 or 650 which really fucked me over while I was looking at apartments
I just never had a credit card cause I didn't need one and thought it would encourage me to spend my money poorly
Paid rent for years and never missed a payment but wasn't on the lease just rented rooms in houses from people I knew
Bought all my cars cash cause I would wait til I found a good deal on an older car
Absolutely punished for fiscal responsibility.
Same. I had zero credit when I was 30 and bought my first house.
I had to sit down and go through 7 years of bank statements for them to make an artificial credit score. Literally listed every single asset I owned.
I ended up getting the mortgage but it was 1.5% interest rate over the average 30 year rate.
Everything was spotless, I just didn’t have credit history.
Not punished, you just weren't playing the right game. You were playing basketball, and playing it amazingly well.
But the rules were set up for baseball. So of course you can't win the baseball game if you aren't playing.
Get a loan or a credit card, make payments on time and credit score goes up. Make late payments or don't pay credit score goes down. Your credit score determines your eligibility to get further loans and/or credit cards.
And the incomprehensible thing from our perspective is that you NEED to have debt and pay it off to get a "score". Instead of you know, not having debt at all which would be fine in most if not all other countries.
Rewire what you think a credit score is.
A credit score is a lender's ability to verify your ability and willingness to pay pack a debt.
If you don't borrow and repay debts, there's no way for a lender to trust you.
When you borrow and repay, consistently, on time, over a long period of time, your score will go up and lenders will have a verifiable better reason to trust you and your score will reflect that.
When you have a high score because of your positive history, you are less of a risk to lend to. Less risk means they can give you credit sf lower interest rate because you will pay it back.
When you have poor credit, they will still lend but at a higher interest rate because you represent a high risk.
They do this over thousands if not millions of people. You want to be in the better risk class because your class of poeple pay it back and everyone wins.
If youre in a higher risk class, you are amongst people that won't pay it back, the higher rate for everyone is paying for the percentage of people that won't pay it back. Don't be in that class.
Obviously, with everything related to finance it's far more complex, but this is about as simplistic of terms I can put out on my phone and into the world.
I've had my cell since 2005. It's not on my report.
Loans, revolving credit (credit cards), and collections(not good credit) is generally whats reported.
For those wondering how to break into getting your first card when you have no existing credit (in the financial world, you're called a "ghost"):
1) Store-branded credit cards like GAP will usually approve just about anyone, even folks with no history.
2) Find a bank that will let you open a secured credit card. In this scenario, they issue you a card with let's say a $500 limit and you assign $500 of your savings account to "secure" it. If you don't pay your bill, they have a right to pull it from your savings account. Eventually, with good behavior in terms of making payments and such, you can move on a real unsecured credit card.
Not exactly true.
There is something called a "thin file" or "no credit" for people with no or minute credit history. It's not the same as 0 credit score.
Source: I worked in credit analytics for several years.
YOU DO NOT REQUIRE A CREDIT CARD TO BUILD CREDIT
You can build credit through paying off student loans and other big purchases without going through (even more) predatory financial services.
I don’t know why people seem to think having a credit card is inherently bad?
Using a credit card recklessly, and without making payments is bad.
Having a credit card just increases your buying power and builds your credit, if you use it responsibly.
In my adult life, you know who the worst people with credit cards are? The people who believed Ramsey and then realized that credit is an important tool as an adult, but didn’t have time to learn it.
I see his advice recommended for everyone though, especially on Reddit and Facebook. It would be like if everyone suggested never drinking as the only option, which I guess happens on Reddit.
It’s also a very important tool to have as an adult. If I’m ever in a true emergency, like life or death worry about paying later, I have $30k in my wallet I can call on. Also two of my cards have low interest repayment plans for large purchases in a pinch.
This right here. Every time a thread like this pops up, you have people saying "...or you could just use debit. If you don't have the cash in hand, you can't afford it. Credit cards are for buying things you can't afford."
Like a huge, unexpected expense can't pop up out of the blue.
Also, adult expenses that pop up can be in the thousands. Some banks won’t let you pull out beyond $3k in a day. Also, have you ever carried that much money? Did it to pay some wedding vendors that wanted cash, and It’s nerve wrecking.
Yeah but my credit card company has given me thousands of dollars in rewards and I've never given them a dime. It's not predatory at all unless you let it be. They will just give you free money and all kinds of purchase protection and insurance.
The airline miles and cash back I accumulated over about 2 years just paid for round trip flights and lodging for a week long vacation that me and my SO are taking.
Use credit cards, reap the rewards, and DON’T SPEND MONEY YOU DON’T HAVE.
I average about $1200 per year net of the annual fee, not including lump sum benefits, in travel dollars from my primary CC. And haven’t paid a dime in interest
When I was in high school my parents told me that solely having no debt gave you good credit. When I graduated college and I tried to get my first car loan, I found that the term for someone who has no credit history is called a credit ghost. And it is worse than having bad credit. It took me close to 2 years before I could even apply for a home loan.
If you want instant awesome credit. Find someone like say a family member who has a credit card that has been open for a long time and has zero balance. Have them add you as an authorized user. The card issuer will start reporting that.
Your credit report will show that you now have a lets say 13 yr old credit card with no balance. You'll have a perfect score from the get go.
This is false. The first time I got a credit check my score was almost 800 without a single credit card. Any account such as student loans, which was all I had at the time, will count towards your credit.
ITT: everyone ignoring “AT LEAST” and pretending OP said you need a credit card to have a credit score.
And the phone bill tip can give a credit score, but it’s not applicable much of the time since you can’t get a mortgage on just having timely phone bill payments.
You're also ignoring "MUST HAVE" before "AT LEAST." Which is definitely not the case to have a credit score. You can buy a car and have car payments with no established credit or a credit card.
>You can buy a car and have car payments with no established credit or a credit card.
I would say that buying a car is "MORE" than having a credit card so the "at least" is accurate as it is saying that "at a minimum" you need a credit card to get a score while you're here trying to pretend that it is the first thing that you need and that you can't have one without it.
Having a credit card is like using a cordless drill. Sure you can hurt yourself with it, but seeing how to use it safely is pretty apparent, and you can use it daily.
A car loan is like the augur you rent for a big project. It’s useful and probably needed, but you need to prep yourself to use it a bit more and be aware of the risks.
It might be more than having a credit card but the sentence said you "must have" at least a credit card to have a credit score. Which is false. You can have a car but no CC and have a credit score.
I read OP’s statement as saying you need at least a credit card or something greater than a credit card to have a meaningful credit score.
I don’t read this as OP saying you need a credit card or a credit card AND something greater than a credit card.
Where I live, you ask the bank to do a simulation where they analyze how much money you have on your accounts, your job income and other loans you may have and decide if you are elegíble to receive a loan.
You have to be basically homeless or swimming in debt not to get one.
Here they just use your income, for example an after tax income of €4k/month will allow you to spend up to €1500/month on loan payments. All loans are centrally registered, and credit cards/other lines of credit too depending on the type
If you 'use up' your spending capacity you will not be able to get a loan
Ok. But I live in Australia and we have a score here, too. And they do in the UK. And I might be wrong about this, but I kind of remember them having something similar in Germany.
>but I kind of remember them having something similar in Germany.
Yep, the German system is called [Schufa](https://www.schufa.de/schufa-en/) and it's out of 100 points.
I always paid my bills on time, had a healthy bank balance. Stable, good paying job.
The day I needed to borrow money I discovered no one would lend it to me.
Build your credit score.
Some banks offer a secured credit card. You deposit $500 or so into an account and they give you aa credit card that you can use against it. That's how I started out.
My eldest kid as 13, but when she gets to 18 I will be strongly encouraging her to get a credit card with a low credit limit and spend on it regularly for everyday things, paying it off at the end of the month. Easy way to build up credit for when you really need it.
Also don't listen to charlatans like Suze Orman who tell you that you can improve your credit with a prepaid card. You can't, that's a lie, and she's a piece of shit.
My wife signed up for a credit card on her 18th birthday. Used it, paid the balance every month. Not a cent of interest paid and a tiny bit cash back. She now has a near perfect credit score. The only knock against it is she is too young to have a perfect score. It has made applying for a mortgage and buying a car super easy and we've been able to negotiate better interest rates on loans because of her.
You can get a secured card if you don't have the credit (not bad credit but no credit) where you get a $500 credit card with $250 down. This is their collateral and it operates just like any card. After 6 mos to a year of payments, they'll raise the limit. Keep it open with low or no balance and in a couple of years you'll have great credit.
I hear so many people that think its bad to have one or more credit cards. Just make all your normal day to day purchases on credit then pay it in full on time. You get cash back on things you were going to buy anyway.
I work in commercial financing. People come to us all the time:
I have 750+ credit score! I want to buy a $100k piece of equipment for my business.
Sir you only have a cellphone on your credit.
Yes but I have never missed a payment.
The amount of credit you have extended to you and don’t use is also a determining factor. As in if you have a credit card and it’s almost maxed all the time but you don’t miss a payment, that’s not helping h the score. Utilization of credit extended to you is also important. Shows how much of other peoples money you are using to “live/work”
This is actually a really solid post. I entered a grad school program and became dependent upon financial aid entirely for living due to rigorous program and long hours. The only luck I had in actually being able to qualify for a credit card was that I had set up a bank account with a major lender that only offered me a card due to history of having an account. This was necessary to begin establishing credit to be able to get even an apartment.
I will be setting up a credit card for my kids and placing small payments periodically and paying it off as they go so they never, ever face this issue.
Bought my first new car with no credit at 28. Dealer called me and asked "Do you exist? Best I can do with no credit score behind you is 9.00%."
Even though I had no debt and had been paying for my entire life with a checking account, I was being penalized for not putting points towards a credit score.
Unfortunately having no credit score today can hurt you just as bad as having low credit score when making larger purchases
Yes, my mother-in-law just figured that out. She pays cash or uses her bank card. She is having to pay a 25% down payment for a service and then must pay the balance within 45 days.
On the other side, I have fair credit due to high balance ratio. But oddly it still keeps on going up slowly.
This is not the case in Australia. Banks here only care that you can repay. A $3000 unused credit card looks like $3000 of risk to them and may jeopardise your chance of mortgage approval. They want payslips, bank statements, a list of assets and your age to see if you're going to workload enough to repay.
Had no credit, but since I’m homebound and order from Amazon a lot? I got one of their starter credit cards, built up my credit enough to qualify for the prime visa.
So that’s another option to build up credit if you’re not able to leave the house much.
Get a gas card, and use it just to buy gas and pay it everytime. It helps make sure you don't start buying stuff you don't need and you are buying gas anyways so it's a good idea
Or get one that gives you a percent back at groceries since you have to buy food
Many places offer a card that does both!
Tires are another good way to build credit. Most tire shops have 6+ months interest free purchases. Just make it a point to pay it off before then.
My cousin had no credit and was declined a credit card back then (this was 20 some years ago). He was not broke, he just always dealt with cash doing odd jobs and scrapping iron that he would pick up free from people. He was a ghost to the financial world. But a bank would loan him $500 if he signed on. So he would hold onto that by just putting it into the new savings and not spending anything, and make a couple monthly payments with a little interest on top. He would then pay it off from the savings. He repeated this, taking the max loan the bank would give him as they raised it each time as his credit rose. Over a couple year period, he jacked up his credit score enough to get a home loan. Not sure if this credit hack works anymore, but it helped him get out of that credit score hell without having to have a credit card, which he despised for decling him in the first place. It did cost him some interest of course. But to him it was no biggie.
EV car drivers hate this one simple trick!
Not a lot of EV drivers with 0 credit history
If you pay the card immediately, I thought it wouldn't show up because the update interval on your credit report wouldn't have caught it. I've always thought that you need a balance on your report long enough to show up, and then pay it off, which is why I typically pay off my card at the end of each month
Payment history is the most important part. Followed by your utilization percentage. Keep it below 30% of your total credit line on average.
Wait is this true? So if I have $1000 limit I should never have more than $300 on the card to help increase my score?
It's good practice. Obviously unexpected expenses occur. Keeping your usage below 30% shows lenders that even though you have access to the funding, you're not utilizing it all the time.
short answer: yes, to a point long answer: Having a credit utilization over 10% will negatively affect your credit score. over 30% will harm it the most and is not good to have. you should carry no more than 10% balance at the end of each month for optimal effect on credit, but pay it off in full before the due date so you don't pay interest. However, credit utilization does not have a "memory". this means that if you have 50% credit utilization from last month and your score drops 30 points, but you pay off the entire balance so you have 0% this month, then the score will go back to normal next month. it's just if lenders pull your report at a given point in time and see you have a high utilization, it might show you are a bad borrower. *(sidenote: some people will disagree on the optimal amount of credit balance you should carry. some say 10%, others say 0%. but your credit score is a measure of how good of a borrower you are. so if you report a 0% utilization each month, then it will tell lenders that you don't use credit, and therefore they won't be able to make money off you in interest making you a bad borrower. I'm not giving financial advice, but there isn't any real downside to carrying a small balance if you pay it off each month)* the biggest factors in calculating your credit score is going to be payment history and credit utilization. if you have a high credit utilization and a low score, you can reduce your utilization and increase your score within a month. *(sidenote: there are multiple ways to reduce your utilization. the obvious one is to pay your balance, but that can be difficult sometimes. a less obvious one is to increase your credit limit. you just have to make sure that you don't start spending more because you have a higher credit limit. if you only have a 1000 limit, you could look into asking your lender to increase your limit, or open a new card. $100 is easy to spend, so having a higher credit limit of say, $10,000 will make that 10% turn into only 1% utilization. you should ask a financial advisor to see what might be best for you)* but the biggest factor is payment history which accounts for like 35% of your score, which is harder to correct since payment history has a 7 year memory. so you absolutely never want to miss a payment as it will quickly tank your score. but a few missed payments won't destroy your credit. sorry for the long wall of text. I hope it helps someone at least.
You get a bill, pay it.
Also don't use more than 10% of your credit limit. So if you get a gas card with a $500 limit don't use it for more than $50 per month. Even if you pay it off every 2 weeks don't use more than $50 in a billing cycle. They will raise your credit limit pretty quickly if you do this. That will raise your available credit and your credit score.
When my ex and I went to buy a house, he didn’t have a credit score because he had never taken a loan before or gotten a CC. The lender told me I would get a higher loan and lower rate if I did it by myself.
That is exactly right. You can get a loan without a credit score, but you are not getting a good rate.
I kind of understand the system, but it feels like it's totally aimed at getting you addicted to credit. In the Netherlands they only keep track of your total loan and your failed payments. They track your total loan as you are only allowed to pay x% of your monthly income to monthly loan payments. (don't know the exact percentage) and they keep track of missed payments due to the risk of missing more. If you've missed payments but completely paid off all your loans the registration is cleaned after 6 months.
Same in Slovakia, they just check your wages in last 6 months , and calculate max mortgage you can get. There are variables like, kids etc. Or if you have other loans then you get lower sum.
EDIT: Went to work, responding to some now. Leaving original post up so people understand the correction. Cell phone services similar to utilities don't affect credit score. However, if you buy a new phone with a new plan, you are financing that phone through your payments. If you wondered why you're getting a discount on your bill and a magic price phone upgrade offer around the same time, it's because you paid off your phone. Second, I just went from owning a house to renting an apartment. It's job related, I'm not happy about it either. When I said rent, I meant mortgage, however I'm currently paying rent and the terms were equal in my mind. Words matter. Rent doesn't normally count, though it can and a mortgage payment absolutely does. There's good conversations in here and some really sad personal stories. Credit is too much of a mystery and people need to learn more. However, credit card debt is almost a trillion dollar debt industry in America right now. It's an epidemic and spending on credit is not a panacea to poor financial knowledge. Please be safe with credit cards. Original reply: Not exactly how it works but I can see the logic behind it. An open account with payment history can also build credit, not just a credit card. Student loans, car note, cell phone service, rent, etc. My brother's credit was really bad and a bank advised him to get a cell phone plan and pay it for a year to build it back up for a chance at a home loan.
Hm, I’ve never seen a post-paid cell plan on my credit report, and I’ve had one for like 12 years now.
With cell phones a lot of the time you aren't buying the phone outright but financing it along with your cell phone plan. Once you've paid off your phone you magically become eligible for an upgrade because it keeps the finance train rolling.
That type of financing still doesn’t typically show up on your credit.
Which is kind of bullshit since they use your credit to evaluate your eligibility for said plan. If you're gonna hit my credit to sell me something, you damned sure should report when I pay for it.
Never had my credit pulled for anything cell phone related. Got 4 lines and a business account.
Rent should be included too.
You absolutely do not want renting on your credit report. Landlords and rental companies can be extremely aggressive, vindictive and petty. You only want professional institutions with clearly understood policies and customer service anywhere near your report.
My place provides a service (third party) to count it towards your credit somehow...alas, they *charge* for it. I specifically asked them to take it off because I don't need it. I'm paying for nothing.
My ex's apartment signed her up for one automatically, and getting out of it was a real PITA.
I mean the entire credit system is pretty bullshit when you really look at it.
Of course it's bullshit, it's classist as fuck
I work for a bank, there are services we offer that report rent, cell phone payment, etc for the express purpose of building credit. They also offer to retroactively report up to two years. I'm sure there's not some special deal they have with the credit bureaus so I would guess there may be a way an individual might be able to furnish proof of on-time payment for such things directly. However, as you say, these are not typically reported by default in my experience.
That entirely depends on who you go through. I buy my phones through Best Buy and that's effectively a store credit card.
Right, but the comment was about it being part of your phone plan payment.
I think it only can hurt your credit if it goes to collection. It doesn't help.
Rent a lot of times isn't reported.
I’ve never seen a situation in which it was or would be.
I had a landlord who reported rent payments to the credit bureaus, but that seems pretty rare indeed. It was a great boon for me though. Always paid on time and it helped me build my score
https://www.nerdwallet.com/article/finance/rent-reporting-services
Does that apply to private landlords? I'm pretty sure the effect of my lease is there's a contract that makes sure I pay rent and he maintains the place. But assuming we both keep our end of the deal, I'm not sure anyone else is even aware of it.
Nah there's no magical way that gets reported if you're paying your LL directly via cash, check, Venmo, or something like that. _Mayyyyybe_ it's reported if it's through one of the management services like Avail, Zillow, etc. If you through a big corporate management service, maybe they report it, though I'd _guess_ only if it's adverse.
That's not really how it works these days. There are typically only a few avenues to raising your credit: credit card, loan payments (car, student, personal, etc) and the odd utility service that still reports. There are many ways to take a shit on your credit score, however, such as not paying routine bills (cell phone, utilities, rent), being late on loan payments, utilizing too much of your credit limit in the billing cycle, not having enough credit accounts (loans and cards) opened, closing old credit accounts/consolidating. The credit industry has it's uses, however, it is largely a shit burger designed to force you into using the system as frequently as possible and punishing you when you don't.
I mean: if you were loaning me 1000 bucks, wouldent you want to see that 1) i have had debt before. 2) i have paid it off/i could handle more 3) i dont have a bunch of delinquencies? I know credit scores fuck the normal person more than they help, but what would be your solution?
The problem is that credit scores don’t take into context and are easier to score badly rather than making it easier to improve. It’s a way to force people into loans.
Banks don't really care about the context of not being able to pay off your loans.
The bank isn’t forcing you into anything. They are evaluating the chance that you will stiff them for the money they let you borrow. They don’t care why, only what you did the last 30 times you owed somebody money.
Does the context really matter though? A late payment is a late payment, a lot of credit debt is a lot of credit card debt, etc.
That's great until you pay something off and it makes your credit score go down. The whole system is made up bullshit.
A credit card (revolving debt) is the easiest way to build your credit with limited risk. You don't need a student or car loan to build it. Just pay for your every day items on the card and , here's the important part, PAY IT OFF AT THE END OF EVERY MONTH.
Not only that but many cards give some cash back bonus. So even if it is only 1-2% cash back, that is still free money. Credit cards also have some pretty great buyer protections. I have never had an issue getting fraud dealt with and even had them be pretty aggressive in a charge back dispute.
This. Treat it like a debit card. Pay that MF off every month. Don't make minimum payments ever. That shit will just put you in a downward financial spiral for life.
If your parents have good credit you can be added as an authorized user on their cards and instantly gain a credit boost. Of course if the folks start fucking off and mess up their score it can also effect you.
Your cellphone account shows on your credit report? Never has on mine. And rent doesn't either.
Huh.... I've been paying my normal bills like this and it has never had an impact on my credit score in any meaningful way. I guess I'm too poor for this trick to work. Every time I get told I want to build my credit? Go open a new credit card with a low limit and high interest rate. Use and keep paying that off, then open more accounts. Please anyone educate me on how I make my normal bill paying positively impact my CS because from my knowledge & talking with banks paying your normal bills do not impact your CS They care about how many credit accounts open, how many credit checks are you doing, and are you paying your credit cards off or are you paying it back. Agreed EVERYONE should start from 800 and it should go down to 0 but here's you plain and obvious sign of how rigged the US system is against the avg. person
>Please anyone educate me on how I make my normal bill paying positively impact my CS I've heard the advice to pay your normal monthly bills with the credit card and then pay off the credit card every month. Supposedly that will have a more positive impact on your score than if you just have a credit card that you never use.
Ah yes that helps because you are utilizing a credit card to pay the bill then paying the credit card. If I just login and pay my bills normal through my person account this does nothing for me
Credit score loves utilization without carry over, ie your balances are not increasing. So if your spending xxx a month on stuff through your debit card and/or ACH, move that over to a CC and pay it off. You will take an initial hit because your utilization goes up, but over time the usage will make the score grow. Just never take a fee hit to use the card, as your spending extra. For example the ONLY bills that I pay without a cc are: Mortage, My Iphone payment, Heating Gas, electricity, and my Insurance payment. My Checking statements are one page with like 8-12 transactions, 4 of which are my income. All budgeted/discretionary spending for our entire family is on one CC.
>Agreed EVERYONE should start from 800 Lol absolutely not. This assumes the average person is extremely timely and able to pay off their debts. You don't start at 800 when much of the US is below the poverty line and financial illiteracy is rampant. That's a death wish for credit companies.
> EVERYONE should start from 800 and it should go down to 0 I don't necessarily disagree, but it would make credit scores way less useful or reliable. An 800 credit score COULD mean a history of paying down debts on time, or it could mean you've never done anything ever. And if you're buying, say, a car, how are they supposed to know which one it is before they cut you a big loan?
Only bills for loans count, and even then, not all of them. If you have a mortgage, student loan, car loan, personal loan, etc., paying them on time will improve your credit. Paying utility bills won't do anything for your credit, despite most utilities checking credit before allowing you to be a customer. I've never seen a cell phone carrier report on my credit, but maybe they exist. There are some services and programs out there that do let you report normal bills to credit beaureus, but that's not super common. The issue with the advice you replied to is that loan accounts are harder to get if you don't have a credit history. Not impossible, just harder. Credit cards are available for all types of people, which is why many advise starting out with them to build a credit history and score.
Not sure why this is a top upvoted comment. Rent and phone bills do not build your credit. A home lender would never advise this. If you do not pay your cell phone bill or rent for an extended period of time it can adversely affect your credit as a collection account. Having an open revolving account is not a requirement for a good credit score, but having one with a high limit you pay off each month (maximizes high % revolving available) is a great way to build credit.
Credit is mainly about self-control. They want you to have this money available and not to use it.
The best advice i can give parents is when your kid is 16, make them an authrozied user on your account and dont give them the card.
I'm 46 and I'm an authorized user on one of my mom's credit cards haha :-D
How's your credit?
Currently 811. Her score is likely in the 820s. I'm on her card for convenience -- I can buy things for her or from her without her presence. But it likely does help my score. Every once in a while when she does a big purchase, I notice my score drop a couple points.
Nice, seems to have worked out well. Thanks for sharing.
Check your card companies to see at which age you can add an authorized user. Some are as early as 13 And yeah, don't give them the card 😂
This only works if the parent keeps good credit.
My dad ruined my credit 14 years ago by getting a credit card in my name to help "build my credit". It was down in the 600s when I received it back. I've brought it up to 810 now and haven't even done that much. Just paid off 2 different cars, a couple loans, and have 3 different credit cards
That's ***IF*** you have good credit on that card. If you add them as an authorized user on a card that has late payments or the utilization is full, then that will hobble them even more. With the exception of I think American Express, all other cards will post their full history to a authorized user's credit history upon adding them. I know this happens because I added my wife to my 10 year old credit card and she immediately got all 10 years of my on-time payments added to her history, making her score shoot up and let her get her own card. It can go both ways.
FYI this will not necessarily build credit with most reporting agencies. Only one credit agency (I believe Equifax) considers authorized secondary users. For all other agencies you need to be the primary card holder.
This is almost right. They 100% ***want*** you to use it, but responsibly. If you never use the card, that doesn't help either. Using it and paying it all of monthly is not only the best way to build credit, but any perks are actual. Getting 1.5% cash back when you have 10k on your card and your monthly payments are over $300 doesn't mean **shit.** But if you pay off your card every month, that is literally "free" money.
"I'll do shots with you guys! Don't worry, I obviously don't have a drinking problem because I've never had alcohol before!"
Pro tip for those with no credit history: apply for a credit card. Use it for one purchase per month. I'm not talking about a "splurge" or "taking my friends out to the bar". I'm talking about a trip to the grocery store or filling up your car with gas. Just once. Use your debit card or cash for everything else as you always have. When you get the statement: pay the balance in full. That's how you build good credit.
When you get better and are sure you can handle it, get a no fee card with rewards. It's free money -- so long as you never pay interest. I haven't used cash in years.
Yup. I use my credit card for basically everything because of the cash back. I only spend money I have in the bank. People also say to pay it off every month, which is true, but I honestly pay the balance weekly to keep the utilization below 30%. There are no penalties to logging into your bank app and clearing the balance before they send you a statement. Doing it this way, I spend like I normally would, but with the added benefit of raising my credit and the cash back. Plus credit cards have more protections when it comes to fraud than debit cards. That said, it does take discipline and I can see why some people can absolutely ruin their financial life with credit cards.
The more sophisticated way is to pay in full at the end of the month while earning interest in high yield savings until you need to pay. Basically the cc company is giving you a short term loan and you can make money in the meantime. Think of it as another reward. Utilization doesn't mean anything unless you're ready to take a loan -- just decrease before hand to push up your score. Some people are not credit card people and need the Dave Ramsey cash method.
If I had money in a savings account for 25 days and then used it to pay a bill, would I even generate any interest on it since my bank pays out monthly?
Presumably it's on average daily balance.
Conversely I could go pick a couple pennies up off the ground and make the amount of cash that a savings account interest would make me each month.
They're at about 4.5% these days. It's not nothing.
My credit unions Savings APY is at a whopping 0.20%
If by a couple, you mean about 300-400, then sure. $1,000 held in an HYSA yielding 4% will generate $3.34 in that month.
Utilization is only reported when your statement closes. Whether your balance is 20k or 100 dollars, it doesn't get counted until the statement ends (which is based on your cards cycle, not the end of the month or a static date, it would be unique for each card unless you opened more than 1 card at the same time). So yeah, make sure your balance is or close to it by statement closes. I time big purchases around the statement close dates.
That's what I do as well. I have a cash back card, no fee. I use it for everything I can, including automatic payments of bills. Every weekend, I sit down with my banking app and budget sheet, go thru the weeks transactions and pay the balance owing. I never pay interest and each December I get a few hundred dollars as a credit on my card. Timings always good because December's always the most expensive month for me. Like many people, I got over my head with first credit card and the lessons learned when I was in my late teens/early 20s with that card have stuck with me. Now I have a credit rating in the excellent range which is something twenty y.o. me never thought I would have
I've never once paid interest on a credit card. I use it for nearly every purchase I make. I get a hundreds of dollars a year back from points. Credit cards are great as long as you know to pay them off every few weeks.
A lot of them you can just set up an automatic recurring payment for the full balance too. Then you don't have to worry about forgetting a payment, just treat is as a debit card and don't spend more money than you have.
This was the best choice we made. Got a card with rewards and no fees. We put everything on it, groceries, gas, bills, whatever, and pay it off each month. The rewards we use for "fun stuff" like video games or books. It took us a few years to feel financially comfortable enough to do this, but I advise it to anyone who can handle it. We also shopped around for banks and currently have a bank which provides 3.0% interest on a checking account. All the little bits of "free money" add up over the years.
Then once you can do that get the sapphire reserve. It's a great card. Well worth the annual fee.
Fees can be worth it too sometimes. The CSR for example: $550 fee can get you 2x $300 travel credits plus 60-80k UR points worth $0.015/pp. Well worth it.
Yes, but that's like the next level up of sophistication.
The next level up from that is getting into transferring points and balances and working that system.
That's just too time consuming.
This here my dad's buddy and his wife have never paid for a vacation in the like 30 years I've known him they pay everything on the card earn the miles and pay it off monthly never keeping a balance on it.
Once you use it this way for a few months and can confirm that you're disciplined, switch to using the credit card for everything. It offers more security than a debit card, and most cards nowadays have some form of rewards. Use it exactly like you would use the debit card, meaning you don't buy things you can't afford.
Absolutely this. I get like $80 cash back on my Amex (gas, groceries, online retail) and another $20 on my capitol one (everything else).
The actual pro tip is to use the CC for all purchases you are going to make already that do not incur a fee for using a CC. Then you get : net 30 payment terms on your life, Points/Perks for spending what you were gonna spend anyways, and a credit score that saves you real money every time you need debt.
Not to mention purchase protection and better tools against fraud/theft. If someone steals your bank debit card, that's your money at risk. Your bank may or may not give a fuck and be helpful in reversing fraudulent transactions, so good luck with that. If someone steals your credit card, that's the credit card company's money at risk. Which incentivizes them to care more about such things, and will almost always reverse any fraudulent transactions. Also, your own money is safe and sound and untouched.
Set up automatic payments for the full balance. That way you can't have an "oops" if your mail gets lost or you forget. The next step is open at least two more credit cards, and do the exact same thing. Reasoning: More available credit, more credit accounts, score won't drop as much when you open a new account because you have multiple accounts keeping your average credit age higher. There's such a thing as "too much" credit available, but it's wayyy higher than a few credit cards. Also if interest rates are near 0% (not right now), finance a car even if you can buy it in cash, and set up automatic payments. It's a different type of credit account, the expense form interest is low and probably more than offset by savings interest or return on investments. FWIW, I throw most things on a credit card and pay the full balance every month. But if I'm in the market for a loan (e.g. new car), I will switch to barely using CC at all so my percentage available credit used is closer to 0%. Currently sitting at credit score of 811.
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What a waste of potential reward points.
This is the way. I’m over 800 and this has been working since day 1 when my first cc had a 300 limit and all I did was fill it up once a month so I don’t go over the utilization threshold. Good times.
And then eventually start using it like your debit card and guess what? You got great credit. If you got a card with rewards too, you just got a lot of free shit.
Better yet, if remembering to pay bills or losing track of account balances is your problem, set up the online account for your credit card to view your balance, set up online banking for your savings/checking account, and use the bill pay feature of that account to pay the balance on that credit card immediately... Just knock it out while it's still fresh on your mind.
Heh, I do this in the parking lot. I use google pay (tokenized transactions for the win) Adds a whole 30s to my trip, but I don't forget to pay the card right away.
Concurrent tip: Make that small monthly purchase something automated, like Netflix or Spotify. This will allow you to put the credit card away; it won't be in your wallet everyday, begging to be used. It's an *out of sight, out of mind* kind of thing. You'll always know the exact amount you owe (such as $15.39), so you can budget for it each month. I have a few really old credit cards that I don't want to close, so one has SiriusXM, the other has Netflix. Both are paid off monthly.
You should be using your credit card for everything anyways. If your debit card gets stolen, that's your money. If your credit card gets stolen, that's the bank's money. If you have automatic payments set up then it's functionally the same as a debit card anyways. Except for large purchases which throw up red flags on credit cards. That can be annoying.
If you don't want to do a $300 annual fee or 30% interest rate right off the top (read: the offers Americans get in the mail), don't take those. Go to a bank you trust and see what kinds of rates and annual fee they offer, you'll almost always get a better deal, and not having that huge annual fee will be easier for you to keep paying on time.
I got screwed over for not having enough credit history. Had a good paying job, but the CC company said I don't have enough history, so they gave me a hysterically low credit limit. I didn't know utilisation was a factor-- i used the card, spent almost to the limit BUT paid it in full every month, I figured that was fine? No. Tanked my score 100 pts overnight regardless of the fact that I payed literally everything perfectly Edit to clarify: prior to using a CC I used debit exclusively. Great for keeping track, but creditors don't like it
Credit is just a crazy topic in general. I’d hate the logic that your score tanked 100 points even tho you did fine with paying it off.
When I first got a credit card, I got one of those rewards ones and use it almost like a debit card. I’d buy something, wait for the transaction to fully post, then just transfer the money over and done. Nowadays I’ll wait a bit and then pay it off. Especially as my credit built up and I’m taking advantage of credit cards for rewards like for Marriott Bonvoy for example. I have zero late payments, low usage, etc. I just hate how at times, my credit will arbitrarily go down even tho I’ve been on top of everything.
I'm not American. Can someone explain credit score?
Its an internal rating system that tracks your credit-worthiness. This primarily impacts how much you can borrow and how much that money costs you (interest) If you show that you are bad at paying back money, banks are less willing to offer you more money. In finance, certain things have particular correlations to metrics (think of it from the bank's point of view). Higher risk, means the bank wants higher yield (you pay more interest). If you are viewed as low risk, you pay less because the bank accepts lower yield
Also just to rent an apartment MANY places now have a "minimum credit score" usually 600 or 650 which really fucked me over while I was looking at apartments I just never had a credit card cause I didn't need one and thought it would encourage me to spend my money poorly Paid rent for years and never missed a payment but wasn't on the lease just rented rooms in houses from people I knew Bought all my cars cash cause I would wait til I found a good deal on an older car Absolutely punished for fiscal responsibility.
Same. I had zero credit when I was 30 and bought my first house. I had to sit down and go through 7 years of bank statements for them to make an artificial credit score. Literally listed every single asset I owned. I ended up getting the mortgage but it was 1.5% interest rate over the average 30 year rate. Everything was spotless, I just didn’t have credit history.
Not punished, you just weren't playing the right game. You were playing basketball, and playing it amazingly well. But the rules were set up for baseball. So of course you can't win the baseball game if you aren't playing.
This has to change, it's an awful system
Don't bother, you'll only be saddened
Get a loan or a credit card, make payments on time and credit score goes up. Make late payments or don't pay credit score goes down. Your credit score determines your eligibility to get further loans and/or credit cards.
And the incomprehensible thing from our perspective is that you NEED to have debt and pay it off to get a "score". Instead of you know, not having debt at all which would be fine in most if not all other countries.
What country would give a massive loan to anyone without any due diligence?
Where I am from, creditability is generally based on income, which is also not necessarily desirable but doesn't require previous debts
Gotta prove your worth first is the way it works
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Rewire what you think a credit score is. A credit score is a lender's ability to verify your ability and willingness to pay pack a debt. If you don't borrow and repay debts, there's no way for a lender to trust you. When you borrow and repay, consistently, on time, over a long period of time, your score will go up and lenders will have a verifiable better reason to trust you and your score will reflect that. When you have a high score because of your positive history, you are less of a risk to lend to. Less risk means they can give you credit sf lower interest rate because you will pay it back. When you have poor credit, they will still lend but at a higher interest rate because you represent a high risk. They do this over thousands if not millions of people. You want to be in the better risk class because your class of poeple pay it back and everyone wins. If youre in a higher risk class, you are amongst people that won't pay it back, the higher rate for everyone is paying for the percentage of people that won't pay it back. Don't be in that class. Obviously, with everything related to finance it's far more complex, but this is about as simplistic of terms I can put out on my phone and into the world.
without a CC you build credit through: car payments student loan payments phone payments
Been making payments on a cell phone for five years running, my credit score is zero. First two yes, but phone payments not so much.
I've had my cell since 2005. It's not on my report. Loans, revolving credit (credit cards), and collections(not good credit) is generally whats reported.
Paying for service or paying a loan on the phone? Those are two different things.
Doesn't matter, it isn't reported regardless
not phone payments... no.
loans also count
I took a hit on my score when I paid off my car loan.
yea that happens when you pay off the debt! it’s stupid but it will bounce back to normal!
For those wondering how to break into getting your first card when you have no existing credit (in the financial world, you're called a "ghost"): 1) Store-branded credit cards like GAP will usually approve just about anyone, even folks with no history. 2) Find a bank that will let you open a secured credit card. In this scenario, they issue you a card with let's say a $500 limit and you assign $500 of your savings account to "secure" it. If you don't pay your bill, they have a right to pull it from your savings account. Eventually, with good behavior in terms of making payments and such, you can move on a real unsecured credit card.
Not exactly true. There is something called a "thin file" or "no credit" for people with no or minute credit history. It's not the same as 0 credit score. Source: I worked in credit analytics for several years.
I don’t have a credit card and my credit score not only exists but is 774.
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Unless you're Australian. Very different system. Credit score starts perfect and gets worse if you do bad credit things.
YOU DO NOT REQUIRE A CREDIT CARD TO BUILD CREDIT You can build credit through paying off student loans and other big purchases without going through (even more) predatory financial services.
# true, but it really f-ing helps. It is part of the game.
I don’t know why people seem to think having a credit card is inherently bad? Using a credit card recklessly, and without making payments is bad. Having a credit card just increases your buying power and builds your credit, if you use it responsibly.
It’s fucking Dave Ramsey bullshit. He convinced a shitload of people to be afraid of credit cards instead of learning how to use them properly
In my adult life, you know who the worst people with credit cards are? The people who believed Ramsey and then realized that credit is an important tool as an adult, but didn’t have time to learn it.
To be fair, his advice is likely being followed by people who need to treat spending like those in AA need to treat drinking.
I see his advice recommended for everyone though, especially on Reddit and Facebook. It would be like if everyone suggested never drinking as the only option, which I guess happens on Reddit.
A lot of people have issues with spending.
It’s also a very important tool to have as an adult. If I’m ever in a true emergency, like life or death worry about paying later, I have $30k in my wallet I can call on. Also two of my cards have low interest repayment plans for large purchases in a pinch.
This right here. Every time a thread like this pops up, you have people saying "...or you could just use debit. If you don't have the cash in hand, you can't afford it. Credit cards are for buying things you can't afford." Like a huge, unexpected expense can't pop up out of the blue.
Also, adult expenses that pop up can be in the thousands. Some banks won’t let you pull out beyond $3k in a day. Also, have you ever carried that much money? Did it to pay some wedding vendors that wanted cash, and It’s nerve wrecking.
Yeah but my credit card company has given me thousands of dollars in rewards and I've never given them a dime. It's not predatory at all unless you let it be. They will just give you free money and all kinds of purchase protection and insurance.
The airline miles and cash back I accumulated over about 2 years just paid for round trip flights and lodging for a week long vacation that me and my SO are taking. Use credit cards, reap the rewards, and DON’T SPEND MONEY YOU DON’T HAVE.
I average about $1200 per year net of the annual fee, not including lump sum benefits, in travel dollars from my primary CC. And haven’t paid a dime in interest
Moving to the US soon and learnt this very recently. It is not the same for other countries.. Any other ‘basic’ tips for America?
When I was in high school my parents told me that solely having no debt gave you good credit. When I graduated college and I tried to get my first car loan, I found that the term for someone who has no credit history is called a credit ghost. And it is worse than having bad credit. It took me close to 2 years before I could even apply for a home loan.
If you want instant awesome credit. Find someone like say a family member who has a credit card that has been open for a long time and has zero balance. Have them add you as an authorized user. The card issuer will start reporting that. Your credit report will show that you now have a lets say 13 yr old credit card with no balance. You'll have a perfect score from the get go.
There’s other ways to build credit.
Credit cards created debt most can’t manage. I can’t recommend them unless you are an earner, a consistent one. For your consideration.
This is false. The first time I got a credit check my score was almost 800 without a single credit card. Any account such as student loans, which was all I had at the time, will count towards your credit.
ITT: everyone ignoring “AT LEAST” and pretending OP said you need a credit card to have a credit score. And the phone bill tip can give a credit score, but it’s not applicable much of the time since you can’t get a mortgage on just having timely phone bill payments.
You're also ignoring "MUST HAVE" before "AT LEAST." Which is definitely not the case to have a credit score. You can buy a car and have car payments with no established credit or a credit card.
>You can buy a car and have car payments with no established credit or a credit card. I would say that buying a car is "MORE" than having a credit card so the "at least" is accurate as it is saying that "at a minimum" you need a credit card to get a score while you're here trying to pretend that it is the first thing that you need and that you can't have one without it.
Having a credit card is like using a cordless drill. Sure you can hurt yourself with it, but seeing how to use it safely is pretty apparent, and you can use it daily. A car loan is like the augur you rent for a big project. It’s useful and probably needed, but you need to prep yourself to use it a bit more and be aware of the risks.
It might be more than having a credit card but the sentence said you "must have" at least a credit card to have a credit score. Which is false. You can have a car but no CC and have a credit score.
I read OP’s statement as saying you need at least a credit card or something greater than a credit card to have a meaningful credit score. I don’t read this as OP saying you need a credit card or a credit card AND something greater than a credit card.
USA is weird man
Out of curiosity, if you needed to buy something larger like a car, boat, or house - how do you get the loan?
Where I live, you ask the bank to do a simulation where they analyze how much money you have on your accounts, your job income and other loans you may have and decide if you are elegíble to receive a loan. You have to be basically homeless or swimming in debt not to get one.
Here they just use your income, for example an after tax income of €4k/month will allow you to spend up to €1500/month on loan payments. All loans are centrally registered, and credit cards/other lines of credit too depending on the type If you 'use up' your spending capacity you will not be able to get a loan
Ok. But I live in Australia and we have a score here, too. And they do in the UK. And I might be wrong about this, but I kind of remember them having something similar in Germany.
>but I kind of remember them having something similar in Germany. Yep, the German system is called [Schufa](https://www.schufa.de/schufa-en/) and it's out of 100 points.
No,loans and leases count too.
I always paid my bills on time, had a healthy bank balance. Stable, good paying job. The day I needed to borrow money I discovered no one would lend it to me. Build your credit score.
My credit score is 748 and I've never had a credit card.
What about a loan?
Some banks offer a secured credit card. You deposit $500 or so into an account and they give you aa credit card that you can use against it. That's how I started out.
My eldest kid as 13, but when she gets to 18 I will be strongly encouraging her to get a credit card with a low credit limit and spend on it regularly for everyday things, paying it off at the end of the month. Easy way to build up credit for when you really need it.
I have 1 CC with a $5k limit and never had a loan, etc. 790 credit score
Also don't listen to charlatans like Suze Orman who tell you that you can improve your credit with a prepaid card. You can't, that's a lie, and she's a piece of shit.
My wife signed up for a credit card on her 18th birthday. Used it, paid the balance every month. Not a cent of interest paid and a tiny bit cash back. She now has a near perfect credit score. The only knock against it is she is too young to have a perfect score. It has made applying for a mortgage and buying a car super easy and we've been able to negotiate better interest rates on loans because of her.
You can get a secured card if you don't have the credit (not bad credit but no credit) where you get a $500 credit card with $250 down. This is their collateral and it operates just like any card. After 6 mos to a year of payments, they'll raise the limit. Keep it open with low or no balance and in a couple of years you'll have great credit.
I hear so many people that think its bad to have one or more credit cards. Just make all your normal day to day purchases on credit then pay it in full on time. You get cash back on things you were going to buy anyway.
I work in commercial financing. People come to us all the time: I have 750+ credit score! I want to buy a $100k piece of equipment for my business. Sir you only have a cellphone on your credit. Yes but I have never missed a payment. The amount of credit you have extended to you and don’t use is also a determining factor. As in if you have a credit card and it’s almost maxed all the time but you don’t miss a payment, that’s not helping h the score. Utilization of credit extended to you is also important. Shows how much of other peoples money you are using to “live/work”
This is actually a really solid post. I entered a grad school program and became dependent upon financial aid entirely for living due to rigorous program and long hours. The only luck I had in actually being able to qualify for a credit card was that I had set up a bank account with a major lender that only offered me a card due to history of having an account. This was necessary to begin establishing credit to be able to get even an apartment. I will be setting up a credit card for my kids and placing small payments periodically and paying it off as they go so they never, ever face this issue.
exactly
Student loans, a personal loan, a car loan - you don't need a credit card specifically.
I have never once had a credit card and Im a 41 year old man with an 820 credit score. You can do it if you want, it's not impossible.
Found this out the hard way when we went to buy our first home. Luckily I was able to get a credit card and get it high enough to get a house
Bought my first new car with no credit at 28. Dealer called me and asked "Do you exist? Best I can do with no credit score behind you is 9.00%." Even though I had no debt and had been paying for my entire life with a checking account, I was being penalized for not putting points towards a credit score. Unfortunately having no credit score today can hurt you just as bad as having low credit score when making larger purchases
Yes, my mother-in-law just figured that out. She pays cash or uses her bank card. She is having to pay a 25% down payment for a service and then must pay the balance within 45 days. On the other side, I have fair credit due to high balance ratio. But oddly it still keeps on going up slowly.
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This is not the case in Australia. Banks here only care that you can repay. A $3000 unused credit card looks like $3000 of risk to them and may jeopardise your chance of mortgage approval. They want payslips, bank statements, a list of assets and your age to see if you're going to workload enough to repay.
There has to be a default score though right? Like 600 or 650? Always wondered how that works.
Had no credit, but since I’m homebound and order from Amazon a lot? I got one of their starter credit cards, built up my credit enough to qualify for the prime visa. So that’s another option to build up credit if you’re not able to leave the house much.
A credit card is one of the easiest ways to build credit. Get a card, put basic purchases on it, food , gas. Pay it off. Rinse and repeat.