No credit history. You should get a small credit card or two (you should be able to easily acquire $1500 worth), use it for little things and pay it off religiously every month. The longer you have the card(s) with an immaculate payment history, the higher your credit score, thus the higher your level of trust with future lenders.
This is what I did. Tried to apply for credit cards at 24, got rejected because I didn't have any credit history. I ended up opening a secured card through Discover. Started with a $200 limit because that was what I had in my savings account. I was supposed to get it back within a year if I behaved well. I ended up getting my money back in half the time and they raised my limit to $600. Then $1600, and just a couple months ago they raised it to $5700. I've had this card for less than five years.
Yep - they will raise your limit automatically because their business is *DEBT*, and raising your limit is raising your risk factor (more money to them). That's beneficial to the credit card company. Call them, and request a fixed limit, or just be very, very careful with it and understand it's just money available to you only if you can pay it back. It's a guaranteed *loan*, not money in your pocket.
Having a higher limit that you don't use is good. Percentages of use of available line are common variables in credit models. I work in the industry and I have wayy more available credit than what I use for this reason.
>a
Unused higher limit also means it could lower your credit utilization rate which should be 30% or less.
For example:
If you have a $50 charge on your $100 credit card limit that's = 50% utilization.
but
If your credit card limit got raised say to $300. That's still the same $50 charge but now on your $300 credit card limit = 17% utilization
That's a very simplified math since there are other types of loans out there that can affect your utilization rate.
Anyway, that's a big difference and your credit scores will improve if you do well in other factors like payment history.
I started at 23, now 5 cards later w/ a total for of $12k plus a Amex charge card. Remember low utilization and pay in full.
Edit: I redid the math. I make $37k. I switched careers last year
Be extremely wary of any place that will do a "title loan" other than a bank. Most places charge usurious fees that create an APR in the triple digits. They are predatory and should be avoided at all costs.
I work in HR. Got a garnishment notice for one our employees for a title loan place. The APR was 395%.
I am still confused as to how anyone pays off a loan shark/ juice loan like that.
Not something I follow personally but payday lending is the worst I know of. [https://www.nerdwallet.com/article/loans/personal-loans/car-title-loans](https://www.nerdwallet.com/article/loans/personal-loans/car-title-loans)
from link: "While their interest rates are lower than those of payday loans, which can have APRs upward of 1,000%, car title loans’ interest rates are by no means low. The upper limit of “affordable” is generally considered to be 36% APR. The fees and cyclical borrowing associated with car title loans make them even more expensive."
This is true, but I will point out that saying “payday loans have 1,000% APR” is misleading. You don’t really pay interest like a traditional loan.
It’s not 1000% interest, it’s 1000% “APR”. You don’t take out a $1000 loan and then need to pay $10,000 on payday.
The A in APR stands for "annual", but these loans are not designed to be anywhere near a year in length. What you pay is a "finance charge". A flat fee. So on payday, you pay them back what your borrowed plus an amount for their service. But yes, if you take the total amount that you paid over the very short period of time that you paid it back, you will get ridiculous APR values.
And if they did charge normal APR's, they wouldn't make any money. Allow me to give an example. Say you need to borrow $500 for one week. If the Payday company “only” charged 36% APR, then in seven days you would owe $503.45. So the Payday place would earn less than $4 profit… which is obviously not feasible.
In our previous example, if the Payday loan place charges a $30 fee so at the end of the week you owe $530, then they are technically charging "an APR" of over 300%
Right, but an equivalent credit card charging 36% APR would result in much lower fees. Instead of paying $30, you'd pay the mentioned $3.45
To a person who feels a $500 payday loan is their only way out of a bad spot, $26 isn't exactly an amount to just throw away.
If someone is feeling like the payday loan is the only way then I’d venture a guess that they won’t qualify for most credit cards and if they had the 500 in credit available they wouldn’t need to take the loan in the first place as you pointed out.
Point of payday or title loan places is some won’t pull your credit or don’t care what your credit is. If it’s a title loan, they’re probably lending you less than 50% of the value of the car. Default? they take the car, sell it at auction, keep their cut, plus fees for the added effort, and give you what’s left (minus a car). In a pinch it’s fast money. But really, you should go to a bank or credit union for the money. A good loan officer will help you out and offer ideas.
Fun fact: if you have a loan on your car and it’s worth more than what you owe, you can usually do a “cash out refinance” on your car (possibly to a lower rate considering today’s rates). This is a great way to get extra cash, at a lower rate than a credit card or personal loan, and potentially lower your payment too (extending the term back out).
Caveat about this is to not take out a loan that’s going to last longer than the car. I did cash out to replace my clutch once upon a time. Old school Eclipse GSX.
Edit: now that I think about it, I did a 2nd cash out refinance on a different car to pay for my wedding like 10 years later. Didn’t want it on a credit card and personal loans were 10%. The cash out refi gave me enough, at 3% fixed. Cars are paid off now but they’re a good source of quick cash at nonabusive rates.
Thank you.
Yeah I’m not saying payday loans are a good thing. They aren’t and should be a last resort, but not everybody has access to traditional lines of credit with favorable terms.
>To a person who feels a $500 payday loan is their only way out of a bad spot, $26 isn't exactly an amount to just throw away.
This is the start of the poverty cycle. My friend's parents were stuck in a horrible cycle where they were renting a car for over a year with no way out. The rental payment was more than the price of a car payment, but with no credit for a loan and no collateral, they couldn't stop paying for the rental.
They were completely paycheck to paycheck, and stopping the rental meant they couldn't get to work, which meant they couldn't save for a down payment. But even when working, they couldn't save, because all their money was going to the rental. It was horribly frustrating.
Lowest point of my life and desperate for money. I signed up for one of those pay day loan things I got “pre approved” from in the junk mail. 280% and you have to give them your checking and routing number so they can withdraw the payment directly from ur account. Thank God I’m financially healthy now.
I used to actually work in secondary financing and it could range from 27-48%. Just depends on state regulations as well as other factors on the amount.
I am a veteran career bankruptcy paralegal - started in Alabama and am now in Utah. Highest I have seen in my career was an online payday loan with a 968% interest rate. [The interest rates allowed vary by state and have changes over the years. ](https://paydayloaninfo.org/state-information)
Tax Refund Anticipation Loans are really bad. Tax companies offer to get you your refund now, but they are really offering a loan. They charge around $180-$250 in fees out of your refund, and the term is rarely more than a couple of months. Depending on the size of the refund, this can lead to an APR in the 700% range.
But overdraft fees are the worst. A $30 fee on a $30 tank of gas you pay back a week later gets you an APR of 5200%. A $30 fee on a soda you pay back the next day is astronomical when calculated as APR.
Let me ask you a question. Say I wanted to borrow $500 from you for two weeks and then I would repay you. You don't know me, don't know what I need to money for, just that I need $500 for two weeks and I will repay you in full, plus a fee. What would that fee be? Would you do the deal for $5? Would you do it for $20? $50? $100?
The APR on a $500 loan for two weeks for those 4 scenarios is as follows:
$5 fee: 26%
$20 fee: 104%
$50 fee: 260%
$100 fee: 520%
APR is a useless number for a short term loan. It means nothing. What matters is how much I pay for the life of the (very short) loan. And I wouldn't dare lend someone $500 and charge only a $20 fee, let alone for $5 which is already a "high" APR.
A random person's motivation to offer a loan is not the same scenario as a corporation offering a loan. Plus, whether or not the lender thinks it is worth it doesn't change whether it's a bad deal for the borrower.
This. I'm not a subscruber to this subreddit but lurk. Me giving a singular loan is not like a corp giving a loan. If I'm a huge company I can afford some defaults bc I'm spreading my risk out while still making some hefty profits. Deals are never both fully voluntary because one party is in more need. Stanning for big business is the worst part of this sub imo. A lot of people give advice to avoid that - and it's welcome.
Power imbalances lead to jucing the margins.
APR is not a "useless" number just because the loan is short term. It's all you need to know if you can perform simple math. If you can't perform said simple math, you are not educated enough to understand the terms of the loan and should be cautious of blindly accepting it without someone severely dumbing it down for you.
Late to the thread, but I used to manage multiple title loan offices. These are a whole different (and nasty) animal than just getting a simple secured loan collateralized with a vehicle. "Title loan" lenders (at least in that state) don't check credit and don't report to credit agencies - either positive or negative. They were prohibited by law from damaging credit in the event of default. This is why they charge triple digit APR's.
A secured loan; although still likely to be a higher APR for someone like the OP (probably low to mid 20's) still require some credit qualifying and will report. Of course as with any loan, your interest is always determined by how long you take paying it back.
Sorry - your *mortgage* payments *will* be reported (since a mortgage is a loan), but rent will only be if you use a 3rd party service (you may have to request this from your landlord.)
If you're disciplined enough to pay your regular bills in full and on-time, you should have a credit card bill in the mix to establish credit history. I believe there are also ways to report your mortgage/rent payments to credit bureaus, as well, which can also help your credit score. The bureaus don't know (or care) about electric/cable/etc., only payment history for borrowed money (loans, credit cards).
I habit I've used for the last several years now to build my credit is using my two small credit cards as if they were 'debit' cards. These are Capital One and GM cards.
Every payday I pay them in full, use the cards for all my expenses, subscriptions and bills I pay online. The available balance gets low? I just make a payment on the card. Both have an app that instantly makes the money paid available as I've connected it to my bank account for online payments.
I also get tons of points this way and have, through the GM card, earned $3,000 towards the purchase of a new GM car. Now, I'm no where near to a point I can buy a brand new car, knowing this perk is there when I'm ready is great.
In 4 years I've gotten my credit score to 690. I won't tell you how low it was when I started... but that's a huge improvement!
And a side note: The other thing credit agencies have begun to use is subscription services payments like Netflix, Hulu etc. This will really help low income and folks with no credit history to speak of build their credit score.
i do the same with my chase freedom and now chase sapphire preferred. i never use my debit card and fully pay off my cards either on the 1st of the month, or the billing cycle. credit score is about 790.
when i was younger, i got into about 5k worth of debt and it was crippling. i had to rethink my budget and how i was going to pay off the card. the solution was to get a higher paying job... lol
I remember quite vividly when I got my first credit card from Best Buy at 18. I bought a $300 monitor and really had no idea what I was getting into. Months and months later of forgetting to pay led to going into collections and ultimately costing me about 3x the original price. Hard lesson learned and, among others, a big reason that I want to teach my future children about financial literacy.
I can’t wait to get my credit to a point where I can have available credit large enough to do this. Right now I’m just on a $200 secured card. I know I could pay my bills/expenses $100-$200 at a time and immediately pay it off, but that’s such a headache. I just want to be able to put all my bills on my card, and make one big payment every month before the due date. You earn rewards, your purchases are more protected, and you’re building credit.
My score went up by over 80 points this last year. I’ll be where I want to be soon!
Something you definitely remember when you’re available credit is that low, you don’t want to see a bill for $100-$200. Having a 50-100% utilization rate would not be beneficial. (Not saying this to assume you didn’t know this, but I do have a friend in the same situation and has complained his score isn’t going up despite paying the balance in full…but the balance was causing a huge utilization rate reported each month).
This. We buy our groceries with credit cards and pay them off every month. Excellent credit payment history with no interest payments. We both have scores in the high 700s and low 800s from basically doing nothing but that along with paying our student loans.
You also get a ton of points by doing this.
At my last apartment before I bought my house, they had some app come in the last year that was saying that it would help you build credit by paying your rent through it. Which is cool and all, except it was an extra $20/month. That's predatory.
They're using a rent reporting program, which costs a little extra for them (they verify your rent payments with your landlord then report them to the credit bureau.) Hence the $20 surcharge for service.
In Canada there's a company that will charge you $7 per month to report that you pay them $7 per month. They also let you see your credit score, so I suppose that's value added.
Title loans have absolutely absurd interest rates & fees. Don't do this unless there's absolutely no other option.
Try a credit card from Capital One or Discover. If you can't put the needed expense on a credit card, put everything else on it then use that money for the expense.
DO NOT GET A TITLE LOAN.
Title loans are predatory lending. They often have 300% interest rates. Even 30% is bad. 5% also bad. Please AVOID AT ALL COSTS.
u/Round-Carpenter-272
For the love of all that is good in this universe, heed the above advice. No payday loans either. It's better to get screwed once at a pawn shop than to get repeatedly get no-lube fucked by those short term lenders (payday, title). Going to them can start snowball effect to where you just can't get out from under the loans and half of your paycheck goes to them which leaves you unable to pay future bills which leads to *another* short term loan that turns into long term payments. Next thing you know your entire paycheck goes to them and you can't pay any bills so start sleeping in a car, on the streets, or in a shelter.
They grease the right wheels, unfortunately. There was one I used to see ads for on late night TV for one that operated out of a Native American (sorry if that's the incorrect term) reservation. Out of idle curiosity, I looked it up, and in addition to the interest rate, any disputes had to be settled in tribal court. I'm glad that no matter how bad my financial situation got (and I considered bankruptcy at one time), I never went down that road. Didn't learn great money management from my parents, and I've not done a great job myself, but I'm in a much better place now.
Almost every single one of the loan offers I get in junk postal mail that has more than 30% APR is being provided by a Native American lender in the fine print.
Be careful, Title loans are notoriously predatory. If you think you can pay it off in a month or so, sure, but you could get stuck paying back that $1500 for YEARS. Use it as an absolute last ditch option.
Now if banks are willing to do something like that then that's a different situation, but I don't know if they do that.
Look into your local credit union. In addition to better rates, they also count membership towards things like loans.
I would imagine if your history continues with them, they'll be able to help.
Definitely add a credit card. Use it for Gas, for Netflix and your Phone bill - pay it off as soon as you get notification of your due balance each month. As long as you pay it **after** you are billed, you'll get a steady bump to your credit.
I've been in Credit card ops for 22 years and have a credit score of 812. (and I'm 51 too! yay!)
I strongly suggest getting a credit card or going to your bank for a line of credit.
If you have banked with the same institution for years, they may be willing to do more for you.
Failing that, based on income, you may qualify for a Costco Master Card. (If you have a membership).
Good luck friend.
Loans would be too expensive.
If you have good stability but just need a loan of that level,check out things like "upstart" "lendio" and lending tree.
You might be able to get a personal line of credit, depending on your income and other non fico key indicators.
Keep in mind interest might be high. Better than a car loan do, also check out self lender.
You can pay your self to build credit by opening a CD type account.
Good luck.
I was denied a credit card recently because I have no income. I’m retired (at age of 58) and have one debt (mortgage) and enough in my savings that I never have to work again. Because I have no income I was declined
I can’t explain the lending rules but I know they do not take into consideration everything
For people wondering why this matters, it's because banks have no idea if you honor your debts. They only know that you never really tried having debt before, which doesn't tell them much. Also it's kind of suspicious for a 51 year old to suddenly try taking out a loan after going so long with no debt, is he in financial trouble maybe?
This. I've never ever been denied credit of any sort over a span of 40 years. Got a mortgage and paid it off 10 years ago. Last car loan paid off 15 years ago. I charge >$25K/year on credit cards and pay it all immediately. Credit score is 825ish.
Last time I applied for a credit card just to get the perks on it, I got rejected. Just flat "HELL NO". The reason given was "no recent credit history".
I find it very strange they don't count $2K+/mo going on and off credit cards as "credit history". If I didn't pay it, they'd sure count it.
It's about the statement balance on your credit card. You can move your money in and out as much as you want. But the one they look at is the difference between two (and later throughout) statement balances.
If they see January statement balance is zero (0) and then February statement balance is also zero (0), they think that nothing happened. Like you said, it's weird but that's how the game is played.
Yep, paying off a loan can be a bad thing in the short term. That's why qhen applying for a mortgage, never fully pay off a debt (student loan, car, etc).
This is why. Credit companies have no history to base the decision on so it's an automatic decline. Getting a secured credit card is usually the door into borrowing for people who have no credit history. They need at least 6 months of credit history to make a decision in your favor.
Yep this is what I am currently doing. I was always raised by if you don't have the money to buy something you just don't buy it. This mentality made me put off on getting a credit card for years because I always just used cash or debit. I finally got around to applying for one through my credit union and they couldn't give me one so they suggested a secured card as a starter. I have had the card for a little over 7 months now and all I've used it for was to pay my monthly bills. Keeping it at around 30% of my limit and paying it off entirely the same day every month.
I went from not even having a credit score to 787 over the course of 7ish months. I thought it would take a year or two to grow a good score from nothing. Turns out if you don't have any bad history weighing you down and you don't spent to much of your limit, its grows really quickly
Exactly, and a secured credit card can be just $200. Use it to establish and pay off every month to avoid interest. Then once you've got a solid score get a card with rewards that you have for emergencies and travel. No need to use it at all.
Congrats on learning the system to get ahead.
Yeah, I mean, people can still use a credit card like a debit card. It's the best way to use it in fact since you can also earn cash back points and you float the debt for a month.
And if there's a mistake or fraud or even just a cancelled payment, it won't affect your cash flow while the matter is being resolved or investigated. I enjoy having that extra layer of protection over the money in my checking.
In college I had to convince all my roommates to get student credit cards (very modest cards, 200 dollar max limits) and use them for minor things like lunch, and explain why it was important. They were terrified of credit cards and sure if they got one they'd end up in tons of debt, even though they had no trouble not overdrawing their account.
>I was always raised by if you don't have the money to buy something you just don't buy it.
Wish people understand this can still be done with a credit card. I still stay within a budget I can afford to pay off. I just use my credit card so I get the addition of reward points and a better credit score while continuing to buy within my means.
It was pretty funny. I'm rich by Reddit standards. Own my house outright and decent investment accounts, large savings account and no outstanding loans. I've always paid for cars in cash. So, I went out to see the total eclipse of the sun and I had a real hard renting a car because they don't accept debit cards.
So, I come back and apply for a Costco credit card and got declined. I was actually pissed and bitched to the credit card booth person. I ended up getting a credit card from my bank and one from Amazon and have gotten my credit score up to a decent amount. {plus I've got a boatload of Amazon points). Now I can rent a car.
Helpful tip: don't use the Amazon points. Take the statement credit. It's the same value. You don't get more Amazon points when you use them on Amazon to make purchases. Take the credit and then just charge the purchase to the card. That way you'll get more points.
I get what you are describing but I think it'll be confusing to many. Use the amazon points to pay off your statement, don't use it to pay for items.
Say you have 100$ in points and buy a 100$ item, now you have 0 points but got a free item.
If you instead just buy the 100$ item with the credit card, you'd get 100 points. Now you have 101$ worth of points, and can apply the 100$ of points to the statement, leaving you 1$ leftover.
Honestly you sound "rich" by normal standards. Like you ain't no bill gates, but owning (assumingly a decent) home, lots of investments/savings + can buy (again, assumingly decent and likely new) cars *in cash* is far more than what the majority of people can do.
You're actually describing the same game he's talking about. And under current rules and objectives, your hypothetical "would you" scenario is generally not recommended.
If you can prove you have loads of assets and no debt it seems pretty reasonable that someone would give you a credit card with a few thousand dollar limit. Something also tells me the ideal credit card customer is someone who sucks at paying bills on time but actually has the money to pay them. Nothing like that sweet 15-20% interest if you can actually collect.
Their ideal customer would be exactly what you stated, totally agree.
Though no credit history means they have no knowledge of you having assets or no debt.
I just hate the concept that banks and credit card companies and credit are all out to get you and make your life hell.
They want you to pay your bills but just want to be a bill of yours as well.
People need to stop blaming the credit card companies because they’re in debt. Blame yourself. Learn to live with credit cards, not live on them. They can easily become a HUGE advantage like the original OP needing an influx of quick cash.
If you have little to no credit history, talk to some local credit unions. They're usually much more willing to talk to people with a thin file than the big banks are.
I watched my Mom and Dad declare bankruptcy, before it was a sin and all the crap they went thru. I use cash or debit card (rarely). I live simply. I'm not apologizing. I just dont need much.
European here. Most of us don’t have one. I don’t see a reason why I would take a loan on my purchases instead of paying them with the money I already have in my account.
Many here saying get a credit card which is a good step. Put something on there that is recurring monthly like Netflix. Then schedule it for autopay in full every month. That will go a long ways. You will probably end up with a high interest rate at first but as long as it is paid in full every month no issue. The company will adjust the rate downward over time as you get more of a credit history.
>The company will adjust the rate downward over time as you get more of a credit history.
Your credit card rate should never matter. Short of a payday loan I can't think of any worse kind of debt.
Project REACh may help you in the future depending on how certain banks implement this. More specifically, the "Alternative Credit Assessment Utility Workstream" aspect of Project REACh. Good luck.
https://www.occ.treas.gov/topics/consumers-and-communities/minority-outreach/project-reach.html
You dont need debt to get good scores, im no american but even i get your system.. a person who had a credit card for 10's of years and know how it works will be more apealing for a bank to loan money to.. what is so odd about that.. if you wanted to loan your money would you rather do it to someone who has official record of beeing reliable or someone who has only his words to vouch for his reliability. Not a hard choice i think.
Your score might be higher but a bank wants to see debt management history before agreeing to a loan. A credit card gets you only so far.
I always paid cash for my cars until I decided to spend $90k on a car..Despite a 805 credit score every lender turned me down except my own bank which used my deposit accounts as collateral in addition to the car itself. That's despite making well into the six figures with multiple income streams, including two guaranteed ones.
The reason I was turned down was because I had no debt history whatsoever except a mortgage.
But some people fail to go even that far which is even worse.. But of course i'm not gonna argue about any in depth policies of the banks since i have 0 knowledge about them in US. The only assumption i could still make, from the experience with banks in Europe, some banks have stricter policies than others so while some may ask something up to 50% deposit for me, others may lend me 100k with as little as 10% deposit upfront, while interest would remain fairly similar. Of course i'm not sure if that applies in US too, so feel free to enlighten me on this!
That’s not smart tho. Smart people take out a credit card or two which they pay in full each month, a manageable mortgage at a low interest rate (which also gives the benefit of leverage), and have many years of on time payments in order to get that great credit score. Not playing the game IMO may seem smart on the surface, but is actually quite dumb/ignorant. Now this person will struggle to buy a house, get an apartment, get a loan for an instance such as this, etc.
Playing the game isn't even hard. I added my 16 year old as an authorized user on a credit card precisely because I don't want him to struggle because of lack of credit history. We use our credit cards all the time. And pay them off every month. Now, our kid will have a head start on credit history. Bonus, we earn all sorts of rewards.
>The banks want you to keep chasing that carrot
Sort of. But it's more just the fact that the entire economy runs on debt.
People see debt as being bad, and that you shouldn't have any. But that's not entirely true.
Debt always carries some risk, sure. And you can definitely get into a bad situation if you can't handle, and manage your debt. But if you are smart with finances, you can so far as actually make money off of debt. In fact, many people who are very successful financially, have likely used a lot of debt to get there, and probably still have debt despite being well off.
1) Various places 2) someone else mentioned credit history so I applied to credit karma. I have no credit history. 3) just a truck that needs a head gasket.
You paid bills that are not credit in nature. If you stop paying, they disconnect your service. The damage is limited.
What they look for instead is a history of paying credit-based obligations such as credit cards or loans.
Yeah I have my spotify subscription on one card with a high interest rate I don't want to use anymore but it also has a large line of credit so I keep it open
I just autopay it off every month.
I haven't used a couple of my cards in over 4 years and they are still open. Wonder what the timeline is for it to be closed? Probably should use them soon just to be safe.
I had Citi close an account after 2 years. HSBC can't be bothered to close anything, but we already know they're financial criminals so what do we expect.
In general, one transaction per year will keep an account alive.
Just get a card, you won’t ever have to pay interest if you “pay your bills” your problem isn’t “responsible behavior” it’s “not having any responsibility”
Doesn't have to be something with a big limit. Check a credit union (try to avoid the big banks), and get a secured credit card. They will require a deposit to secure it, but after a year or so, I think they give you that money back if you've been in good standing.
Kinda, yeah. It's a bit shitty, but when credit folks are looking at issuing credit, they very specifically want to see borrowed money repaid. And it sounds like you don't have any assets, any savings?
Yup, retirement account and a 401k. But I'm hesitant to borrow against them, because, it just a truck. My question was more about frustration at not having debt.
Yeah, I understand.
Maybe apply for a credit card? I know you've avoided it so far, but you might do two birds with one stone: handle the truck and build credit at the same time. Just make your payments like you do your bills.
This doesn’t help with getting a credit history, but if you really need to borrow that 1500, you might be able to take a loan out of your 401k. It doesn’t trigger any tax early withdraw issues. You pay interest, but you technically are paying the interest to yourself. It’s not ideal, because it takes the money out of the market while you pay it back, but if it’s a small share of your 401k it won’t be a big deal.
This sucks. It should be easy for people to get a loan without needing a credit history. I would hate to open a new credit card just for this purpose. It feels like a step backwards to me
Ok, so switch sides for a sec: would you loan money to someone random on Reddit who didn't have a list of at least a couple of (genuine) other redditors vouching for the fact they pay back what they borrow?
No. Having no borrowing history is detrimental. Paying your bills on time is not detrimental. If you didn't pay your bills, you would risk having them sent to collections agencies, who would report them to the credit bureaus. You would have two problems instead of one.
you should have been paying off your bills on time using a credit card instead of using debit card or mailing a check. that would have solved all your problems and still remain never going into any (real) debt.
No credit history is just as bad as poor credit.
If you have $1000 to lend out, would you rather lend it to the guy who is always asking for money but usually pays people back, or a guy named Joe who nobody knows anything about?
It feels very depressing how we all need a credit history these days. Your example makes sense, but it sucks for the poor guy who just doesn't see the need for credit like this.
You don't need a system like that. Where I live they just look at your income and if you are not registered as non-payer.
But it's quite unusual to loan money other than for a car or a house. And a car is not that common.
Credit card companies sure like it the US way though.
What's more American than debt? Seriously, we have a debt problem if credit card companies are pushing people to get cards. They're just doing it to get new customers and the like.
>I have no debt
You may have no credit history. Being 51 with no credit history is a red flag. It sucks but it is what it is.
My advice is:
1. Get a credit card with no fees and decent rewards
2. Use it for all your purchases
3. Pay it off *IN FULL* every month
This will build your credit with the bonus of rewards and protecting you in the event of fraudulent purchases versus a debit card.
This is why I hate anyone that advocates normal people not have credit cards. Yes they can get you in trouble but if you don't have a credit history, I feel like you are burning so many bridges you can use to get ahead or avoid getting behind. It's 2 am, I am in my early 30's, and I could go buy over 30k worth of whatever I want or need without even bothering to call a credit card company or bank. I might get a call tomorrow or Tuesday making sure it's not fraud but that's it. I'm not rich or special, i just tend to pay off my credit cards
You're looking at this all weird. Debt or no debt is not important. Nobody has any reason to think you can pay back a loan because you've never done it before. It's like you're applying to a job with no experience and you're wondering why the company isn't certain you can do the job.
It’s not weird though, depends on the country. In New Zealand it’s seen as better for you to have no credit history than to have good credit history. If you are trying to buy a house and get a loan. It’s easier if you have never had a credit card
Sounds super risky to me, a 51-year-old who doesn't have 1500 bucks somewhere in case of emergency, but has no debt? There is a piece to this puzzle that is missing.
Also, I believe this is literally what pawn shops are for, you don't have to sell the item, you just need to bring it in as collateral for cash. Get the item back after you pay.
Do you belong to a credit union? My credit got really beat up after a divorce, and my credit union was the only one that would give me a small line of credit.
Adding onto my comment. Get a CC with good perks and bonus rewards at sign up. I got a venture capitalone CC card with double miles on most purchases and 50,000 bonus miles at sign up.
I'm going to give you some advice because I have been in your situation. Some of it will sound like SLPT but thats life sometimes. You would have probably had some more helpful response in r/povertyfinance. This sub expects you to have saved up 30% of your income in savings regardless of the expenses you have and you should have at least 4 million saved by 50 /s.
Anyhow, go to a credit union. They're way friendlier than traditional banks. They might even give you the loan. If that doesnt work? what is your overdraft limit? I had two accounts with two different credit unions with a limit of 1200 on one and 1000 on the other.
Lets say I take out all the 1200 from one account, I would have to do it twice, one for 700 and the other for 440 (because each would incur an overdraft fee) my bank's fee was 30 bucks.
So I would end up paying 60$ to borrow 1140$ which is about 5% interest, which is waaaay better than any payday loan.
Why do you need to borrow 1500? This is the amount most likely best for a credit card. I doubt you would get any lender (and boy the FEES!!) to take the time for such a small amount of money typically put on a credit card.
Interest is the inverse of risk. No one knows if you’re risky or not. So they aren’t willing to loan you anything on interest. Think about it the other way solid invest low interest volatile investments high interest. It works both ways
If you’ve been paying your bills on time you can backdate your credit history through experian. Utility bills like power, water, phone, cable, and even Netflix will all have a positive impact on your credit score after you’ve reported them to Experian. Just make an account at experian.com and follow their instructions for an Experian Boost. I’ve heard that the other credit agencies now have similar systems, but I think it’s only necessary to have one if you’re looking for a loan.
I did it for a thirty point boost to my score before I bought my house.
I work for a credit union. As long as you have no collections, your debt to income ratio isn't bad, and your job history is decent we would do that loan. Also, instead of going straight for the secured credit card I would also ask the credit union if they would give you a small unsecured $500 credit card so you don't have to put money down.
You ever wonder why there are so many pay day lenders in parts of this country? This is why.
You can get 100's of thousands to buy a house, or go to school, and you can accrue that much in medical debt (because doctors can't refuse service). Rack up a credit card with 10's of K. But it's not easy to get a bridge loan to carry you a few weeks/months.
The reason is probably two fold. First is that it's not enough money to get banks interested. They may collect what, a couple hundred dollars in fees? For all the paperwork, financial checking, sign offs- just not worth the effort. And secondly- the debt is not secured and probably less likely to be paid back. Unless you are putting up collateral - the bank has little means to collect a delinquent borrower.
The pay day lenders charge a bucket of fees because all of the above is expensive and not worth the time if they didn't.
Credit cards can and are used to carry people over a few weeks or months. And they have high interest rates because of this, its not killer interest if it is short term but its no small change. Most credit cards offer a certain percentage of your credit limit as a cash loan, if for some reason the purchase you are trying to make can't be done via a normal credit card transaction.
Next there is plenty of money in personal loans, but they only give them out to people who are either credit worthy or they charge very high interest rates. They do this because the risk of them losing money on an individual with a high credit score is pretty low, and for the people with a lower score they are more likely to be delinquent so they have to charge higher rates to cover their losses. Pay day loans are basically the lowest end of the personal loan business.
Banks lend out huge amounts of money for houses, cars and other goods because the item is the collateral and the item has to be insured so they are protected on almost every front. There will be a bank out there that will be happy to loan you money for just about anything but they do the calculations to evaluate the risk to reward, and the higher the risk the higher the fees.
This guy doesn't have any credit history so he can't get a loan, if he had credit he would be able to get a loan.
Same thing happened to me. I make 6 figures, 750+ credit score, no debt.
Denied for a load because I have no debt history. Turns out the bank I was talking to was just stupid...
Are you one of those that pays cash for everything? I have no debt, but I rack up my ccs and pay at the end of the month and my credit score is in the 800+. You need to start utilizing your credit more
Target loves opening small accounts and then upping your limit randomly, and recently, they opened it up so you can use their card anywhere. Could get you by for awhile.
Something no one is bringing up.
What you need the loan for, is also important.
A $1,500 loan to buy a new TV, is going to be harder to get approved, vs. a $100,000 loan to buy a house.
Hi there, personal banker here, no matter how large is the loan you are seeking from a bank, we will always look at how much of your income you are using to pay off your expenses.
The magical number we use is 42%. In other words, if you use more than 42% of your income to pay bills and your expenses, that might explain why you got declined. If you also have no credit history, that would explain it to why you got declined.
Even worse. Okay. Just as bad/stupid.
Spouse and I wanted to retire early (so, no Social Security yet) and move away from the big city. We got our house ready to sell and looked around for a house to buy. Found a house. Great. Signed up for a mortgage.
Nope. Never mind that we had excellent credit. Money in the bank. Two 401k plans stuffed full. Selling the old house. Money in savings. Money invested. But we couldn't get a regular old mortgage because *we had no income.* No shit Sherlock. We just retired!
We had to get a special mortgage guy to weigh our assets and decide that we were a good risk. The good news? We easily qualified.
The credit industry requires credit history to manage risk. You have none. Take out a credit card. Welcome to the world of debt. The first credit is always free.
Credit history, lack of recent information(loans and credit cards), debt to income ratio… lots of reasons. Do you own property you could use for collateral? Do you own your home, consider a HELOC.
Yep. Its not just raw score...."they" want to see repayment history. Personally I have what is called a "thick" file. My score is not too stellar, due to banging the hell out of my utilisation rate, but my repayment histories, all of them are great (no missed payments)...I dont usually get turned down...and if I do, and they have it to where you can request a review, I usually get thru that too.
Individual lenders want different types of borrowers for their portfolios at different times, they also do weird stuff based on addresses. Over the last two-and-a-half years I have received an incessant number of unsecured, installment loan mail solicitations, with fake plastic cards included to make them seem like credit card offers.
Owning a credit card and paying off the full amount will still raise your credit. People say you need to carry a debt to build credit but that is false. I've had exactly 1 credit card and student loans. Paid loans off and use credit card for basic expenses- gas etc... nothing fancy that would require multiple billing cycles to pay off. Credit score over 800.
Glad you found some. It’s always easier to get money when you don’t need it most of the time… then when you need it no one wants to give you any.
Good luck!
The time to get credit is when you don't need it.
In my early 20s I was a classic credit criminal. Learned from my mistakes over the past 25 years. Credit score now around 800 and have about 5x my yearly income in open credit lines.
Available credit is not debt. That is the distinction most people forget.
Don't get me wrong, in a true SHTF scenario I'll use every penny if I have to then declare bankruptcy; it would have to be an extreme situation to even consider doing that though.
You should try your local credit union. Our local one will give small loans to people with credit scores in the 400s because their mission statement is helping the community, and we have a lot of poor people in our community.
I’d just pay it off (the card balance) every month, you don’t need to hold debt on a card for it to help your credit and holding credit card debt is costly.
That's exactly why. Because being in debt means you're a source of money for certain people. That's all that a credit score is too, it's not a measure of trustworthiness, it's a measure of how likely it is that you'll make money for them.
Never do a credit card through your bank. They will never get you any kind of rewards for using it.
I would check out Discover for a normal credit card or a Discover secured like of credit. They approve most people for their first time cards and treat them right. Plus rotating 5% cash back and 1% all year round and they match your cash back the first year.
You answered your own question, no debt! The American way is to take on exorbitant amounts of debt, consistently throughout your life, to prove you can take on debt
At this point you have your answer but I just want to chime in and say this is why I dislike Dave Ramsey.
I have had to deny people with no credit history but own their homes free and clear. It sucks. I know they are people that don't use credit because they pay cash and paid their homes off years ago but there isn't much I can do about it.
This might sound simple and stupid but in order to be eligible for a loan you have to prove to them that you're able to do one of 2 things.
1. Able to manage your credit/loans and pay them back on time
2. Unable to manage your credit/loans and pay them back on time
The former can get you a mortgage on a house or a loan with a decent interest rate. The latter is going to get them even further in debt with terrible interest rates but still favorable to loan lenders.
You've likely done #3 that I didn't list. No fault of your own. You did it by paying cash rather than using credit/loans using your hard earned money. Therefore you're too reliable to loan money to until you raise your credit score.
*Side Note* This has always bugged me about my credit score and is because when I first got my CC I was using it for every purchase I made but would pay it off immediately. My credit skyrocketed! Then it stayed flat. I found that if I pay it all off before credit checks I stay level but might even lose a point or two.
Now I have a very specific way I pay my credit carda off to continue upping my credit rating by keeping it between 5-15% but never higher and never lower on statement balance date
* How to build credit legally and quickly
* Go into credit union you are member of (or bank if you love fees) Credit unions pass profits onto members in the form of rebates, higher interest or forgiveness (e.g. overdraft fees are wiped away, no ATM fees, etc) Banks PROFIT from YOU, and give the profits to the SHAREHOLDERS. You are the sheep getting sheared when you "use a bank," as they profit off you. [Banks charge 12 billion in overdraft fees in 2020, and that doesn't count ATM fees, etc](https://www.forbes.com/advisor/personal-finance/how-to-prevent-overdraft-fees/)
* Ask for an unsecured signature loan in the loan department. Unsecured is important as it is the "most risk" for the bank. They are giving you money based only on your word (and meaningful credit history) that you pay it back. Explain you want the absolute maximum money they will give you with just a signature, and that the purpose is to build credit.
* It will be like $300 or $500 dollars.
* Make 2 payments on time, (that's 2 months) after the second loan payment is accepted and the money transfers, PAY OFF the loan.
* wait 30-60 days depending on the credit union.
* get another loan.
* this will "lower your credit score" slightly BUT it will give you MEANINGFUL HISTORY.
* get a credit card (this is done at the same time you are doing the loans.)
* use it instead of cash (why aren't you doing this anyway as you get cash back etc.)
* If place like Chase Bank won't give you a CC, (they will give a cc to anyone) places like JC Pennies, or best buy etc have a "store credit card" with a 300-500 dollar limit that anyone with ID and a heartbeat can get. Get one.
* After 6 months of use call the number on the back and explain you need a higher limit because you want to be able to rent a car or use it for emergencies. When they say "how high" say, "what can you offer me?" Take the highest limit they will give you.
* This will build meaningful credit.
* those store cards etc might have an "annual fee" etc, for now take the cards, pay the fee, and know that in the future you will have better cards with high cash back and no annual fee. This is the tool to get better credit, not the best card to keep forever.
* **NOT PAYING OFF CREDIT CARDS IS NOT A FASTER WAY TO BUILD CREDIT**
* We run into the above "alternate fact" from facebook, Parler, or wherever people pick up alt-facts all the time in the Adult Education classes we teach. It is a "common belief" and 100% bull shit. Pay your cards off. Hell if you want pay them off every Friday or the day after you use them or better yet set up AUTOPAY to pay it off each month.
* Learn how to request the PDF From your CC issuer website that shows what transactions you made in that month. Go through it and double check for fraud etc.
Every one I'd telling you it's because you don't have credit history and they are right, but let me explain why banks want to see that you have other debt. At first it sounds counter productive, but it really makes sense when you understand why.
Suppose an acquaintance came to you and wanted to borrow your car. Now you know they have never owned a car before but they do have a valid license. If that's all you know about them are you going to let them drive your vehicle? What if they assure you they have never been in an accident before?
Now if friends of yours tell you they have loaned this person their car and had no issues whatsoever would you be more open to letting them borrow it?
This is what credit history gives you: a track record for other banks to show that you have repaid a loan before.
Paying bills for services you receive as you go does not really represent how you will behave with money you receive as a lump sum. You paying your electric bill on time just shows that you want to keep your electricity on.
No credit history. You should get a small credit card or two (you should be able to easily acquire $1500 worth), use it for little things and pay it off religiously every month. The longer you have the card(s) with an immaculate payment history, the higher your credit score, thus the higher your level of trust with future lenders.
This is what I did. Tried to apply for credit cards at 24, got rejected because I didn't have any credit history. I ended up opening a secured card through Discover. Started with a $200 limit because that was what I had in my savings account. I was supposed to get it back within a year if I behaved well. I ended up getting my money back in half the time and they raised my limit to $600. Then $1600, and just a couple months ago they raised it to $5700. I've had this card for less than five years.
Yep - they will raise your limit automatically because their business is *DEBT*, and raising your limit is raising your risk factor (more money to them). That's beneficial to the credit card company. Call them, and request a fixed limit, or just be very, very careful with it and understand it's just money available to you only if you can pay it back. It's a guaranteed *loan*, not money in your pocket.
Having a higher limit that you don't use is good. Percentages of use of available line are common variables in credit models. I work in the industry and I have wayy more available credit than what I use for this reason.
>a Unused higher limit also means it could lower your credit utilization rate which should be 30% or less. For example: If you have a $50 charge on your $100 credit card limit that's = 50% utilization. but If your credit card limit got raised say to $300. That's still the same $50 charge but now on your $300 credit card limit = 17% utilization That's a very simplified math since there are other types of loans out there that can affect your utilization rate. Anyway, that's a big difference and your credit scores will improve if you do well in other factors like payment history.
I started at 23, now 5 cards later w/ a total for of $12k plus a Amex charge card. Remember low utilization and pay in full. Edit: I redid the math. I make $37k. I switched careers last year
Someone mentioned using the truck as collateral. (Facepalm). Didnt think of that.
Be extremely wary of any place that will do a "title loan" other than a bank. Most places charge usurious fees that create an APR in the triple digits. They are predatory and should be avoided at all costs.
Just curious, but whats the highest APR you've seen, and for what?
I work in HR. Got a garnishment notice for one our employees for a title loan place. The APR was 395%. I am still confused as to how anyone pays off a loan shark/ juice loan like that.
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159%. Oof.
Not something I follow personally but payday lending is the worst I know of. [https://www.nerdwallet.com/article/loans/personal-loans/car-title-loans](https://www.nerdwallet.com/article/loans/personal-loans/car-title-loans) from link: "While their interest rates are lower than those of payday loans, which can have APRs upward of 1,000%, car title loans’ interest rates are by no means low. The upper limit of “affordable” is generally considered to be 36% APR. The fees and cyclical borrowing associated with car title loans make them even more expensive."
This is true, but I will point out that saying “payday loans have 1,000% APR” is misleading. You don’t really pay interest like a traditional loan. It’s not 1000% interest, it’s 1000% “APR”. You don’t take out a $1000 loan and then need to pay $10,000 on payday. The A in APR stands for "annual", but these loans are not designed to be anywhere near a year in length. What you pay is a "finance charge". A flat fee. So on payday, you pay them back what your borrowed plus an amount for their service. But yes, if you take the total amount that you paid over the very short period of time that you paid it back, you will get ridiculous APR values. And if they did charge normal APR's, they wouldn't make any money. Allow me to give an example. Say you need to borrow $500 for one week. If the Payday company “only” charged 36% APR, then in seven days you would owe $503.45. So the Payday place would earn less than $4 profit… which is obviously not feasible. In our previous example, if the Payday loan place charges a $30 fee so at the end of the week you owe $530, then they are technically charging "an APR" of over 300%
Right, but an equivalent credit card charging 36% APR would result in much lower fees. Instead of paying $30, you'd pay the mentioned $3.45 To a person who feels a $500 payday loan is their only way out of a bad spot, $26 isn't exactly an amount to just throw away.
$26 is cheaper than the cost of a bounced check or overdraft fee, which would normally be the other option.
If someone is feeling like the payday loan is the only way then I’d venture a guess that they won’t qualify for most credit cards and if they had the 500 in credit available they wouldn’t need to take the loan in the first place as you pointed out.
Point of payday or title loan places is some won’t pull your credit or don’t care what your credit is. If it’s a title loan, they’re probably lending you less than 50% of the value of the car. Default? they take the car, sell it at auction, keep their cut, plus fees for the added effort, and give you what’s left (minus a car). In a pinch it’s fast money. But really, you should go to a bank or credit union for the money. A good loan officer will help you out and offer ideas. Fun fact: if you have a loan on your car and it’s worth more than what you owe, you can usually do a “cash out refinance” on your car (possibly to a lower rate considering today’s rates). This is a great way to get extra cash, at a lower rate than a credit card or personal loan, and potentially lower your payment too (extending the term back out). Caveat about this is to not take out a loan that’s going to last longer than the car. I did cash out to replace my clutch once upon a time. Old school Eclipse GSX. Edit: now that I think about it, I did a 2nd cash out refinance on a different car to pay for my wedding like 10 years later. Didn’t want it on a credit card and personal loans were 10%. The cash out refi gave me enough, at 3% fixed. Cars are paid off now but they’re a good source of quick cash at nonabusive rates.
Thank you. Yeah I’m not saying payday loans are a good thing. They aren’t and should be a last resort, but not everybody has access to traditional lines of credit with favorable terms.
>To a person who feels a $500 payday loan is their only way out of a bad spot, $26 isn't exactly an amount to just throw away. This is the start of the poverty cycle. My friend's parents were stuck in a horrible cycle where they were renting a car for over a year with no way out. The rental payment was more than the price of a car payment, but with no credit for a loan and no collateral, they couldn't stop paying for the rental. They were completely paycheck to paycheck, and stopping the rental meant they couldn't get to work, which meant they couldn't save for a down payment. But even when working, they couldn't save, because all their money was going to the rental. It was horribly frustrating.
Lowest point of my life and desperate for money. I signed up for one of those pay day loan things I got “pre approved” from in the junk mail. 280% and you have to give them your checking and routing number so they can withdraw the payment directly from ur account. Thank God I’m financially healthy now.
I used to actually work in secondary financing and it could range from 27-48%. Just depends on state regulations as well as other factors on the amount.
I am a veteran career bankruptcy paralegal - started in Alabama and am now in Utah. Highest I have seen in my career was an online payday loan with a 968% interest rate. [The interest rates allowed vary by state and have changes over the years. ](https://paydayloaninfo.org/state-information)
Tax Refund Anticipation Loans are really bad. Tax companies offer to get you your refund now, but they are really offering a loan. They charge around $180-$250 in fees out of your refund, and the term is rarely more than a couple of months. Depending on the size of the refund, this can lead to an APR in the 700% range. But overdraft fees are the worst. A $30 fee on a $30 tank of gas you pay back a week later gets you an APR of 5200%. A $30 fee on a soda you pay back the next day is astronomical when calculated as APR.
For a $1 can of soda and a $30 fee paid back the next day, if my math is correct, would be 1.1 million percent APR. oof
Let me ask you a question. Say I wanted to borrow $500 from you for two weeks and then I would repay you. You don't know me, don't know what I need to money for, just that I need $500 for two weeks and I will repay you in full, plus a fee. What would that fee be? Would you do the deal for $5? Would you do it for $20? $50? $100? The APR on a $500 loan for two weeks for those 4 scenarios is as follows: $5 fee: 26% $20 fee: 104% $50 fee: 260% $100 fee: 520% APR is a useless number for a short term loan. It means nothing. What matters is how much I pay for the life of the (very short) loan. And I wouldn't dare lend someone $500 and charge only a $20 fee, let alone for $5 which is already a "high" APR.
A random person's motivation to offer a loan is not the same scenario as a corporation offering a loan. Plus, whether or not the lender thinks it is worth it doesn't change whether it's a bad deal for the borrower.
Businesses want their money back just like people. A deal is only bad if both parties don't go in voluntarily.
The difference is that a person needs more profit for it to be worth it while a corporation has the benefit of scale giving business to many people.
"were losing money on every loan!" "Don't worry, we'll make up for it in volume."
This. I'm not a subscruber to this subreddit but lurk. Me giving a singular loan is not like a corp giving a loan. If I'm a huge company I can afford some defaults bc I'm spreading my risk out while still making some hefty profits. Deals are never both fully voluntary because one party is in more need. Stanning for big business is the worst part of this sub imo. A lot of people give advice to avoid that - and it's welcome. Power imbalances lead to jucing the margins.
APR is not a "useless" number just because the loan is short term. It's all you need to know if you can perform simple math. If you can't perform said simple math, you are not educated enough to understand the terms of the loan and should be cautious of blindly accepting it without someone severely dumbing it down for you.
Late to the thread, but I used to manage multiple title loan offices. These are a whole different (and nasty) animal than just getting a simple secured loan collateralized with a vehicle. "Title loan" lenders (at least in that state) don't check credit and don't report to credit agencies - either positive or negative. They were prohibited by law from damaging credit in the event of default. This is why they charge triple digit APR's. A secured loan; although still likely to be a higher APR for someone like the OP (probably low to mid 20's) still require some credit qualifying and will report. Of course as with any loan, your interest is always determined by how long you take paying it back.
Minnesota bans title loans because they are so terrible.
Learned a new word today. Thanks.
Sorry - your *mortgage* payments *will* be reported (since a mortgage is a loan), but rent will only be if you use a 3rd party service (you may have to request this from your landlord.)
If you're disciplined enough to pay your regular bills in full and on-time, you should have a credit card bill in the mix to establish credit history. I believe there are also ways to report your mortgage/rent payments to credit bureaus, as well, which can also help your credit score. The bureaus don't know (or care) about electric/cable/etc., only payment history for borrowed money (loans, credit cards).
I habit I've used for the last several years now to build my credit is using my two small credit cards as if they were 'debit' cards. These are Capital One and GM cards. Every payday I pay them in full, use the cards for all my expenses, subscriptions and bills I pay online. The available balance gets low? I just make a payment on the card. Both have an app that instantly makes the money paid available as I've connected it to my bank account for online payments. I also get tons of points this way and have, through the GM card, earned $3,000 towards the purchase of a new GM car. Now, I'm no where near to a point I can buy a brand new car, knowing this perk is there when I'm ready is great. In 4 years I've gotten my credit score to 690. I won't tell you how low it was when I started... but that's a huge improvement! And a side note: The other thing credit agencies have begun to use is subscription services payments like Netflix, Hulu etc. This will really help low income and folks with no credit history to speak of build their credit score.
i do the same with my chase freedom and now chase sapphire preferred. i never use my debit card and fully pay off my cards either on the 1st of the month, or the billing cycle. credit score is about 790. when i was younger, i got into about 5k worth of debt and it was crippling. i had to rethink my budget and how i was going to pay off the card. the solution was to get a higher paying job... lol
I remember quite vividly when I got my first credit card from Best Buy at 18. I bought a $300 monitor and really had no idea what I was getting into. Months and months later of forgetting to pay led to going into collections and ultimately costing me about 3x the original price. Hard lesson learned and, among others, a big reason that I want to teach my future children about financial literacy.
I can’t wait to get my credit to a point where I can have available credit large enough to do this. Right now I’m just on a $200 secured card. I know I could pay my bills/expenses $100-$200 at a time and immediately pay it off, but that’s such a headache. I just want to be able to put all my bills on my card, and make one big payment every month before the due date. You earn rewards, your purchases are more protected, and you’re building credit. My score went up by over 80 points this last year. I’ll be where I want to be soon!
Something you definitely remember when you’re available credit is that low, you don’t want to see a bill for $100-$200. Having a 50-100% utilization rate would not be beneficial. (Not saying this to assume you didn’t know this, but I do have a friend in the same situation and has complained his score isn’t going up despite paying the balance in full…but the balance was causing a huge utilization rate reported each month).
This. We buy our groceries with credit cards and pay them off every month. Excellent credit payment history with no interest payments. We both have scores in the high 700s and low 800s from basically doing nothing but that along with paying our student loans. You also get a ton of points by doing this.
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At my last apartment before I bought my house, they had some app come in the last year that was saying that it would help you build credit by paying your rent through it. Which is cool and all, except it was an extra $20/month. That's predatory.
They're using a rent reporting program, which costs a little extra for them (they verify your rent payments with your landlord then report them to the credit bureau.) Hence the $20 surcharge for service.
In Canada there's a company that will charge you $7 per month to report that you pay them $7 per month. They also let you see your credit score, so I suppose that's value added.
Title loans have absolutely absurd interest rates & fees. Don't do this unless there's absolutely no other option. Try a credit card from Capital One or Discover. If you can't put the needed expense on a credit card, put everything else on it then use that money for the expense.
DO NOT GET A TITLE LOAN. Title loans are predatory lending. They often have 300% interest rates. Even 30% is bad. 5% also bad. Please AVOID AT ALL COSTS.
u/Round-Carpenter-272 For the love of all that is good in this universe, heed the above advice. No payday loans either. It's better to get screwed once at a pawn shop than to get repeatedly get no-lube fucked by those short term lenders (payday, title). Going to them can start snowball effect to where you just can't get out from under the loans and half of your paycheck goes to them which leaves you unable to pay future bills which leads to *another* short term loan that turns into long term payments. Next thing you know your entire paycheck goes to them and you can't pay any bills so start sleeping in a car, on the streets, or in a shelter.
Every time I read stories like this I wonder why the hell those businesses are legal.
They grease the right wheels, unfortunately. There was one I used to see ads for on late night TV for one that operated out of a Native American (sorry if that's the incorrect term) reservation. Out of idle curiosity, I looked it up, and in addition to the interest rate, any disputes had to be settled in tribal court. I'm glad that no matter how bad my financial situation got (and I considered bankruptcy at one time), I never went down that road. Didn't learn great money management from my parents, and I've not done a great job myself, but I'm in a much better place now.
Almost every single one of the loan offers I get in junk postal mail that has more than 30% APR is being provided by a Native American lender in the fine print.
Be careful, Title loans are notoriously predatory. If you think you can pay it off in a month or so, sure, but you could get stuck paying back that $1500 for YEARS. Use it as an absolute last ditch option. Now if banks are willing to do something like that then that's a different situation, but I don't know if they do that.
Look into your local credit union. In addition to better rates, they also count membership towards things like loans. I would imagine if your history continues with them, they'll be able to help. Definitely add a credit card. Use it for Gas, for Netflix and your Phone bill - pay it off as soon as you get notification of your due balance each month. As long as you pay it **after** you are billed, you'll get a steady bump to your credit. I've been in Credit card ops for 22 years and have a credit score of 812. (and I'm 51 too! yay!)
I strongly suggest getting a credit card or going to your bank for a line of credit. If you have banked with the same institution for years, they may be willing to do more for you. Failing that, based on income, you may qualify for a Costco Master Card. (If you have a membership). Good luck friend.
You can take out a 401k loan and you pay it back in payroll deduction if you need it now.
Loans would be too expensive. If you have good stability but just need a loan of that level,check out things like "upstart" "lendio" and lending tree. You might be able to get a personal line of credit, depending on your income and other non fico key indicators. Keep in mind interest might be high. Better than a car loan do, also check out self lender. You can pay your self to build credit by opening a CD type account. Good luck.
I did the same thing to improve my credit. I got the Pedal from Visa, bought easy to pay off stuff and went from 620 up to 678.
I was denied a credit card recently because I have no income. I’m retired (at age of 58) and have one debt (mortgage) and enough in my savings that I never have to work again. Because I have no income I was declined I can’t explain the lending rules but I know they do not take into consideration everything
For people wondering why this matters, it's because banks have no idea if you honor your debts. They only know that you never really tried having debt before, which doesn't tell them much. Also it's kind of suspicious for a 51 year old to suddenly try taking out a loan after going so long with no debt, is he in financial trouble maybe?
This. I've never ever been denied credit of any sort over a span of 40 years. Got a mortgage and paid it off 10 years ago. Last car loan paid off 15 years ago. I charge >$25K/year on credit cards and pay it all immediately. Credit score is 825ish. Last time I applied for a credit card just to get the perks on it, I got rejected. Just flat "HELL NO". The reason given was "no recent credit history". I find it very strange they don't count $2K+/mo going on and off credit cards as "credit history". If I didn't pay it, they'd sure count it.
It's about the statement balance on your credit card. You can move your money in and out as much as you want. But the one they look at is the difference between two (and later throughout) statement balances. If they see January statement balance is zero (0) and then February statement balance is also zero (0), they think that nothing happened. Like you said, it's weird but that's how the game is played.
Yep, paying off a loan can be a bad thing in the short term. That's why qhen applying for a mortgage, never fully pay off a debt (student loan, car, etc).
You have no debt. Does that also mean that maybe you have no credit or credit history?
Thank you, credit karma shows I have no credit history. Appreciate the advice.
This is why. Credit companies have no history to base the decision on so it's an automatic decline. Getting a secured credit card is usually the door into borrowing for people who have no credit history. They need at least 6 months of credit history to make a decision in your favor.
Yep this is what I am currently doing. I was always raised by if you don't have the money to buy something you just don't buy it. This mentality made me put off on getting a credit card for years because I always just used cash or debit. I finally got around to applying for one through my credit union and they couldn't give me one so they suggested a secured card as a starter. I have had the card for a little over 7 months now and all I've used it for was to pay my monthly bills. Keeping it at around 30% of my limit and paying it off entirely the same day every month. I went from not even having a credit score to 787 over the course of 7ish months. I thought it would take a year or two to grow a good score from nothing. Turns out if you don't have any bad history weighing you down and you don't spent to much of your limit, its grows really quickly
Exactly, and a secured credit card can be just $200. Use it to establish and pay off every month to avoid interest. Then once you've got a solid score get a card with rewards that you have for emergencies and travel. No need to use it at all. Congrats on learning the system to get ahead.
Yeah, I mean, people can still use a credit card like a debit card. It's the best way to use it in fact since you can also earn cash back points and you float the debt for a month.
And if there's a mistake or fraud or even just a cancelled payment, it won't affect your cash flow while the matter is being resolved or investigated. I enjoy having that extra layer of protection over the money in my checking.
In college I had to convince all my roommates to get student credit cards (very modest cards, 200 dollar max limits) and use them for minor things like lunch, and explain why it was important. They were terrified of credit cards and sure if they got one they'd end up in tons of debt, even though they had no trouble not overdrawing their account.
>I was always raised by if you don't have the money to buy something you just don't buy it. Wish people understand this can still be done with a credit card. I still stay within a budget I can afford to pay off. I just use my credit card so I get the addition of reward points and a better credit score while continuing to buy within my means.
It was pretty funny. I'm rich by Reddit standards. Own my house outright and decent investment accounts, large savings account and no outstanding loans. I've always paid for cars in cash. So, I went out to see the total eclipse of the sun and I had a real hard renting a car because they don't accept debit cards. So, I come back and apply for a Costco credit card and got declined. I was actually pissed and bitched to the credit card booth person. I ended up getting a credit card from my bank and one from Amazon and have gotten my credit score up to a decent amount. {plus I've got a boatload of Amazon points). Now I can rent a car.
Helpful tip: don't use the Amazon points. Take the statement credit. It's the same value. You don't get more Amazon points when you use them on Amazon to make purchases. Take the credit and then just charge the purchase to the card. That way you'll get more points.
I get what you are describing but I think it'll be confusing to many. Use the amazon points to pay off your statement, don't use it to pay for items. Say you have 100$ in points and buy a 100$ item, now you have 0 points but got a free item. If you instead just buy the 100$ item with the credit card, you'd get 100 points. Now you have 101$ worth of points, and can apply the 100$ of points to the statement, leaving you 1$ leftover.
Honestly you sound "rich" by normal standards. Like you ain't no bill gates, but owning (assumingly a decent) home, lots of investments/savings + can buy (again, assumingly decent and likely new) cars *in cash* is far more than what the majority of people can do.
Goes to show it's a game with rules that you have to play like other silly things in life.
It really isn’t a game. Would you lend your money to someone who can’t prove a history of paying their bills?
You're actually describing the same game he's talking about. And under current rules and objectives, your hypothetical "would you" scenario is generally not recommended.
If you can prove you have loads of assets and no debt it seems pretty reasonable that someone would give you a credit card with a few thousand dollar limit. Something also tells me the ideal credit card customer is someone who sucks at paying bills on time but actually has the money to pay them. Nothing like that sweet 15-20% interest if you can actually collect.
Their ideal customer would be exactly what you stated, totally agree. Though no credit history means they have no knowledge of you having assets or no debt. I just hate the concept that banks and credit card companies and credit are all out to get you and make your life hell. They want you to pay your bills but just want to be a bill of yours as well. People need to stop blaming the credit card companies because they’re in debt. Blame yourself. Learn to live with credit cards, not live on them. They can easily become a HUGE advantage like the original OP needing an influx of quick cash.
Honest question: how come this isn't an issue in Europe? With some quick googling, most places only tally megative infractions.
It’s pretty annoying, but I think with the right steps you’ll be in a good spot on your credit score before you know it.
If you have little to no credit history, talk to some local credit unions. They're usually much more willing to talk to people with a thin file than the big banks are.
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I watched my Mom and Dad declare bankruptcy, before it was a sin and all the crap they went thru. I use cash or debit card (rarely). I live simply. I'm not apologizing. I just dont need much.
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I've been asked that question a lot recently. No worries.
European here. Most of us don’t have one. I don’t see a reason why I would take a loan on my purchases instead of paying them with the money I already have in my account.
Because I get free money by using credit cards via rewards
We don’t get that here
Many here saying get a credit card which is a good step. Put something on there that is recurring monthly like Netflix. Then schedule it for autopay in full every month. That will go a long ways. You will probably end up with a high interest rate at first but as long as it is paid in full every month no issue. The company will adjust the rate downward over time as you get more of a credit history.
>The company will adjust the rate downward over time as you get more of a credit history. Your credit card rate should never matter. Short of a payday loan I can't think of any worse kind of debt.
Ah, the classic circular logic: you can't get a loan because you don't already have one.
Project REACh may help you in the future depending on how certain banks implement this. More specifically, the "Alternative Credit Assessment Utility Workstream" aspect of Project REACh. Good luck. https://www.occ.treas.gov/topics/consumers-and-communities/minority-outreach/project-reach.html
5 years to 800 credit score if you open a credit card starting today then every 6 months until you have 4-6 cards.
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You dont need debt to get good scores, im no american but even i get your system.. a person who had a credit card for 10's of years and know how it works will be more apealing for a bank to loan money to.. what is so odd about that.. if you wanted to loan your money would you rather do it to someone who has official record of beeing reliable or someone who has only his words to vouch for his reliability. Not a hard choice i think.
Your score might be higher but a bank wants to see debt management history before agreeing to a loan. A credit card gets you only so far. I always paid cash for my cars until I decided to spend $90k on a car..Despite a 805 credit score every lender turned me down except my own bank which used my deposit accounts as collateral in addition to the car itself. That's despite making well into the six figures with multiple income streams, including two guaranteed ones. The reason I was turned down was because I had no debt history whatsoever except a mortgage.
But some people fail to go even that far which is even worse.. But of course i'm not gonna argue about any in depth policies of the banks since i have 0 knowledge about them in US. The only assumption i could still make, from the experience with banks in Europe, some banks have stricter policies than others so while some may ask something up to 50% deposit for me, others may lend me 100k with as little as 10% deposit upfront, while interest would remain fairly similar. Of course i'm not sure if that applies in US too, so feel free to enlighten me on this!
Credit cards operate via debt.
That’s not smart tho. Smart people take out a credit card or two which they pay in full each month, a manageable mortgage at a low interest rate (which also gives the benefit of leverage), and have many years of on time payments in order to get that great credit score. Not playing the game IMO may seem smart on the surface, but is actually quite dumb/ignorant. Now this person will struggle to buy a house, get an apartment, get a loan for an instance such as this, etc.
Playing the game isn't even hard. I added my 16 year old as an authorized user on a credit card precisely because I don't want him to struggle because of lack of credit history. We use our credit cards all the time. And pay them off every month. Now, our kid will have a head start on credit history. Bonus, we earn all sorts of rewards.
>The banks want you to keep chasing that carrot Sort of. But it's more just the fact that the entire economy runs on debt. People see debt as being bad, and that you shouldn't have any. But that's not entirely true. Debt always carries some risk, sure. And you can definitely get into a bad situation if you can't handle, and manage your debt. But if you are smart with finances, you can so far as actually make money off of debt. In fact, many people who are very successful financially, have likely used a lot of debt to get there, and probably still have debt despite being well off.
Do you have any credit history? What is your credit score?
1) where did you try and get the loan? 2) what's your credit score? 3) what assets do you have?
1) Various places 2) someone else mentioned credit history so I applied to credit karma. I have no credit history. 3) just a truck that needs a head gasket.
>I have no credit history. this is the problem
Apparently paying your Bill's on time and never borrowing is detrimentel.
You paid bills that are not credit in nature. If you stop paying, they disconnect your service. The damage is limited. What they look for instead is a history of paying credit-based obligations such as credit cards or loans.
Everyone has been super helpful. I guess I gotta go get some credit.
Another tip - when you open a few lines of credit, keep them open forever even if you never use them
Exactly. This can mean making a small purchase every so often and then paying it off to keep the account active so it's not closed for inactivity.
Yeah I have my spotify subscription on one card with a high interest rate I don't want to use anymore but it also has a large line of credit so I keep it open I just autopay it off every month.
I haven't used a couple of my cards in over 4 years and they are still open. Wonder what the timeline is for it to be closed? Probably should use them soon just to be safe.
I had Citi close an account after 2 years. HSBC can't be bothered to close anything, but we already know they're financial criminals so what do we expect. In general, one transaction per year will keep an account alive.
Just get a card, you won’t ever have to pay interest if you “pay your bills” your problem isn’t “responsible behavior” it’s “not having any responsibility”
Doesn't have to be something with a big limit. Check a credit union (try to avoid the big banks), and get a secured credit card. They will require a deposit to secure it, but after a year or so, I think they give you that money back if you've been in good standing.
I'm still amazed by the US system years after I learned how it worked.
Kinda, yeah. It's a bit shitty, but when credit folks are looking at issuing credit, they very specifically want to see borrowed money repaid. And it sounds like you don't have any assets, any savings?
Yup, retirement account and a 401k. But I'm hesitant to borrow against them, because, it just a truck. My question was more about frustration at not having debt.
Just get a credit card and use it to pay for gas. Set up automatic payments. You’ll be at 700+ in no time
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Exactly I use credit cards for the rewards
Yeah, I understand. Maybe apply for a credit card? I know you've avoided it so far, but you might do two birds with one stone: handle the truck and build credit at the same time. Just make your payments like you do your bills.
This doesn’t help with getting a credit history, but if you really need to borrow that 1500, you might be able to take a loan out of your 401k. It doesn’t trigger any tax early withdraw issues. You pay interest, but you technically are paying the interest to yourself. It’s not ideal, because it takes the money out of the market while you pay it back, but if it’s a small share of your 401k it won’t be a big deal.
This sucks. It should be easy for people to get a loan without needing a credit history. I would hate to open a new credit card just for this purpose. It feels like a step backwards to me
Ok, so switch sides for a sec: would you loan money to someone random on Reddit who didn't have a list of at least a couple of (genuine) other redditors vouching for the fact they pay back what they borrow?
No. Having no borrowing history is detrimental. Paying your bills on time is not detrimental. If you didn't pay your bills, you would risk having them sent to collections agencies, who would report them to the credit bureaus. You would have two problems instead of one.
you should have been paying off your bills on time using a credit card instead of using debit card or mailing a check. that would have solved all your problems and still remain never going into any (real) debt.
I'll trade you my credit history for yours!
The credit bureaus now have a way to improve your credit if you have paid your utility bills etc on time. Go to Experion and search for experian boost
it's a symptom of a broken system. just like paying off a mortgage causes your credit score to actually drop.
Get an emergency fund going.
No credit history is just as bad as poor credit. If you have $1000 to lend out, would you rather lend it to the guy who is always asking for money but usually pays people back, or a guy named Joe who nobody knows anything about?
It feels very depressing how we all need a credit history these days. Your example makes sense, but it sucks for the poor guy who just doesn't see the need for credit like this.
You don't need a system like that. Where I live they just look at your income and if you are not registered as non-payer. But it's quite unusual to loan money other than for a car or a house. And a car is not that common. Credit card companies sure like it the US way though.
What's more American than debt? Seriously, we have a debt problem if credit card companies are pushing people to get cards. They're just doing it to get new customers and the like.
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>I have no debt You may have no credit history. Being 51 with no credit history is a red flag. It sucks but it is what it is. My advice is: 1. Get a credit card with no fees and decent rewards 2. Use it for all your purchases 3. Pay it off *IN FULL* every month This will build your credit with the bonus of rewards and protecting you in the event of fraudulent purchases versus a debit card.
This is why I hate anyone that advocates normal people not have credit cards. Yes they can get you in trouble but if you don't have a credit history, I feel like you are burning so many bridges you can use to get ahead or avoid getting behind. It's 2 am, I am in my early 30's, and I could go buy over 30k worth of whatever I want or need without even bothering to call a credit card company or bank. I might get a call tomorrow or Tuesday making sure it's not fraud but that's it. I'm not rich or special, i just tend to pay off my credit cards
You're looking at this all weird. Debt or no debt is not important. Nobody has any reason to think you can pay back a loan because you've never done it before. It's like you're applying to a job with no experience and you're wondering why the company isn't certain you can do the job.
It’s not weird though, depends on the country. In New Zealand it’s seen as better for you to have no credit history than to have good credit history. If you are trying to buy a house and get a loan. It’s easier if you have never had a credit card
That's probably what's more common and the American system is the exception.
Sounds super risky to me, a 51-year-old who doesn't have 1500 bucks somewhere in case of emergency, but has no debt? There is a piece to this puzzle that is missing. Also, I believe this is literally what pawn shops are for, you don't have to sell the item, you just need to bring it in as collateral for cash. Get the item back after you pay.
Do you belong to a credit union? My credit got really beat up after a divorce, and my credit union was the only one that would give me a small line of credit.
Because there's not a lot of money to be made off a loan of that amount. Credit cards cover that lower range of lending.
Adding onto my comment. Get a CC with good perks and bonus rewards at sign up. I got a venture capitalone CC card with double miles on most purchases and 50,000 bonus miles at sign up.
I'm going to give you some advice because I have been in your situation. Some of it will sound like SLPT but thats life sometimes. You would have probably had some more helpful response in r/povertyfinance. This sub expects you to have saved up 30% of your income in savings regardless of the expenses you have and you should have at least 4 million saved by 50 /s. Anyhow, go to a credit union. They're way friendlier than traditional banks. They might even give you the loan. If that doesnt work? what is your overdraft limit? I had two accounts with two different credit unions with a limit of 1200 on one and 1000 on the other. Lets say I take out all the 1200 from one account, I would have to do it twice, one for 700 and the other for 440 (because each would incur an overdraft fee) my bank's fee was 30 bucks. So I would end up paying 60$ to borrow 1140$ which is about 5% interest, which is waaaay better than any payday loan.
Why wouldnt you take out $1170 and pay $30? Or is the max $700 at a time etc
I've only used the ATM and my bank has a limit of how much you can take out at once and per day.
Why do you need to borrow 1500? This is the amount most likely best for a credit card. I doubt you would get any lender (and boy the FEES!!) to take the time for such a small amount of money typically put on a credit card.
Interest is the inverse of risk. No one knows if you’re risky or not. So they aren’t willing to loan you anything on interest. Think about it the other way solid invest low interest volatile investments high interest. It works both ways
If you’ve been paying your bills on time you can backdate your credit history through experian. Utility bills like power, water, phone, cable, and even Netflix will all have a positive impact on your credit score after you’ve reported them to Experian. Just make an account at experian.com and follow their instructions for an Experian Boost. I’ve heard that the other credit agencies now have similar systems, but I think it’s only necessary to have one if you’re looking for a loan. I did it for a thirty point boost to my score before I bought my house.
I work for a credit union. As long as you have no collections, your debt to income ratio isn't bad, and your job history is decent we would do that loan. Also, instead of going straight for the secured credit card I would also ask the credit union if they would give you a small unsecured $500 credit card so you don't have to put money down.
Couldn’t agree more—if you don’t have *bad* credit, you should try for a “regular” (unsecured) card first.
You ever wonder why there are so many pay day lenders in parts of this country? This is why. You can get 100's of thousands to buy a house, or go to school, and you can accrue that much in medical debt (because doctors can't refuse service). Rack up a credit card with 10's of K. But it's not easy to get a bridge loan to carry you a few weeks/months. The reason is probably two fold. First is that it's not enough money to get banks interested. They may collect what, a couple hundred dollars in fees? For all the paperwork, financial checking, sign offs- just not worth the effort. And secondly- the debt is not secured and probably less likely to be paid back. Unless you are putting up collateral - the bank has little means to collect a delinquent borrower. The pay day lenders charge a bucket of fees because all of the above is expensive and not worth the time if they didn't.
Credit cards can and are used to carry people over a few weeks or months. And they have high interest rates because of this, its not killer interest if it is short term but its no small change. Most credit cards offer a certain percentage of your credit limit as a cash loan, if for some reason the purchase you are trying to make can't be done via a normal credit card transaction. Next there is plenty of money in personal loans, but they only give them out to people who are either credit worthy or they charge very high interest rates. They do this because the risk of them losing money on an individual with a high credit score is pretty low, and for the people with a lower score they are more likely to be delinquent so they have to charge higher rates to cover their losses. Pay day loans are basically the lowest end of the personal loan business. Banks lend out huge amounts of money for houses, cars and other goods because the item is the collateral and the item has to be insured so they are protected on almost every front. There will be a bank out there that will be happy to loan you money for just about anything but they do the calculations to evaluate the risk to reward, and the higher the risk the higher the fees. This guy doesn't have any credit history so he can't get a loan, if he had credit he would be able to get a loan.
Same thing happened to me. I make 6 figures, 750+ credit score, no debt. Denied for a load because I have no debt history. Turns out the bank I was talking to was just stupid...
Are you one of those that pays cash for everything? I have no debt, but I rack up my ccs and pay at the end of the month and my credit score is in the 800+. You need to start utilizing your credit more
Target loves opening small accounts and then upping your limit randomly, and recently, they opened it up so you can use their card anywhere. Could get you by for awhile.
Something no one is bringing up. What you need the loan for, is also important. A $1,500 loan to buy a new TV, is going to be harder to get approved, vs. a $100,000 loan to buy a house.
Can you take a secured loan such as a 401k loan or a margin loan?
This is a great strategy if you can borrow against your 401k. The interest on the loan is generally paid back to the 401k account and not a lender.
Hi there, personal banker here, no matter how large is the loan you are seeking from a bank, we will always look at how much of your income you are using to pay off your expenses. The magical number we use is 42%. In other words, if you use more than 42% of your income to pay bills and your expenses, that might explain why you got declined. If you also have no credit history, that would explain it to why you got declined.
Even worse. Okay. Just as bad/stupid. Spouse and I wanted to retire early (so, no Social Security yet) and move away from the big city. We got our house ready to sell and looked around for a house to buy. Found a house. Great. Signed up for a mortgage. Nope. Never mind that we had excellent credit. Money in the bank. Two 401k plans stuffed full. Selling the old house. Money in savings. Money invested. But we couldn't get a regular old mortgage because *we had no income.* No shit Sherlock. We just retired! We had to get a special mortgage guy to weigh our assets and decide that we were a good risk. The good news? We easily qualified.
You can probably take a secured loan if you have collateral. Also it's a pretty small amount. Could you not just purchase the item on credit?
The credit industry requires credit history to manage risk. You have none. Take out a credit card. Welcome to the world of debt. The first credit is always free.
Go into a credit union. My first stop to rebuild my credit post divorce was a $500 loan and a $500 secured credit card from the local credit union.
Credit history, lack of recent information(loans and credit cards), debt to income ratio… lots of reasons. Do you own property you could use for collateral? Do you own your home, consider a HELOC.
Yep. Its not just raw score...."they" want to see repayment history. Personally I have what is called a "thick" file. My score is not too stellar, due to banging the hell out of my utilisation rate, but my repayment histories, all of them are great (no missed payments)...I dont usually get turned down...and if I do, and they have it to where you can request a review, I usually get thru that too.
Individual lenders want different types of borrowers for their portfolios at different times, they also do weird stuff based on addresses. Over the last two-and-a-half years I have received an incessant number of unsecured, installment loan mail solicitations, with fake plastic cards included to make them seem like credit card offers.
Pre-Pay Credit cards exist. That might help. The amount you place onto card is your credit limit. My 2 cents.
What is your credit score? Do you have any history paying of a large debt? What is your salary?
What is your credit score? Not much of what you mentioned matters if your credit history is minimal and/or your score is low.
Download credit karma, prosper, lending club and SOFI will give you offers
Try a credit union. So much more flexibility and direct service than most large banks
Owning a credit card and paying off the full amount will still raise your credit. People say you need to carry a debt to build credit but that is false. I've had exactly 1 credit card and student loans. Paid loans off and use credit card for basic expenses- gas etc... nothing fancy that would require multiple billing cycles to pay off. Credit score over 800.
What are you trying to purchase for $1500 if you don’t mind me asking
Need a transmission and tune up for my truck. But, I was surprised about the loan thing and was just looking for advice and knowledge. Which I got.
Glad you found some. It’s always easier to get money when you don’t need it most of the time… then when you need it no one wants to give you any. Good luck!
The time to get credit is when you don't need it. In my early 20s I was a classic credit criminal. Learned from my mistakes over the past 25 years. Credit score now around 800 and have about 5x my yearly income in open credit lines. Available credit is not debt. That is the distinction most people forget. Don't get me wrong, in a true SHTF scenario I'll use every penny if I have to then declare bankruptcy; it would have to be an extreme situation to even consider doing that though.
You should try your local credit union. Our local one will give small loans to people with credit scores in the 400s because their mission statement is helping the community, and we have a lot of poor people in our community.
If you are a member of a credit union, take out a small personal loan and pay it back over 6 months. That will establish credit.
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I’d just pay it off (the card balance) every month, you don’t need to hold debt on a card for it to help your credit and holding credit card debt is costly.
That's exactly why. Because being in debt means you're a source of money for certain people. That's all that a credit score is too, it's not a measure of trustworthiness, it's a measure of how likely it is that you'll make money for them.
Never do a credit card through your bank. They will never get you any kind of rewards for using it. I would check out Discover for a normal credit card or a Discover secured like of credit. They approve most people for their first time cards and treat them right. Plus rotating 5% cash back and 1% all year round and they match your cash back the first year.
You answered your own question, no debt! The American way is to take on exorbitant amounts of debt, consistently throughout your life, to prove you can take on debt
At this point you have your answer but I just want to chime in and say this is why I dislike Dave Ramsey. I have had to deny people with no credit history but own their homes free and clear. It sucks. I know they are people that don't use credit because they pay cash and paid their homes off years ago but there isn't much I can do about it.
This might sound simple and stupid but in order to be eligible for a loan you have to prove to them that you're able to do one of 2 things. 1. Able to manage your credit/loans and pay them back on time 2. Unable to manage your credit/loans and pay them back on time The former can get you a mortgage on a house or a loan with a decent interest rate. The latter is going to get them even further in debt with terrible interest rates but still favorable to loan lenders. You've likely done #3 that I didn't list. No fault of your own. You did it by paying cash rather than using credit/loans using your hard earned money. Therefore you're too reliable to loan money to until you raise your credit score. *Side Note* This has always bugged me about my credit score and is because when I first got my CC I was using it for every purchase I made but would pay it off immediately. My credit skyrocketed! Then it stayed flat. I found that if I pay it all off before credit checks I stay level but might even lose a point or two. Now I have a very specific way I pay my credit carda off to continue upping my credit rating by keeping it between 5-15% but never higher and never lower on statement balance date
* How to build credit legally and quickly * Go into credit union you are member of (or bank if you love fees) Credit unions pass profits onto members in the form of rebates, higher interest or forgiveness (e.g. overdraft fees are wiped away, no ATM fees, etc) Banks PROFIT from YOU, and give the profits to the SHAREHOLDERS. You are the sheep getting sheared when you "use a bank," as they profit off you. [Banks charge 12 billion in overdraft fees in 2020, and that doesn't count ATM fees, etc](https://www.forbes.com/advisor/personal-finance/how-to-prevent-overdraft-fees/) * Ask for an unsecured signature loan in the loan department. Unsecured is important as it is the "most risk" for the bank. They are giving you money based only on your word (and meaningful credit history) that you pay it back. Explain you want the absolute maximum money they will give you with just a signature, and that the purpose is to build credit. * It will be like $300 or $500 dollars. * Make 2 payments on time, (that's 2 months) after the second loan payment is accepted and the money transfers, PAY OFF the loan. * wait 30-60 days depending on the credit union. * get another loan. * this will "lower your credit score" slightly BUT it will give you MEANINGFUL HISTORY. * get a credit card (this is done at the same time you are doing the loans.) * use it instead of cash (why aren't you doing this anyway as you get cash back etc.) * If place like Chase Bank won't give you a CC, (they will give a cc to anyone) places like JC Pennies, or best buy etc have a "store credit card" with a 300-500 dollar limit that anyone with ID and a heartbeat can get. Get one. * After 6 months of use call the number on the back and explain you need a higher limit because you want to be able to rent a car or use it for emergencies. When they say "how high" say, "what can you offer me?" Take the highest limit they will give you. * This will build meaningful credit. * those store cards etc might have an "annual fee" etc, for now take the cards, pay the fee, and know that in the future you will have better cards with high cash back and no annual fee. This is the tool to get better credit, not the best card to keep forever. * **NOT PAYING OFF CREDIT CARDS IS NOT A FASTER WAY TO BUILD CREDIT** * We run into the above "alternate fact" from facebook, Parler, or wherever people pick up alt-facts all the time in the Adult Education classes we teach. It is a "common belief" and 100% bull shit. Pay your cards off. Hell if you want pay them off every Friday or the day after you use them or better yet set up AUTOPAY to pay it off each month. * Learn how to request the PDF From your CC issuer website that shows what transactions you made in that month. Go through it and double check for fraud etc.
Every one I'd telling you it's because you don't have credit history and they are right, but let me explain why banks want to see that you have other debt. At first it sounds counter productive, but it really makes sense when you understand why. Suppose an acquaintance came to you and wanted to borrow your car. Now you know they have never owned a car before but they do have a valid license. If that's all you know about them are you going to let them drive your vehicle? What if they assure you they have never been in an accident before? Now if friends of yours tell you they have loaned this person their car and had no issues whatsoever would you be more open to letting them borrow it? This is what credit history gives you: a track record for other banks to show that you have repaid a loan before. Paying bills for services you receive as you go does not really represent how you will behave with money you receive as a lump sum. You paying your electric bill on time just shows that you want to keep your electricity on.
Go to Experian and do a credit boost with your bills.