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Thread: How to build good credit?

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    Default How to build good credit?

    I was told about a year or so ago by a lady that approves people for loaans for houses that there were two ways to raise my credit score, get a credit card or a personal loan. Well what happens when you cant get either one? I got turned down for a store card today, I dont have a regular credit card either and I am pretty sure I would get turned down for a personal loan so what do I do?
    I don't feel myself today
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    You get just enough just to give it away
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    Default Re: How to build good credit?

    Have you been approved for credit in the past, or is this your first time?

    The first thing you might want to do is find out why your credit is bad. If you have anything outstanding: unpaid phone bill, student loan...
    these will be reflected on your credit report and as soon as you settle out everything owing or make a payment arrangement that the collection company or unpaid provider( there will be a corresponding phone number for each item listed). Each time a collector does a credit check on you, it affects your credit score in a bad way.
    For example, I owed roughly $1500 in unpaid interest on my student loan and the collection company that they sold the debt to or hired to collect for them were hitting up my credit info 4 times a year! : (

    Second, you can get yourself one of these guaranteed approval credit cards:
    http://www.capitalone.ca/credit-card...ageName=Things to Know About Credit&PortletLocation=2&ComponentName=ca_primary_ nav&ComponentStrategy=&ContentElement=3%3BOur+Cred it+Cards&TargetLob=MTS%3A%3ALCTMMQC4S&TargetPageNa me=Credit+Cards+Home&linkid=&email_delivery_id=&re ferer=&external_id=
    (sorry about the long link lol)

    These are prepaid cards, and my understanding is that many banks offer them, so if you have a bank account already, you could go and ask the bank teller.
    Anyways, the way it works is the bank will you have to pay them say $300 if your credit is bad OR if you don't have any credit and the card limit is $300. There is usually an annual fee to pay to use the card, Capital One is $59/year, and as long as you pay your bill on time for just over the minimum amount, you get back your deposit and you can have an improved credit score in about 2 years. Btw, you don't have to spend the entire amount, even just making a $10 purchase each month and paying your full balance will be effective in this strategy

    I applied for one of these after I paid off my unpaid debts that were showing on my credit report. I figured, even though my credit was pretty bad and I couldn't get approved for any others, a guaranteed approval prepaid credit card, and after a few months, I re applied for a different credit card that denied me a year before and I was approved.

    Hope this helps: )

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    Default Re: How to build good credit?

    You get a secured credit card where you give them some amount ($200, $500, $1000+) and that becomes your line of credit. Its a credit card with a refundable deposit essentially.

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    Default Re: How to build good credit?

    As a result of recent financial regulations, these days good credit begins with having a 'verifiable' income. And for people who work as independent contractors in 'cash' businesses like dancing, that income verification essentially takes the form of past years' IRS tax returns. Since these recent regulations took effect, it no longer officially matters how much 'cash' you have or how much money you SAY that you earn. What officially matters is how much money you reported that you earned to the IRS ( and paid taxes on ).

    Once you can document a 'verified' income, building credit then moves to building a history of financial 'responsibility'. Indeed, prepaid credit cards, retail store credit cards, promo subprime credit cards etc. are a good first step.

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    Default Re: How to build good credit?

    It seems strange now but when I was a "yoot" I had a lot of trouble getting my first credit card. I kept getting turned down because I had no credit history. My first one was American Express and I made sure to pay off everything ASAP. That plus my sterling record in paying off my student loan helped me to finally get a Visa card.

    Today, as Melonie said, most banks want to see a verifiable income and a good payment history ( phone bill, electric bill, student loan etc.).

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    Default Re: How to build good credit?

    A quick note, if you were interested in getting a mortgage or a loan, here in Canada(assuming it's the same in the US) there are a few ways to get around the bad credit situation. Def. Verifiable income/work history is big but getting a co signer, having a large down payment(which reduces the amount of the loan and therefor reduces the risk for the lender) or using your assets as leverage ie: signing over future dividends, cash value life insurance...

    Many private lenders who refer to themselves as sub prime lenders are willing to fork out to almost anyone but without having to comply with legislation like a bank, they can have much higher interest rates than the bank. This is often how people with bad or poor credit are able to get a loan.

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    Default Re: How to build good credit?

    Quote Originally Posted by a_little_mermaid View Post
    I was told about a year or so ago by a lady that approves people for loaans for houses that there were two ways to raise my credit score, get a credit card or a personal loan. Well what happens when you cant get either one? I got turned down for a store card today, I dont have a regular credit card either and I am pretty sure I would get turned down for a personal loan so what do I do?
    I used to be one of those ladies. But bankers that give out the above advice drive me insane.

    Do you understand how credit reporting works? Do you have no credit? or bad credit? That is what makes the difference in what you would do.
    Learn about credit reporting and FICO scores at www.myfico.com. It is a real simple over view that explains what information goes into your score.
    Then go to www.annualcreditreport.com for a free credit report. It is a government sponsered website. The report is free but they charge like five bucks for the score. Skip the score. Once you get your report it will list all the things that are negatively impacting your credit score.

    The next step is to correct those negative items. There are alot of ways to do that. If you have questions about that you may pm me.

    Once you get to the point of having no negative items or IF you have no credit, the best way to build credit is a credit card. Credit cards are still easy to get if you are this point in the process. Be careful not to apply too many times for a credit card. Each time you apply an inquiry is posted on your credit reports. The more inquiries you have in a short amount of time the worse it looks. I have seen people with no credit trash their chances by applying way too much.

    It does not matter what credit card you get. The important thing to look for is a 28-day grace period. That way if you pay it off each month you will not pay interest. So get a credit card, purchase only a pack of gum each month with it, and pay it off each month. As long as yu have an on time payment each month you are building positive credit.

    The last point I will make is..... a personal loan, credit card, or secured credit card WILL NOT build positive credit if you have negative items on your credit report. This is a lie alot of bankers and people on forums continue to repeat. But it isnt true. You have to erase the negative to get to the positive.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: How to build good credit?

    Quote Originally Posted by Eric Stoner View Post
    Today, as Melonie said, most banks want to see a verifiable income and a good payment history ( phone bill, electric bill, student loan etc.).
    Phone bills and electric bills DO NOT qualify as a good payment history.

    The ONLY items that qualify show up on credit reports. Those items are loans and lines of credit.

    No offense but to help others understand credit I like to clarify these types of issues.
    Last edited by Vamp; 12-26-2012 at 09:47 AM. Reason: wrong wording ..... ack!
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: How to build good credit?

    Quote Originally Posted by Misskatia View Post
    These are prepaid cards, and my understanding is that many banks offer them, so if you have a bank account already, you could go and ask the bank teller.
    Anyways, the way it works is the bank will you have to pay them say $300 if your credit is bad OR if you don't have any credit and the card limit is $300. There is usually an annual fee to pay to use the card, Capital One is $59/year, and as long as you pay your bill on time for just over the minimum amount, you get back your deposit and you can have an improved credit score in about 2 years. Btw, you don't have to spend the entire amount, even just making a $10 purchase each month and paying your full balance will be effective in this strategy

    I applied for one of these after I paid off my unpaid debts that were showing on my credit report. I figured, even though my credit was pretty bad and I couldn't get approved for any others, a guaranteed approval prepaid credit card, and after a few months, I re applied for a different credit card that denied me a year before and I was approved.

    Hope this helps: )
    Awesome job!!

    The type of credit card you are referring to is a SECURE credit card. Prepaid credit cards do NOT have any impact on credit reports.

    Clarifying in case anyone goes into a bank asking for one
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: How to build good credit?

    Get a student credit card with Capital One. If you aren't a student, they'll accept you. Keep paying it every month.
    In a year, get another credit card.

    Contrary to popular belief, you need up to 3 or 4 credit cards to up your credit score more. Why? Because more credit given to you overall, looks better.
    Someone who was $2000 avaialble credit looks better than someone with $500 available credit.

    Also, never spend more than 30% on a credit card and let the company bill you. If you spend $500 (and the max is $500) pay it off the next day immediately!

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    Default Re: How to build good credit?

    Go to www.annualcreditreport.com and follow instructions to review a free copy of your credit report. You can pick from any of the three services that offer the reports. You can get a report from each service once a year. Do this and see what negative entries may be on your report. If not accurate you can contest them....if they are accurate you can see what you can do to clear them up. At least they will be paid off but they will still remain on your report for a while. Doing so won't help too much immediately but may help you down the road.

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    Default Re: How to build good credit?

    Quote Originally Posted by klever View Post
    Get a student credit card with Capital One. If you aren't a student, they'll accept you. Keep paying it every month.
    In a year, get another credit card.

    Contrary to popular belief, you need up to 3 or 4 credit cards to up your credit score more. Why? Because more credit given to you overall, looks better.
    Someone who was $2000 avaialble credit looks better than someone with $500 available credit.

    Also, never spend more than 30% on a credit card and let the company bill you. If you spend $500 (and the max is $500) pay it off the next day immediately!
    This isnt accurate.

    Percentage of available credit is the only thing used to calculate FICO scores. www.myfico.com has a great tutorial about FICO scores.
    FICO is used because it adds or subtracts different variables from a raw credit score.

    Credit scores ONLY care about the timely manner of payments on loans or lines of credit. You can have a 710 credit score with one credit card and no negative information on your credit report. But your FICO score would be lower because your credit card is maxed out.
    Some banks use FICO for everything. Others only use FICO for larger purchases. Some banks have their own system. One bank I worked for added 200 points to your credit score if you had a house for 10 years without a late payment.

    Because of how credit reporting cycling dates fall, NEVER max out your credit card. You could be maxing it out on the last day of a reporting cycle. Two months down the road when you are trying to buy a car it will show up as maxed, even if you paid it off the next day.

    The only time I have seen the number of credit cards become an issue is for mortgages or too many cards. Three is the max number of credit cards you should ever have. Always keep the oldest credit card open. Long standing credit is used to calculate FICO as well.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: How to build good credit?

    Ok so I applyed for a Xapital One card, got it, but with only a $300 limit. How come I cna get that but not a freakin Best Buy card? Also if it looks better to have more than one card what other kinds of cards should I be looking at.
    I don't feel myself today
    Just a figure in a big monopoly game
    Struggle is the price you pay
    You get just enough just to give it away
    I'm sinking but I'm floating away
    Throw me a line so I can anchor my pain
    The fabric is about to fray




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    Default Re: How to build good credit?

    Quote Originally Posted by a_little_mermaid View Post
    Ok so I applyed for a Xapital One card, got it, but with only a $300 limit. How come I cna get that but not a freakin Best Buy card? Also if it looks better to have more than one card what other kinds of cards should I be looking at.
    Does it have a 28 day grace period? Stay with one card for a few months. Buy a pack of gum with it and pay it off each month. You need to build up some history with that card first. The few months will also lessen the impact of the credit report pull capital one did. Each inquiry into your credit reduces your score. I would give it six months.

    Did you check your credit report? I cant tell you why you cant get a best buy card without basic info from your report.

    This is a guess based on my experiance.... IF you do not have any negative things on your credit report ..... then it is because you do not have any credit.

    If you have had credit cards or loans in the past, then there is something negative on your credit report. Capital One didnt care about it but Best buy does.

    I am not saying you have to have 3 cards. I am saying that is the max number you should ever have.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: How to build good credit?

    Quote Originally Posted by Misskatia View Post
    Have you been approved for credit in the past, or is this your first time?

    The first thing you might want to do is find out why your credit is bad. If you have anything outstanding: unpaid phone bill, student loan...
    these will be reflected on your credit report and as soon as you settle out everything owing or make a payment arrangement that the collection company or unpaid provider( there will be a corresponding phone number for each item listed). Each time a collector does a credit check on you, it affects your credit score in a bad way.
    For example, I owed roughly $1500 in unpaid interest on my student loan and the collection company that they sold the debt to or hired to collect for them were hitting up my credit info 4 times a year! : (

    Second, you can get yourself one of these guaranteed approval credit cards:
    http://www.capitalone.ca/credit-card...ageName=Things to Know About Credit&PortletLocation=2&ComponentName=ca_primary_ nav&ComponentStrategy=&ContentElement=3%3BOur+Cred it+Cards&TargetLob=MTS%3A%3ALCTMMQC4S&TargetPageNa me=Credit+Cards+Home&linkid=&email_delivery_id=&re ferer=&external_id=
    (sorry about the long link lol)

    These are prepaid cards, and my understanding is that many banks offer them, so if you have a bank account already, you could go and ask the bank teller.
    Anyways, the way it works is the bank will you have to pay them say $300 if your credit is bad OR if you don't have any credit and the card limit is $300. There is usually an annual fee to pay to use the card, Capital One is $59/year, and as long as you pay your bill on time for just over the minimum amount, you get back your deposit and you can have an improved credit score in about 2 years. Btw, you don't have to spend the entire amount, even just making a $10 purchase each month and paying your full balance will be effective in this strategy

    I applied for one of these after I paid off my unpaid debts that were showing on my credit report. I figured, even though my credit was pretty bad and I couldn't get approved for any others, a guaranteed approval prepaid credit card, and after a few months, I re applied for a different credit card that denied me a year before and I was approved.

    Hope this helps: )
    I have had credit cards in the past currently have a VS card and the one I was just approved for. Got into some trouble a few years ago to the tune of $4,000, but that was all paid off and thats been almost 4 years. I dont understand the secured cards, if I had the 3 to 500 to put into a card I wouldnt need the card. Am I right? And whwen my Best Buy card was paid off I apparently closed it and they wouldnt reopen it thats dumb.
    I don't feel myself today
    Just a figure in a big monopoly game
    Struggle is the price you pay
    You get just enough just to give it away
    I'm sinking but I'm floating away
    Throw me a line so I can anchor my pain
    The fabric is about to fray




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    Default Re: How to build good credit?

    I'm not a student, and how could I pay a $500 credit card off the next day?

    Quote Originally Posted by klever View Post
    Get a student credit card with Capital One. If you aren't a student, they'll accept you. Keep paying it every month.
    In a year, get another credit card.

    Contrary to popular belief, you need up to 3 or 4 credit cards to up your credit score more. Why? Because more credit given to you overall, looks better.
    Someone who was $2000 avaialble credit looks better than someone with $500 available credit.

    Also, never spend more than 30% on a credit card and let the company bill you. If you spend $500 (and the max is $500) pay it off the next day immediately!
    I don't feel myself today
    Just a figure in a big monopoly game
    Struggle is the price you pay
    You get just enough just to give it away
    I'm sinking but I'm floating away
    Throw me a line so I can anchor my pain
    The fabric is about to fray




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    Default Re: How to build good credit?

    If you got in trouble a few years ago, it still will show on your credit report if you were late or faulted on payments or loans. Still, as I suggested above, pull a free copy of your credit report and see what is on there.

    The charge $500 and pay it off immediately is just an example. Charge a little each month and pay off the balance each month.

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    Default Re: How to build good credit?

    Quote Originally Posted by Raider View Post
    If you got in trouble a few years ago, it still will show on your credit report if you were late or faulted on payments or loans. Still, as I suggested above, pull a free copy of your credit report and see what is on there.

    The charge $500 and pay it off immediately is just an example. Charge a little each month and pay off the balance each month.
    Ok I will check my credit out. But I guess I'm not getting the concept of the card you are talking about? It requires a deposit?
    I don't feel myself today
    Just a figure in a big monopoly game
    Struggle is the price you pay
    You get just enough just to give it away
    I'm sinking but I'm floating away
    Throw me a line so I can anchor my pain
    The fabric is about to fray




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    Default Re: How to build good credit?

    No specific card in mind. Merely the general approach you need to follow to build credit with any credit card you get. Make small enough purchases that you can pay off monthly to show responsibility and yet not incur a finance charge.

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    Default Re: How to build good credit?

    Quote Originally Posted by a_little_mermaid View Post
    Ok I will check my credit out. But I guess I'm not getting the concept of the card you are talking about? It requires a deposit?
    Am I being ignored? I answered this question above. If am being ignored please tell me and I will stop responding.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: How to build good credit?

    Quote Originally Posted by Vamp View Post
    Am I being ignored? I answered this question above. If am being ignored please tell me and I will stop responding.
    Sorry I guessed I missed it. Will reread, sorry.
    I don't feel myself today
    Just a figure in a big monopoly game
    Struggle is the price you pay
    You get just enough just to give it away
    I'm sinking but I'm floating away
    Throw me a line so I can anchor my pain
    The fabric is about to fray




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