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03/21/2007 03:30:05 PM · #26 |
| The reason to create a balance and pay it off over a term of at least six months is because that shows lenders that you can sustain payments. It gives them a history of your actions. It's one thing to have credit and an entirely different thing to have built a good history of using the credit. imo |
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03/21/2007 03:34:12 PM · #27 |
Don't carry a balance. I can't imagine it's worth the hassle of keeping track. Just pay it every month and you'll be fine.
Sounds like you have a good head on your shoulders. Just keep it that way. :)
And remember - you may not have many expenses now, but you're going to have to pay for those models to shoot for nudes eventually (even if it's just taking your girlfriend out for nice dinners). ;)
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03/21/2007 03:50:16 PM · #28 |
Originally posted by levyj413:
Don't carry a balance. I can't imagine it's worth the hassle of keeping track. Just pay it every month and you'll be fine.
Sounds like you have a good head on your shoulders. Just keep it that way. :)
And remember - you may not have many expenses now, but you're going to have to pay for those models to shoot for nudes eventually (even if it's just taking your girlfriend out for nice dinners). ;) |
i always take my girlfriend out for dinners and buy her flowers and nice things so if anything she owes me! |
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03/21/2007 04:03:00 PM · #29 |
Originally posted by drewbixcube:
Originally posted by Rebecca:
A responsible way to use credit cards when you're young is to make one small purchase every month and pay off the entire balance. Do this every time and the creditors won't be wondering why you have no credit history when you go to buy a house or a car. Trust me, a 25 year old with no credit history is a big red flag to a lender. |
I think having a small carry over creates better credit without hurting the consumer.
Example: You have $100 money in the bank to spend. You set it aside and buy a $100 on your credit card. When the statement comes at the end of the month you take that $100 and pay $90 to the card. You will incure and intrest charge on the $10 left (say $2), but I believe it is better for your credit score to have accrued AND PAID interest charges. Next month charge nothing on the card and use the $10 you have left, and a little extra, to pay the $12 balance. |
That's what I mean.
Face it, credit companies are about making money. If you have a history of paying interest (even small amounts), you'll be more appealing to them. Credit is based on a lot of things, not just your income or credit rating.
For instance, those who have gone through bankrupcy have horrible credit, however often they will get offers for credit (whereas others with no credit will be turned down). This is because theses people cannot file again for 7 years, so the credit company has 7 years to try and make as much money as they can from them.
The small balance point was something our mortgage loan officer recommend we do to increase our credit rating before purchasing our home. The other thing is, even if you do not use a credit card, do not close it unless it has a bad history. Closing good credit does not make you more appealing, you actually lose credit history that way. That money that was allocated to that card disappears and actually makes your debt ratio worse.
Another thing we were advised to do is to get a loan from the bank, and pay it off early, but not too early. Make overage payments each month, but don't pay it off (even though you have that money from the bank). You'll pay a little extra, but increasing your credit rating isn't always cheap. You'll just have to make sure that the loan doesn't have a clause in it that disallows early loan payment. Some loans will fine you for early payoff.
Message edited by author 2007-03-21 16:08:21. |
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03/21/2007 04:06:48 PM · #30 |
Originally posted by pcody:
The reason to create a balance and pay it off over a term of at least six months is because that shows lenders that you can sustain payments. It gives them a history of your actions. It's one thing to have credit and an entirely different thing to have built a good history of using the credit. imo |
Use a lower interest vehicle to create a credit history. Doing it at 21% is not the way. Even if you pay most of the balance the interest is charged from the date the transactions posted, not the due date.
Message edited by author 2007-03-21 16:07:39. |
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03/21/2007 04:11:13 PM · #31 |
carrying a balance is not bad. Its a ratio of limit to balance that works on your credit rating. If you have a $4K limit and a $3500 balance, it looks bad. On the other hand a $250 balance would have no negative effects.
What to look out for is when you have multiple cards. Companies can base/change rates based on your performance w/ other lenders. For example, you are perfect w/ paying your Amex, but had a late payment on your Visa. YOur Amex has the right to adjust your rate, so they could take a 7% rate and make it a 13% rate based on your missed payment w/ Visa. Kind of stupid but troublesome. To me its like missing an electric bill payment so they jack up your mortgage rate.
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03/21/2007 04:17:52 PM · #32 |
| well i think for that for me (starving student who spends money on only camera gear and food) will just pay off right away as every dollar is important in my life right now |
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03/21/2007 04:22:21 PM · #33 |
Let me clarify. My advice to pay it off every month wasn't because I was saying that carrying a balance is bad for your credit score. Rather, it's good financial management, ensures you don't spend what you don't have, and lets you sleep at night.
In general, my advice is to live your life and pay off your loans. Let the credit score take care of itself. Get a card, use it, pay it off. When it's time to buy a car, find a good loan and pay it off. Etc.
It's your time, of course. So if you want to try a million things to get a credit history, go for it. But I've never done anything special, and my credit score is around the 90th percentile.
Now, what does that mean?
I have credit card companies begging to lend me money at 0%, I've gotten the best mortgage rates, car loan rates, etc. In fact, over the past 5 years, I've accepted their generous 0% offers for 2 credit cards (no interest, no transfer fees, no fees of any kind), AND they gave me bonus points. I used those to get a free cordless headset so I can watch movies late at night when my family's asleep. :) So, basically, THEY paid ME $100 to borrow $10K from them for a year. I just kept transferring the balance from the card I use for purchases and holding onto the money. Then I paid off the minimum every month on the 0% card. After the year was up, I used the money I'd held onto to pay off the remaining balance.
The secret? NEVER, EVER get caught without the means to pay, and don't use those cards to purchase anything, ever. Only for balance transfers. Otherwise, they take most (or all, depending on the card) of your payments and apply them to the 0% balance, not the purchase balance.
Message edited by author 2007-03-21 16:22:52.
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03/21/2007 06:52:11 PM · #34 |
levyj has it right. Remember, we're giving advice to a 16 year old, who I would assume is still many years away from his first mortgage.
Don't be afraid to use credit, but only buy what you can afford, and keep the card paid off. Look at new credit card and loan offers, but only take the ones that are truly a better deal than what you already have. If you follow that over several years, by the time you're ready to buy a car or a house, the credit rating will have taken care of itself. |
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03/21/2007 07:17:58 PM · #35 |
I can really attest to what levyj413 is saying, I used to have just one card with a $500 limit on it, I used it a little and paid it off every time. I had a pretty good credit score, when it came time to buy our house we didn't have any savings but still got 5.75% interest rate. But things have gone south from there, more bills come up and stuff spins out of control (oh maybe a challenge entry there hummm). I am fighting everyday to correct my credit before I retire from the military in less than 3 years. I have about $100 per paycheck that goes to me and my essentials such as food, the other 1400+ goes straight to bills and I'm barely making a dent. My wife cares for over 12 kids a day and is constantly scrapping the bottom of the barrel to get by so that we can have a better life later. It sucks but it is what we have to do since we were careless earlier.
Along with credit though a savings will go a VERY long way in your future. If you can get a nice hefty savings going you will have money for the things you want to splerge on. Get used to paying yourself an allowance every month and it will pay off in the end.
I have two friends that do this, they each have an allowence for the month, everything else goes to bills, savings accounts and things like mutual funds, bonds etc. When they needed a new car she was able to pay cash for it, sure it didn't help their credit any but when you save like they do it isn't an issue...they still got a great rate on their house cause they were able to dump a ton into the down payment.
You are young with plenty of time to over come mistakes but if you watch it now you can use that time to enjoy the rewards instead. Credit is certainly essential today so be careful, go see an actual financial expert and find out all the ins and outs it will be well worth it.
Message edited by author 2007-03-21 19:19:09. |
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03/21/2007 07:18:54 PM · #36 |
Don't go crazy I got mine cos of my camera well I dont have much left on it so hmm yeah O.o
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03/21/2007 07:25:21 PM · #37 |
| credit cards are definitely bad habits... I recommend getting the PayPal Mastercard for online purchases or everyday use, it acts like a credit card (without credit) but works like a debit card, puchases come directly out of your checking account but go through PayPal first where they give you a 1% instant cash back. I pay all my bills with it, thats about $8-10 extra bucks a month I save.. The only downside is that you cant use it to puchase gas since most petro stores ask for an open end authorization before you pump. I love it :) |
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03/21/2007 10:45:34 PM · #38 |
I think it's only a free service in the US.
I have a bank card for my checking account that's backed by Visa. No debit charges and it just comes out of my account. I don't get 1% back, but I do get points on all purchases and bills paid through the account. While it's nice, it doesn't build up credit.
I think noisemaker gets the idea though. Just have to be careful with your credit. It could become very important to you in the future.
Like levyj said, it will help you. We don't buy anything on financing if it's more than 2-3%, 0% is most desirable. Just don't out spend what you earn. |
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03/21/2007 11:51:14 PM · #39 |
| As Ray said, credit cards aren't bad, and using one isn't bad. Using credit cards irresponsibly is bad: purchasing beyond your means, only paying partial amounts owed or the minimum payment necessary, and carrying a balance. So there. :P |
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03/22/2007 12:12:47 AM · #40 |
As long as it's prepaid you can't get into that much trouble...but take it from me (I'm sure there are plenty others that would attest to this also) DON'T GET A CREDIT CARD. I'm in serious debt because I went to college and had a magic card that got me anything and everything I wanted...forgot about the little tid bit that I would have to pay it all back one day...WITH INTEREST!!! Keeping it prepaid or only using your bank card is the way to go. Only spend the money you got...if you don't have any then save up. You'll be patting yourself on the back when you are trying to start your life off with absolutely no debt, it truly is a wonderful feeling...hope I can feel it one day.
And yes I'm sure there are many of you that say credit cards aren't bad...but the majority of people who get one they are the devil...I am one of those.
Clint |
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03/22/2007 12:14:26 AM · #41 |
Originally posted by Dseale:
I tried to co-sign for a friend to get a loan for a car ... |
That better be some friend. You're basically putting your credit at their feet. They're late with or miss or forget a payment, it dings your credit. They decide they don't feel like making the payments anymore, you're on the hook for their car and it doesn't become your car either, just your payment.
Co-signing for someone other than a very close relative is almost always a very bad idea and in any case, is risky. |
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03/22/2007 01:11:02 AM · #42 |
Originally posted by Spazmo99:
Originally posted by Dseale:
I tried to co-sign for a friend to get a loan for a car ... |
That better be some friend. You're basically putting your credit at their feet. They're late with or miss or forget a payment, it dings your credit. They decide they don't feel like making the payments anymore, you're on the hook for their car and it doesn't become your car either, just your payment.
Co-signing for someone other than a very close relative is almost always a very bad idea and in any case, is risky. |
As a banker who has seen way too much of this sort of thing, I can authoritatively say that co-signing never ever ever goes well. I have never once seen it work. The borrower disappears. If the repo guy can find it, the car is pretty much trashed and goes at auction for much less than what is owed on the loan. The co-signer is stuck making payments on someone else's upside-down car loan. Their bad debt becomes your bad debt, because it all goes on your credit bureau too. If they can't buy it on their own, they shouldn't be buying it.
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03/22/2007 08:54:45 AM · #43 |
| This turning in to Life Lessons 101. I agree...NEVER cosign for anyone. Unless you know beyond a shadow of a doubt they won't destroy your credit, even then bad things happen. If the guy looses his job and can't pay, or worse gets injured and can't work at all for months on end...you will be paying for it. |
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03/22/2007 09:19:51 AM · #44 |
Congrats noisemaker.
Now you can bankrupt yourself on credit. But you still can't photograph nudes. |
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03/22/2007 10:47:33 AM · #45 |
| Cut it up! Put it through the shreader! Oh the horror! |
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03/22/2007 10:53:49 AM · #46 |
Originally posted by Rebecca:
Originally posted by Spazmo99:
Originally posted by Dseale:
I tried to co-sign for a friend to get a loan for a car ... |
That better be some friend. You're basically putting your credit at their feet. They're late with or miss or forget a payment, it dings your credit. They decide they don't feel like making the payments anymore, you're on the hook for their car and it doesn't become your car either, just your payment.
Co-signing for someone other than a very close relative is almost always a very bad idea and in any case, is risky. |
As a banker who has seen way too much of this sort of thing, I can authoritatively say that co-signing never ever ever goes well. I have never once seen it work. The borrower disappears. If the repo guy can find it, the car is pretty much trashed and goes at auction for much less than what is owed on the loan. The co-signer is stuck making payments on someone else's upside-down car loan. Their bad debt becomes your bad debt, because it all goes on your credit bureau too. If they can't buy it on their own, they shouldn't be buying it. |
My parents co-signed on a loan for my first car when I was 16. The loan was for $1500 and I paid the bank every penny on time. I was very grateful to my parents for helping me with the loan, but I wouldn't suggest that every parent do that for their child. If I had slacked off or not paid, I would have suffered, immediately and immeasurably, the full wrath of my parents. |
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03/22/2007 11:12:24 AM · #47 |
Originally posted by Spazmo99:
Originally posted by Rebecca:
Originally posted by Spazmo99:
Originally posted by Dseale:
I tried to co-sign for a friend to get a loan for a car ... |
That better be some friend. You're basically putting your credit at their feet. They're late with or miss or forget a payment, it dings your credit. They decide they don't feel like making the payments anymore, you're on the hook for their car and it doesn't become your car either, just your payment.
Co-signing for someone other than a very close relative is almost always a very bad idea and in any case, is risky. |
As a banker who has seen way too much of this sort of thing, I can authoritatively say that co-signing never ever ever goes well. I have never once seen it work. The borrower disappears. If the repo guy can find it, the car is pretty much trashed and goes at auction for much less than what is owed on the loan. The co-signer is stuck making payments on someone else's upside-down car loan. Their bad debt becomes your bad debt, because it all goes on your credit bureau too. If they can't buy it on their own, they shouldn't be buying it. |
My parents co-signed on a loan for my first car when I was 16. The loan was for $1500 and I paid the bank every penny on time. I was very grateful to my parents for helping me with the loan, but I wouldn't suggest that every parent do that for their child. If I had slacked off or not paid, I would have suffered, immediately and immeasurably, the full wrath of my parents. |
It's different when it's parent/child, but when it's a boss co-signing for an employee or a friend co-signing for a friend, it just never works.
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03/22/2007 11:50:45 AM · #48 |
Credit cards are a good thing; as long as they are used in moderation! I have 2. 1 of them I got when I was 17, that was 4 years ago. I've had my other for 2 years. Unfortunately, I've racked up $6k in CC debt. But, it's a good thing I have them because I'd be in a lot worse trouble!
Since I just got my job though, I am going to pay them off. My girl has $2k, so we are going to be completely debt free (except student loans) in 12 months.
Good luck with yours, and I hope you don't end up actually needing them. |
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