Building credit if you have NONE.. Not bad, literally no history?

In reply to spitfirebill:

No clue really, credit scores are more witchcraft than turbochargers...lol

They still make money if you pay in full every month. They get paid at POS by the businesses for the privilege of using the account.

WonkoTheSane wrote: Anyone else have any ideas?

Here's my story.

I went for years (as in double digits) without a bank account. Then Ohio changed some laws and I couldn't get my checks cashed anymore. (Nobody wanted to touch a handwritten paycheck, and we're too small a business for a payroll service)

Incidentally, this happened the weekend of the 2014 GLDiv National Challenge, which is why I paid irish44j $100 in quarters for some wheels. I made a promise to give him $100 that weekend and my slovenly change-keeping habits meant I had that many quarters in my change bucket And that was all the money I had because I couldn't cash my paycheck... but a promise is a promise.

Company-wise, we were planning on going paperless with direct deposit anyway, so I got some time off and went to the bank the company used and we set me up with bank accounts and direct deposit.

A year or so later (note: never once went overdrawn on my checking account) I start lookin' to buy a car. Filled out some online forms but the interest rates were crazy, and I decided that maybe getting a loan for a unicorn for which parts are either nonexistent or silly expensive was not the wisest move, so I passed.

However, several months AFTER that, I get a letter from Capital One. Pre-approved for a Platinum credit card. Follow this URL. Click click, type type, it's an unsecured card with a $500 limit and a 24.5% interest rate after the first month. But first month same as cash. Well hell, gotta start somewhere.

Got the card in the mail a couple days ago. Plan is to use it for extant motorsports expenses and pay it off every month. This won't be hard as I'm blowing about $1000-1200 a month on motorsports as it is, so I'll max out the card in a week or two. Actually I haven't used the card yet but I'm going to max it out tomorrow with an order from Summit.

Not stupid: Not buying before I have the money. I could make the purchase with ready cash. I'm just buying it on the card, then paying off the card. Do that enough times, credit rating goes up, interest rate goes down, pan doesn't stick.

spitfirebill wrote: I thought PIF each month didn't help as much as paying over a few months because you are really using your "credit".

You are using your credit, just over the term of one month rather than several. I have had a Citi Card since 1977 and never carried a balance over. I do use it for groceries every 2 weeks and pay off at the end of the month.

former520 wrote: They still make money if you pay in full every month. They get paid at POS by the businesses for the privilege of using the account.

Yep, the merchant pays a processing fee for every transaction. When I worked in the hardware store the owner told us, if the transaction was less then $20 and a card was offered; "Don't ask, run it as a credit card". If it was for more than $20; "Ask to use it as a debit card".

The fee for credit transactions was a percentage of the amount of the sale. The fee for debit transactions was a fixed amount. $20 was the point where it cost him less for debit than credit transactions.

Knurled wrote: Not stupid: Not buying before I have the money. I could make the purchase with ready cash. I'm just buying it on the card, then paying off the card. Do that enough times, credit rating goes up, interest rate goes down, pan doesn't stick.

Just be careful with that method. They're looking to see 0-40% of total credit utilization, if your entire credit availability is only this one card your credit score might not go up quickly if you max out all $500 of your revolving credit every month. I wouldn't worry about it for a month or two, but if you want to build good credit, try to keep it much lower for a few months, and that should open the door to better cards/limits/rates.

Great discussion here, it seems still seems like a secured card is going to be the way to go for him. To answer a few other questions, he doesn't have any utility bills at all yet, parents still pay phone, and the rent is under-the-table, cash, all inclusive.

If any of you guys who do use credit responsibly are interested, I'd totally recommend using the Amex Blue Cash Preferred & Citi Double Cash Mastercard combo. The Amex is 6% back on groceries, 3% on gas, 1% on everything else, whereas the Citi is 2% on everything. Between the two, my wife and I get ~$1200 back a year in cash. Note that the Amex card costs $80/year, which we were pretty opposed to paying until we did the math and realized that by paying $80/yr it was worth ~$800/yr.

If the guidance on creditkarma is to be believed, the goal for credit utilization on cards is 1% to 20% as "excellent" with 21% to 30% being "good". It gets worse from there, with 0% being not great. There needs to be a little use but not much. This is why I've got one card that, until I got a credit limit lift to $5000 a few days ago, was only used for gasoline purchases once or twice a month. $500 limit kept me from doing much much more with it which was fine.

Get a small loan from the bank.

Pay it back quickly.

Get another slightly bigger loan.

Pay it back on time.

and so on.

That is how it was done before credit cards, my father told me.

yamaha wrote: In reply to BoxheadTim: With certain CC companies, paying it off entirely each month so no interest is charged is a good way to get one cancelled after awhile. Capitol One and BoA both did that to me recently (after 2 and 1.5 years respectively)of paying off my food expenses each month.....lol My FCU Card behaves like a personal loan with 7.9% fixed, so I use that for larger purchases.

We've put nearly all our expenses on our Discover card and then paid it off every month for something like 10+ years now. I always wonder if they will put an end to us doing that at some point. They still get the transaction fees from the merchants minus whatever the cashback bonus they give us. Doing this lowers our credit score because when they run a credit report it comes up as a large balance on a credit card for a long time. Silly, because we haven't paid them a cent of interest in what seems like forever and the balance goes to zero every few weeks.

In reply to WonkoTheSane, pres589:

Good to know, thanks!

T.J. wrote: We've put nearly all our expenses on our Discover card and then paid it off every month for something like 10+ years now. I always wonder if they will put an end to us doing that at some point. They still get the transaction fees from the merchants minus whatever the cashback bonus they give us. Doing this lowers our credit score because when they run a credit report it comes up as a large balance on a credit card for a long time. Silly, because we haven't paid them a cent of interest in what seems like forever and the balance goes to zero every few weeks.

The solution here is stupid, but the agencies look at what percentage of available credit you are using, looking for that sweet spot (0-20%), so play that by getting another card and never using it. If your Discover has a 5k limit, and you're using 2500 every month, that's a 50% utilization. Get another card (doesn't matter which one, as long as there's no fees) that has a 10k limit, and now your utilization is only 16%.

Disregard this advice if you or someone in your house can't be trusted with access to an extra 10k :)

Knurled - You're welcome! The game is stupid, but you have to play it to be part of modern society.

In reply to WonkoTheSane:

You should occasionally use any cards you have, or you do run the risk of having the issuer close the account. The average age of your accounts also factors into your credit score, so it benefits you to have older, continuous accounts. My understanding is that your score could be dinged significantly if your oldest accounts are closed.

pinchvalve wrote: Before he does anything, he has an opportunity to drop off the grid entirely here. I mean, create an I.D. and an online presence, get credit cards and all that, but keep your true ID locked away. You never know when you might want to just walk away.

Uh, I'm listening. Unfortunately I have a presence, but say you wanted to go off grid and create said identity- are you talking out your ass, or is this remotely possible?

Update: Capital One just upped my limit to $3500.

Just bought $500 worth of rearend bits from a seller on eBay. Saw the PayPal Credit option, eh why not. Instant approval for $1250, no interest if paid in 6 months. I can pay it off right now if I had to, and intend to do so in the very near future.

But still, having gone from nothing to close to $5k of accessible credit in such a short time is a strange place to be.

The funny part is, I wanted to fix my credit so I could buy a Focus RS if not this year then next year. All of my interest in that car died when I saw it has electronic shocks. That's a giant nope for me.

My dad opened a card for me when I turned 18 (I'm sure he talked to me about it but I forgot). I never even had the card on my person. When I graduated, he told me to call and get a card sent to me. I did, and started using it and paying in full each month. Boom. 4 years of active credit history in a few months.

Someone will give you a credit card. Get one. Use it a bit, but never to carry a balance. It's like getting a job though, not everyone will give you a card, but be persistent. They are not all using the same algorithm.

However, you should easily be able to get a car loan with nothing other than a job and 99 down...

Credit Union! Seriously. Either a secured credit card attached to an account you have set up there, or, and this is a big one for credit repair as well. Credit Unions offer a ONE TIME, unsecured loan of up to 5000 dollars. Get said loan, put it in an account and setup autopay out of that account. Make double minimum payments or more, but the key for rebuilding credit is to kind of keep it alive. Really people, credit unions are the E36 M3, and mostly the owners don't get kickbacks for non payment like the wall street owners of national and regional banks(you know, the pricks who cleaned up billions from the housing bubble).

I had the misfortune of tanking my credit as soon as I was able to get it. Now that I pay cash for every, berkeley banks and that whole credit scam, I really don't care about it, and my score has stalled at like 640 because my utilties and phone bills aren't on my credit report and I've been done with loans since I finally paid off my debt collectors 2 years ago. A total of 8500 borrowed, 2500 on Worst Buy store credit card, 5500 through an unsecured loan at citifinancial, 12 years and 42000 dollars later, it was finally paid off. Turns out, if you quit paying a debt collector and another collector buys it, you have to start paying from the beginning all over again. Great great scam if you can be the lender/collector, terrible horrible life ruining scam if you're the consumer.

I'll echo the credit union sentiment. When I bought the Camaro 2 years ago I too had like literally zero credit history, never had a credit card or anything, had been at my job <6 months, and my CU had zero qualms about lending me $4k towards the purchase. (As a bonus, they'll basically finance any car purchase, including classics, so long as the car is worth at least $3k, has a title, and doesn't look like a complete basket case. Very reasonable rates too.)

Building credit history was really the only reason I borrowed money on the car to begin with, so I doubled up my monthly payments and had the loan paid off in a bit over a year. Between that loan and my student loans (which my parents actually pay, thanks mom and dad) I've now got a 750 credit score. Still don't have a credit card either.

In reply to Furious_E:

Hi Furious_E - what CU are you using? I recently finished my studies and want to buy a car - the only credit history I have is from paying my student loans. I have a 650 credit score, at least according to WalletHub. Do you think they’d approve me?

Canoe