Building Credit score from scratch what do you guys recommend?

Question

Hello Bigger Pockets community.

So I am 20 years old and I have a part time job.

I am currently writing out a plan to present to potential partners in my area so that I can get the ball rolling on investing but...

I want to start building my own credit so that when success starts rolling in I will be able to go on my own personal investing ventures.

I plan on only using my card for trivial things that I can pay off at the end of the month (like a video game or a meal)

but with soo many existing services it is hard even begin the search. The obvious first answer would be with my bank which I will be doing but are there any services that you guys would recommend to a New Yorker that may give me a better deal on interests ect?

Thank you guys in advanced I'm going to do some personal research on this. Hopefully I'll be able to learn of a service that is really good but I haven't thought of.

Adrian Valdez · Answer

Thank you guys for the replies. I am planning on getting some secured credit cards in the very near future I just need to get a new job because i am having huge financial issues because of their inability to pay on time .

Andy Mirza · Answer

@Adrian  Valdez

1) Get 3-5 credit cards. Don't use more than 30% of your maximum credit. Use them and pay them off every month. If you have problems getting an unsecured credit card, get secured ones. Ask for credit increases and lowered interest rates over time.

2) Get an installment loan (any kind of loan where you make the same monthly payments). If your car is paid off, refinance it with your bank at the LTV that will get you the lowest rate. Banks also offer unsecured installment loans.

3) Avoid Department Store credit cards. These typically will not have a maximum credit limit but they'll report your largest use of credit to the bureaus as your maximum. Example: if you bought $1000 with the credit card, they'll report $1000 as your maximum credit. This shows that you've used 100% of your credit limit, which is bad.

4) Check your credit report from time to time to make sure the credit card companies are reporting accurate information. Correct errors when you find them

Fred Heller · Answer

Some banks offer collateralized credit cards. You deposit an amount in a savings account, and they issue a card for the same amount. The money is returned to you when you cancel the card. It shows up on your credit report as a regular credit card. There's nothing to indicate it's a collateralized card.

I used this when I first started out many years before you were born. That was also before we had the national credit reporting companies. Everything went through the local credit bureau. I used Key Bank, and I think they're still around. You can google "collateralized credit cards" to find a bank that issues them.

Josh B. · Answer

Also you can piggie back off someone with established credit if you can find someone who will allow you to be an authorized user on a card. This can backfire if they start having bad debt though.

Josh B. · Answer

I was in the same boat not long ago. I couldn't even get a store credit card from our Target (lol not even the debit one). My score was not even showing up on reports. I had never had a credit card and used cash for everything. NO ONE would give me a shot to prove myself.

After some studying the only way I could find a way inside was a secured credit card (paying $ for a secured line of credit based on how much $ you add) to get my foot in the door. I looked at several and after $99 for a secured credit card from capital one I was at step one.

Several months of $10 - $20 per months (low balances) I had enough credit to get my Discover IT card. From there on it was smooth sailing.

I would recommend starting out there. Also some other tips to keep things running along right.

1.) Do not cancel ANY cards

2.) Pay on time, EVERYTIME

3.) Keep low balances: I think safely on 40% of balance, anymore and it can lower your score

4.) Don't jump the gun and try applying to a bunch of cards. Do the secured and then maybe two months later apply to another.

5.) I would aim for a card per month after you are approved for the second, until you get 4-5 this will build you up about as fast as possible for a great credit score.

6.) Pay off any and all debts

Credit forums are a great wealth of information of realistic cards and all that. Good luck!!!

Chanté Owens · Answer

Read these two sites: Credit Board Forums (http://creditboards.com/forums/?showforum=2)

& MyFico Forum (http://ficoforums.myfico.com/)

They each offer information that's credit related. You can ask questions that are pertinent to your circumstances, as each individuals' situations are different. There are search functions on each site, so you can type in specific questions and see what those responses have been.

Good luck and happy credit building!

Adrian Valdez · Answer

Thank you guys for the replies. I honestly had no idea you could use a loan cd combination to build credit. that is interesting . I have no intent on getting anywhere close to the max on a credit card. Ive seen the negatives in credit and i dont want to be under water before i start

Peter MacKercher · Answer

Buy a used car from a dealership and finance through them or the bank.

OR

Talk to your local bank they will most likely have a credit builder program where you can borrow a small amount like a grand or 3. and you put that in there CD or money market account and you pay the difference in interest like 10 bucks a month.

Good credit takes a few years. Be patient and work at it and then one day you will have great credit and be able to finance things.

Frank Jiang · Answer

Keep all balances under 30% of maximum.

Consider getting a personal line of credit and use it the same way as you describe using your credit card.  Similar to investments, you want your debt to be "diversified."

Consistently request credit increases with the credit card.

Assuming you've stayed current on these accounts, ask any company who has billed you (phone, utility, cable & internet) to report your payment history to the credit bureaus.  Sometimes these are left off on reporting.  They are not obligated to do this but some may be cooperative.

Hope this helps!