19, What is the next step for excellent credit?

[Anonymous]

I turned 19 recently and am looking to take the next step toward having excellent credit. I am seeking advice or a plan for the next steps to achieve my goal of excellent credit as soon as possible. I would like to have excellent credit as early in life as possible and have as many tools available to me as possible.

Here is a summary of my credit reports/scores as report from various sources:

Credit Karma Transunion: 690 (1/31/2016)

Credit Karma Equifax: 674 (1/31/2016)

Citi provided FICO:  637 12/29/2015)

Quizzle: 674 (1/30/2016)

The only thing on my credit reports is my one Citi card I was able to open 07/2015 and one hard pull from 03/2015. The Citi card has a credit limit of $1000 and I am currently showing 84% utilization. However I have paid off all but $200 and will pay off the rest before my next statement and reporting date mid-February. On 1/30/2016 I attempted to request a credit line increase on the Citi website however I was declined and will receive a letter soon.

Here is a link to an overview from Credit Karma:  http://imgur.com/ZHstEJs

I am currently employed but I do not have any sort of stunning income to report. I live rent free.

Here are a few options I am considering:

-Finance a small $200 appliance from Home Depot and pay it off before interest kicks in (I am probably going to delay this purchase until after my upcoming large purchases mentioned below)

-Apply for another credit card (Leaning towards this one once I have everything paid off soon)

-Request a credit line increase on my Citi card again (Maybe also do this one)

-Apply for an Amazon Store Card

-Apply for a personal loan from a company like SoFi

-Apply for a line of credit with a bank that is offering one (none of the banks I am currently with offer one)

-Possibly finance a used car sometime in the future (This is unlikely)

I am anticipating some large purchases in the coming months (~$2500) that I would like to finance in some way but I can get by without financing them if need be.

Here is my ideal outcome: I am able to open a new account (or maybe more than one!) so my reports aren't quite so thin and then I have some way to finance $2500 in PayPal charges at 0%. I also would have a higher total available credit so I can use my credit without excessive utilization numbers.

I am at your disposal. I'd appreciate hearing any thoughts or ideas you might have.

[willwar14]

I am also 19, build from a completely blank profile and a 605 score across all 3 CRAs. I would recc paying down your Citi card to under 9% utilization. At that point I think you stand a decent chance at getting approved for the Amazon Store Card. If you are interested in getting a installment loan on your reports, I would suggest getting a secured loan from alliant CU. 

[takeshi74]

I'd suggest starting with this:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

It doesn't contain everything but it is a handy starting point.  Given that info:

Payment History must be 100%.  All payments must be on time.  Do whatever it takes to ensure that they are all on time.  If auto pay would be of benefit to you then make use of it to ensure that at least your minimums are covered.  Derogs tend to have a significant impact and will tend to hold you down as long as they are on your reports so avoid them.

Revolving utilization has a significant impact and falls under Amounts Owed.  General advice is do not exceed 30% but keep in mind that 30% is far from ideal.  Lower is generally better as long as you don't have all your revolvers reporting 0 balances.  It can be tricky to maintain low revolving utilization with low limits but just worry about keeping it under 30%.  You can drop it as needed when applying for new credit.  You can reduce reported revolving utilization by paying down balances prior to report date.

Most of the rest just takes time and responsible usage to build.  You have a young and thin credit profile and that will limit how many new accounts you can add in a given timeframe.  It will also have an impact on the limits that you will qualify for as you have already experienced.  Gradually add credit cards.  General advice is at least 2-3 cards for scoring purposes so slowly work your way to that.

Credit building is a long, slow process so get yourself in the right mindset and be prepared to be in it for the long haul.

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@Anonymous wrote:

Here is a summary of my credit reports/scores as report from various sources:

Credit Karma Transunion: 690 (1/31/2016)

Credit Karma Equifax: 674 (1/31/2016)

Citi provided FICO:  637 12/29/2015)

Quizzle: 674 (1/30/2016) 

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You can use whatever scores you want to monitor trends with your credit but keep in mind that a given creditor/product will use a specific scoring model & CRA and that other scoring models and CRA's will not be relevant.  Always consider the specific model when referencing scores.  CK provides VantageScores that are used by some creditors.  Citi provides a FICO 8 Bankcard which is not the same thing as a FICO 8.  I don't recall what Quizzle provides.

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@Anonymous wrote:

-Apply for a personal loan from a company like SoFi

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Don't just apply for loans for scoring purposes.  Open accounts that suit your needs.  If you have a need for a loan then get a loan.  An installment only helps Credit Mix when it is open.  If you close your only installment you'll lose whatever benefit it provided to Credit Mix.  Also note the relative weight of Credit Mix.

[Anonymous]

Thank you for your replies. I know that my current utilization is holding me back. That is why my first priority is to pay the rest of that off. I will consider applying for the Amazon Store Card at that point but I am thinking I will try to apply for another (currently undetermined) credit card first. That would be more useful than the Amazon Store Card.

I will look into a secure loan from Alliant CU but I am not sure I have anything to secure it with.

I understand that it is a bad idea to open accounts just for scoring purposes. I would have a use for a personal loan but I am unsure if my likelyhood for being approved is enough that it is even worth applying.

[bdhu2001]

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@Anonymous wrote:
Thank you for your replies. I know that my current utilization is holding me back. That is why my first priority is to pay the rest of that off. I will consider applying for the Amazon Store Card at that point but I am thinking I will try to apply for another (currently undetermined) credit card first. That would be more useful than the Amazon Store Card.

I will look into a secure loan from Alliant CU but I am not sure I have anything to secure it with.

I understand that it is a bad idea to open accounts just for scoring purposes. I would have a use for a personal loan but I am unsure if my likelyhood for being approved is enough that it is even worth applying.

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You want to keep less than 10% on it.  That means pay full previous balance by due date so that you don't pay interest, but buy something you need before statement close date. If you have new charges before statement close date, make sure that the amount keeps you below 10%.

Your FICO is based on your responsible use of credit.  Thus, they like to see some use (i.e. a small balance) The best mix is to have 3 cards, but only have one card report a balance of less than 10%.

If you have at least 90 days before you need the loan, then open an account at Alliant and get a shared loan.  Your mix of credit accounts for 10% of your score which means your leaving up to 85 points on the table if you don't have an installment loan.

[Anonymous]

I started my credit journey at the same age, one of the best decisions I ever made, so; good job first of all. 

It has already been said but obviously the first step, and probably the most important would be to pay down your card to under 10% util.

Applying for other cards also helps your util percentage so you can afford to still carry some balances. It is a good practice to try and view credit cards as debit/charge cards and just pay them off in full each month, although I understand this isn't always possible. 

I would probably apply for multiple credit cards with different banks that you could see yourself holding onto for the long term too, to build your AAoA and number of accounts.

For example an Amex Blue Cash and a Chase Freedom, these cards have no AF and are generally useful. Most lenders like to see at least 1 year of credit history though, thats why I personally waited just over 1 year to apply for my second (Amex), third (Chase) and fourth CC's (Citi). 

Yes, also some sort of personal loan would be a good move.

Just keep your payments on time and your util low, these are the most important things to worry about.

[pipeguy]

Citi, Chase and AmEx are not exactly starter cards and other than the obvious high utility issue, I think your real issue is a very thin file (new, very few tradelines). I'd suggest you look at Capital One and see if there is a pre-quality offer available to you on their site. I would not go with secure cards unless you have to, but if you are going to burn hard pulls, I'd cast my chances with a lender that tends to say yes to new to credit applicants like Capital One. Do NOT use Credit One, First Premier or any of the other sucker cards (fees, high fees, low limits, high APR and more fees). 

You can also look at store cards like old Navy (Gap), J. Crew, Home Depot (issued by CiTi) or Walmart, but just be aware that store cards carry very high APR's - you can close these in a year after you get 3 prime bank cards cards. At 19 you are not going to go from the 600's to the 800's quickly, but if you open and never miss any payments, keep your utility below 20% (under 10 percent is better, but that doesn't always happen when you don't have much as far as credit limits), you'll see 700's within a year. If it was me, my first stop would be Capital One.

[Anonymous]

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@pipeguy wrote:

Citi, Chase and AmEx are not exactly starter cards and other than the obvious high utility issue, I think your real issue is a very thin file (new, very few tradelines). I'd suggest you look at Capital One and see if there is a pre-quality offer available to you on their site. I would not go with secure cards unless you have to, but if you are going to burn hard pulls, I'd cast my chances with a lender that tends to say yes to new to credit applicants like Capital One. Do NOT use Credit One, First Premier or any of the other sucker cards (fees, high fees, low limits, high APR and more fees). 

You can also look at store cards like old Navy (Gap), J. Crew, Home Depot (issued by CiTi) or Walmart, but just be aware that store cards carry very high APR's - you can close these in a year after you get 3 prime bank cards cards. At 19 you are not going to go from the 600's to the 800's quickly, but if you open and never miss any payments, keep your utility below 20% (under 10 percent is better, but that doesn't always happen when you don't have much as far as credit limits), you'll see 700's within a year. If it was me, my first stop would be Capital One.

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I am just giving advice based on the exact things that I did when starting out, and my scores have grown to what I would imagine the OP is looking for in just over 2 years.

I was also 19 with similar scores, after the year mark is when I was approved for my Amex, they are known to be much more likely to approve after the 1 year mark. And I was also approved for my Chase Freedom and CSP the month after. 

While it is probably easier to obtain store cards and cards that offer no rewards, these are not long term products and you will be much more likely to close at a later date due to non usage. Then your AAoA's drop along with your scores, and noone wants that.

Think long term.

[jamie123]

DO NOT GET ANY LOANS OR FINANCE ANYTHING UNLESS YOU DO IT THROUGH A BANK OR CREDIT UNION!

It can actually be detrimental to your credit to get a loan through a personal finance company. Once that information is on your reports it will stay there for 7 years and drag your score down NOT raise your score up. I do believe that the appliance you wanted to finance at Home Depot would fit this bill.

[Anonymous]

I can't seem to login to my forum account as "boringname" so I have created a new account but I am the same person as the original poster.

Thank you everyone for the feedback. Here is my current game plan:

-Get added as an AU on a relatives old excellent credit card and change billing address to my relative's so it is sure to report (done)

-Pay down current balance to $2 before my next statement is cut (will be done as soon as I get paid)

After statement has cut, the ultralow balance is reported, my credit is looking better, and hopefully the card I am an AU on is also reporting I will:

-Change my address back

-Apply for American Express Blue Cash Everday

-Once I get the card in the mail, apply for a 3X CLI

-After 6 months, I will apply for another 3X CLI

-Once that second CLI reports, I will apply for a card from Chase and Capital One and they should provide higher limits that can grow faster once they see a high limit on the Amex.

Maybe somewhere in there after the Amex I will sign up with a CU and get a $500 60 month secured loan and pay $450 immediately to improve my credit mix. I will need to do some research first.

What do you think?

Also, are there any credit unions I should consider applying for a credit card with at some point that are known for being friendly to people with thin profiles?