No credit, need help!

pdxuser · ‎02-19-2008

I really don't like the whole concept of credit. I don't like the feeling of owing money I haven't paid. I don't like knowing that any new financial institution I go to can go poking around in my history. I just don't like it.

But that's been preventing me from starting a credit history, which I know is unproductive, especially since I would like to own a house some day, and I seem to have misplaced that spare half-million dollars I had laying around here somewhere.

So, how should I start? I would prefer not to have to tell a CCC how much money I make. I work for myself as a freelance web developer, anyway, so it's not like anyone would be impressed. Is there any credit card I can get without providing income?

Also, I really don't want to use this card for day-to-day expenses. I would really not like to use it at all, and my second preference would be to just use it for a small cash advance once a month to show activity, but I know that's not a good idea, either. If I could just put one utility bill on the card, that would be cool with me. Does it matter to the CCC or FICO what I'm using my card for? It doesn't seem like it should, but I also know that rewards cards can choose to give cash back for a water bill but not a phone bill, so clearly someone seems to care.

Another thing: people say the ideal situation (guesstimated, I know) is to have a balance on half one's cards or fewer, and to have those balances be 1-9% of the CL for each card (or is it 1-9% of one's total CL?) So, with one card, should I only allow a reported balance every other month? Should I actually bother to split a utility bill between cash and the card if that's what I need to do to make sure the card has less than 9% of the CL on it?

Another thing, I know the maximum historical balance of a card is on a CBR. (The acronyms page says CBR and not CR, but wouldn't anyone know that CR = Credit Report?) Anyway, is this the maximum end-of-cycle, normally reported balance? Or if I max out a card for a day, will my high be listed as 100% of my CL? Does anyone care if I'm ever temporarily maxed out but back down to 1-9% by the end of the cycle?

I've got plenty more of these random little questions, but I'll save those for later.

Message Edited by pdxuser on 02-19-2008 10:51 PM

Anonymous · ‎02-20-2008

I'm in/was in your exact situation and totally understand where you are coming from regarding cash vs credit. I should have a score in approx a mth hopefully.
You may want to see my post: http://ficoforums.myfico.com/fico/board/message?board.id=generalcredit&message.id=72797#M72797 Another good post http://ficoforums.myfico.com/fico/board/message?board.id=generalcredit&message.id=69889#M69889

I'm just a newbie guinea pig, so take my view with a grain of salt:
- get a Crown Jewelers acct, buy something for approx $60 so reporting can start.
- pull all 3 reports and make sure all info is correct, and dispute any bogus charges.
- go into your local bank, explain your situation and have them grant you a nofee unsecured card. Limit may be low, but hey at least it's a start.
- join a credit union (research forums to figure which one you stand a chance of getting a card with) and app for a card. NFCU will give approx $1K to someone with no history. CCCU won't unless you have a yr history.
- look into BofA $99/$500 secured card. - Some say it's not needed, but look into an installment loan that reports for at least a yr.
- Per forum search, look into getting some store cards. Kay Jewelers gave me a $400 cl with approx 3 mth history.
Personally, I have tried to stay away from secured cards and subprime cards. Tho secured BofA does look good. Since there is no history my goal has been to try to only acquire products/institutions that I want a long term relationship with and that will grant cl increases. I'll probably drop CJ in about a yr, once I acquire other cards. But nothing wrong with getting subprimes to start building. Hopefully you can replace them with primes within a yr.

So, how should I start? I would prefer not to have to tell a CCC how much money I make. I work for myself as a freelance web developer, anyway, so it's not like anyone would be impressed. Is there any credit card I can get without providing income?

Afaik, besides most student cards, Nordstrom Visa does not ask for income. I can't tell you to 'lie', but I have heard of ppl being very creative with what they list as HHI...like including their roommates income lol.

Also, I really don't want to use this card for day-to-day expenses. I would really not like to use it at all, and my second preference would be to just use it for a small cash advance once a month to show activity, but I know that's not a good idea, either. If I could just put one utility bill on the card, that would be cool with me. Does it matter to the CCC or FICO what I'm using my card for? It doesn't seem like it should, but I also know that rewards cards can choose to give cash back for a water bill but not a phone bill, so clearly someone seems to care.

Imo, getting credit is 1 thing, but actually using/managing it is another. It's a very valuable lesson for us newbs to learn early on. Supposedly, FICO08 will be considering basing some of the score on how you utilize your cards, coupled with the fact that ccc's like utilization, I think it's best to put the cash away and use the cards as much as possible. Considering they'll never get a fee or finance charge out of me (knock wood), the least I can do is use the card...

Another thing: people say the ideal situation (guesstimated, I know) is to have a balance on half one's cards or fewer, and to have those balances be 1-9% of the CL for each card (or is it 1-9% of one's total CL?) So, with one card, should I only allow a reported balance every other month? Should I actually bother to split a utility bill between cash and the card if that's what I need to do to make sure the card has less than 9% of the CL on it?

Not sure, but I do not think using only 50% TLs is important at this point. Getting the TL's is important for now. You have 6 mths before getting a score, so I'd suggest concentrating on getting the TLs for the 1st 6 mths-1yr, and then worry about only using 50% TL after you get them. You can put the entire bill on the card, and pay off enough before the statement date, so that you can report your 1-9% target balance.

Another thing, I know the maximum historical balance of a card is on a CBR. (The acronyms page says CBR and not CR, but wouldn't anyone know that CR = Credit Report?) Anyway, is this the maximum end-of-cycle, normally reported balance? Or if I max out a card for a day, will my high be listed as 100% of my CL? Does anyone care if I'm ever temporarily maxed out but back down to 1-9% by the end of the cycle?

I'd like to know this also!

pdxuser · ‎02-20-2008

It looks like you have me getting half a dozen cards at once. Shouldn't I throttle the account-opening activity a bit? How many cards is optimal, anyway? Especially if I want to graduate to better cards and either abandon or close these later on? And how would the CRAs know how much activity is on a card, don't they just know the end-of-cycle balances?

Also, I assume the FICO score distinguishes between secured and unsecured cards, right? Do they care beyond that whether I've got some shady Crown Jewelers card and a student Visa in my pocket vs Chase Freedom and AmEx Blue or whatever?

Also, I'm hoping to buy a house with my aunt and uncle who are in real estate, with their histories getting the good mortgage and my name tacked on. I plan to rent out rooms, which would help me both with reportable income and mortgage payments, which I would be responsible for until I'm able to refinance the mortgage solo. The only reason I'm looking into cards right now is because I want to have a good score when I look to refinance the mortgage. So I figure I probably don't need any superfluous installment loans, given that I'll already have a mortgage.

Anonymous · ‎02-20-2008

You could always go to local banks or credit unions and open 3 secured credit cards. Since you open them with your money you should be able to go non income stated. Just secure each one with $100 and place 1 small charge on each one every 30 days. Have them set up to take the payment each month out of your checking account automatically. I say 3 because that seems to help folks the most. More if you want. But you gain less history and scores with less. However, 1 secured card will work too, just takes longer. I felt the same way too, finally I started giving out income. But if you really don't want to give income, call some banks and ask for secured cards. Does the same for credit scores and history.

pdxuser · ‎02-20-2008

I have absolutely no problem personally with secured cards. I just figured that they weren't as helpful either in terms of a FICO score or a lender personally reviewing the history, because they only show that you manage not to drown when you're wearing floaties.

Another thing, I thought I saw something about not opening more than two lines of credit every six months, the idea being that someone who goes crazy with the account openings is a high risk who needs a lot of cash fast.

Anonymous · ‎02-21-2008

You've misread my post. Never suggested you apply for 6 credit cards lol! I should've been more clear, but I assumed you would read the other posts I referenced. I listed backup/alternate 'options' in case you can't get unsecured bank or cu credit cards.
I think the long term goal is 2-3 prime credit cards, with 1-2 store cards for utilization ratio padding (if needed), and just letting them age. This will help pad the 50% utilization as explained in the 1st referenced post. But currently the issue is "how" to get there. My post suggests 4 revolving accts: 1 cu credit card, 1 bank credit card, 1 store credit line (CJ - which you can drop later) and 1 store card (Kay). If you can't get the unsecured bank/cu cards, then go for secured and subprime.
The earlier/faster you get cards the faster you start building and creating a history. Staggering apps when you have no score or history isn't going to help you. So instead take these 6 mths of no history and use it to your advantage! Make the situation work for you! Tho the inquiries remain, they affect your score the most in the 1st 6 mths - so get 'em over with. When your credit is bare, Lenders can understand why the app spree exists - tell them the truth: you are trying to create a strong credit history.
Once your initial 4 cards/TL's and score age 9-12 mths, then you can evaluate where you stand and what cards you'd like to add, keep and get rid of. Once that's done, sit back and relax!

- How many cards is optimal, anyway? Debatable, but I've read that more than 8 may hurt but I think the "hurt" depends on the individual history age, balance mix etc. I have read that the minimum number of TL's (credit, store, loan etc) should be 3-4 for starting out. FICO scores revolving accts most heavily so I think having at least 4 TLs when you have limited history is going to give you the best advantage scorewise.
- how would the CRAs know how much activity is on a card, don't they just know the end-of-cycle balances? No, most banks report the total amt /highest balance reached.
- FICO score distinguishes between secured and unsecured cards, right? Yes, if the bank reports the card as unsecured. Some do not report it as unsecured, so it'll 'look' and 'score' unsecured on your report. If you go the secured route, look for those cards.
- Do they care beyond that whether I've got some shady Crown Jewelers card and a student Visa in my pocket vs Chase Freedom and AmEx Blue or whatever? I don't *think* cra's distinguish between prime and subprime, not sure about Fico. But, upon manual review, most lenders will notice.
-Saw something about not opening more than two lines of credit every six months, the idea being that someone who goes crazy with the account openings is a high risk who needs a lot of cash fast? Applies more to ppl with a history and thicker file. The key is to strategize and plan. Only apply for cards you have a high chance/assured of being approved for. Right now you need to set a foundation for creating history and a score, so try to get at least 3-4 TL's reporting.

Message Edited by Stylin on 02-21-2008 07:47 AM

Anonymous · ‎02-21-2008

FICO does not score secured CC's differently-

Stylin wrote:
- FICO score distinguishes between secured and unsecured cards, right? Yes, if the bank reports the card as unsecured. Some do not report it as unsecured, so it'll 'look' and 'score' unsecured on your report. If you go the secured route, look for those cards.

Message Edited by Stylin on 02-21-2008 06:44 AM

Anonymous · ‎02-21-2008

Just wanted to add a some info, I'm sure you'll learn in your research. The minimum cra reporting goal on any acct is 12 mths. Accts stay on your cr for 7 years. So with an acct like CJ, I'm aiming to keep it open/reporting for a minimum of 12 mths, then closing it. The good history will remain and enhance my 'short/thin' file. At that point, I can reexamine my goals and replace CJ with a prime card if I choose. The same goes for my installment loan, and depending on what's been achieved so far I may close Kay's also after the 12 mth mark. There may be a time (most likely 9-15mth mark) where I have too many open TL's for my liking, but it will not be by accident, as I'll be opening accts and closing the ones that no longer serve their purpose.
hth

Anonymous · ‎02-21-2008

@Anonymous wrote:

FICO does not score secured CC's differently-

@Anonymous wrote:
- FICO score distinguishes between secured and unsecured cards, right? Yes, if the bank reports the card as unsecured. Some do not report it as unsecured, so it'll 'look' and 'score' unsecured on your report. If you go the secured route, look for those cards.

Message Edited by Stylin on 02-21-2008 06:44 AM

Yes Timothy, I stand corrected. After I double checked my notes, I had looked to 'edit' that part earlier and missed it - thks. 'Secured' does NOT affect FICO scoring, but may hurt upon manual review, as lenders may question why you are not worthy enough for an unsecured. Supposedly this is especially true for those with thicker/lengthy histories...Is that correct?
Also:
-Per pdx, Does anyone care if I'm ever temporarily maxed out but back down to 1-9% by the end of the cycle?
- Do cra's distinguish between prime and subprime? Does Fico?

Message Edited by Stylin on 02-21-2008 07:45 AM

Anonymous · ‎02-21-2008

I am impressed you take notes on this-

Most of what I know is between the ears and hardly any is documented-

@Anonymous wrote:

@Anonymous wrote:

FICO does not score secured CC's differently-

@Anonymous wrote:
- FICO score distinguishes between secured and unsecured cards, right? Yes, if the bank reports the card as unsecured. Some do not report it as unsecured, so it'll 'look' and 'score' unsecured on your report. If you go the secured route, look for those cards.

Message Edited by Stylin on 02-21-2008 06:44 AM

Yes Timothy, I stand corrected. After I double checked my notes, I had looked to 'edit' that part earlier and missed it - thks. 'Secured' does NOT affect FICO scoring, but may hurt upon manual review, as lenders may question why you are not worthy enough for an unsecured. Supposedly this is especially true for those with thicker/lengthy histories...Is that correct?
Also:
-Per pdx, Does anyone care if I'm ever temporarily maxed out but back down to 1-9% by the end of the cycle?
- Do cra's distinguish between prime and subprime? Does Fico?

Message Edited by Stylin on 02-21-2008 07:45 AM