Starting Credit

[nocredithistory]

So, if I get a secured credit card $700. In which, $1 spent in purchases equals 1 point. Does that mean, I'll get 700 points to what as my score?. (I want to start my credit) Does 700 points mean a 700 score or all depends how the bank I'm using calculates it to report to the bureau??.

[nocredithistory]

Also, after getting a secured card. If I'm putting in $700, are their any payments I make, no right?.

And if I spend those $700, in within a month or two. Does that timing matter when scoring if its going by points? Or how long or recently should I use the card?

Can I keep myself behind a secure credit card, I'm better off knowing I have the money to use the card. The owing balance just isn't me.

[Gunnar419]

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@nocredithistory wrote:
So, if I get a secured credit card $700. In which, $1 spent in purchases equals 1 point. Does that mean, I'll get 700 points to what as my score?. (I want to start my credit) Does 700 points mean a 700 score or all depends how the bank I'm using calculates it to report to the bureau??.

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Points you get for spending on credit cards have nothing to do with credit scoring. They are simply reward points that might let you get merchandise, a statement credit, a gift card, etc.

700 reward points would be worth different amounts and useable for redeeming on different things depending on the credit card issuer, but will likely be worth about $7 or less.

You DO have to make regular payments on a secured card. The money you put up front is just a security to ensure that if you fail to make payments, the company won't get totally screwed. By showing you can make payments on a secured card, you build your credit history.

[dodfire]

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@Gunnar419 wrote:

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@nocredithistory wrote:
So, if I get a secured credit card $700. In which, $1 spent in purchases equals 1 point. Does that mean, I'll get 700 points to what as my score?. (I want to start my credit) Does 700 points mean a 700 score or all depends how the bank I'm using calculates it to report to the bureau??.

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Points you get for spending on credit cards have nothing to do with credit scoring. They are simply reward points that might let you get merchandise, a statement credit, a gift card, etc.

700 reward points would be worth different amounts and useable for redeeming on different things depending on the credit card issuer, but will likely be worth about $7 or less.

You DO have to make regular payments on a secured card. The money you put up front is just a security to ensure that if you fail to make payments, the company won't get totally screwed. By showing you can make payments on a secured card, you build your credit history.

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+1

[Gunnar419]

Also, once you get a secured credit card, you can spend, then pay it off, spend then pay it off. There is no requirement for spending the amount you deposit, and you are not limited to spending only $700. It's just that you can carry a balance of no more than $700 at a time (assuming that your credit limit is also $700; sometimes the deposit and credit line may be different).

As you pay off whatever balances you run up, your credit line renews, so you have that spending power all over again.

Another thing to know, and this is very important, you should try NOT to carry a $700 balance on a card with a $700 limit. In fact, you should carry only a tiny fraction of that. When a card reports to the credit bureaus with most of its credit line used up, that's called maxing the card out and it really HURTS both your credit score and your reputation with the lender.

I know at this point everything probably seems confusing. If anything isn't clear, just keep asking questions.

[InvincibleSummer3]

Hi, Nocredithistory -

Agree wholeheartedly with what you've been told so far; also thought I'd point you to some threads that might help. Both are full of helpful information.

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/Your-Guide-to-Credit-Scoring/m-p/718550#U7185...

And this:http://ficoforums.myfico.com/t5/Credit-Cards/Veni-Vidi-Vinci-Visa-or-How-to-Master-Your-MasterCard/m...

Good luck!

[nocredithistory]

So I put up front $700 for a secure card which may be the credit line limit.

Try Not to max the card out and use only a small fraction of it and pay it off. (Credit Score)

Make monthly payments. (Credit History)

At this rate, how long can i see myself in a good score? I got pre-approved for a home loan without credit history but with my sister income included on the transaction as well.

My lender advised to start our credit, to open 3 accounts and to improve working on it for 3 months. Will that work?

[Gunnar419]

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@nocredithistory wrote:

At this rate, how long can i see myself in a good score? I got pre-approved for a home loan without credit history but with my sister income included on the transaction as well.

My lender advised to start our credit, to open 3 accounts and to improve working on it for 3 months. Will that work?

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Well, that's tricky -- for a couple of reasons.

If you are already preapproved for a mortgage and planning to take the homebuying plunge this year, applying for any new credit now could present problems. General rule is not to apply for any credit for six months before apping for a mortgage. In the very short term, new inquiries and new credit aren't good for your score.

If you literally have NO score right now, secured cards can help you build one. But although you might have a nice little score within a few months, you're generally considered to have a "thin file" until you've had credit for at least six months.

Sometimes loan officers aren't as well-educated about credit as they should be. They'll recommend you get credit cards, which is a good idea, but won't understand that the actual mortgage loan underwriters frown on too much new credit.

So while building your score via secured cards is a good way to go, in either case it could get tricky to buy a house in the near future.

MyFico members who are more experienced in mortgages than I will need to help you work this dilemma out.

[Gunnar419]

Another thought that might help you build credit in a short time. Is there anyone (sister, parents, even a friend) who could add you as an authorized user (AU) on one or more of their credit cards?

If someone adds you to a credit card that a) is well established/many years old, b) always has a low balance and c) is always paid on time, you usually inherit all the benefits of that account. It isn't even necessary for your to use or even possess the card.

If someone can do that for you, you get a jump start on building your credit. You'll probably still want to get a card or two of your own, but this will help you get started on that process.