topic Re: New to the world of Credit. in General Credit Topics

New to the world of Credit.

Anonymous — Sun, 14 Jul 2019 23:01:24 GMT

Hello, I am 28 years old, employed full time and have virtually zero credit history. I was raised to believe that credit card companies are evil and that I should never take out a loan or open a line of credit. Little did I know at the time, this entire world runs on credit and debt... and without it, you're pretty much screwed. Unless of course you make 300k a year.

Anyway, I recently went to finance a used car and got a rude awakening. Literally NO ONE will finance me without a co-signer because I have no credit history. So here I am, about to start a rigorous journey building and establishing good credit from scratch. I signed up for a free 30 day trial at Experian.com. According to Experian I don't have enough credit history for them to generate me a score. I also just applied for a Discover It Secured Credit Card and am currently going through the approval process.

With all that said, my current goals are to establish enough credit to be able to finance a car on my own without a co-signer. So for those of you who have been in my position, what would you recommend I do? What was your first credit score? And last but not least, how long did it take you to establish good credit?

Any help would be greatly appreciated.

Re: New to the world of Credit.

SouthJamaica — Sun, 14 Jul 2019 23:35:10 GMT

@Anonymous wrote:
Hello, I am 28 years old, employed full time and have virtually zero credit history. I was raised to believe that credit card companies are evil and that I should never take out a loan or open a line of credit. Little did I know at the time, this entire world runs on credit and debt... and without it, you're pretty much screwed. Unless of course you make 300k a year.

Anyway, I recently went to finance a used car and got a rude awakening. Literally NO ONE will finance me without a co-signer because I have no credit history. So here I am, about to start a rigorous journey building and establishing good credit from scratch. I signed up for a free 30 day trial at Experian.com. According to Experian I don't have enough credit history for them to generate me a score. I also just applied for a Discover It Secured Credit Card and am currently going through the approval process.

With all that said, my current goals are to establish enough credit to be able to finance a car on my own without a co-signer. So for those of you who have been in my position, what would you recommend I do? What was your first credit score? And last but not least, how long did it take you to establish good credit?

Any help would be greatly appreciated.

1. I would recommend doing exactly what you are doing: starting out with a secured card and building a credit history with that.

2. I would recommend your joining a good credit union. After a while you will probably find the credit union offering you an auto loan, at a very low rate

3. Once you have some FICO scores, think about whether you would want any credit beyond the auto loan. If not, then you're good. If so, come back to us with your scores, and a thought as to what you would like, and we'll be able to make recommendations.

I don't know what my credit scores were initially; I didn't learn about that kind of thing until about the time I joined this forum. But I can tell you from reading here that (a) your initial scores probably won't be far from 700 and (b) you'll be able to have good scores quickly.

Re: New to the world of Credit.

Anonymous — Mon, 15 Jul 2019 00:36:59 GMT

Excellent advice from @SouthJamaica.

I'd also second the recommendation to join a credit union and also suggest that you open a small "credit builder" loan. They are sometimes called different names but the function is the same...to help you establish credit. Plus a loan will help your credit mix and add points to your FICO score.

It usually takes 6 months of at least one account reporting to the credit bureaus before a FICO score can be generated although I've seen several instances where TransUnion was able to to calculate a score before six months.

No one starts out with a bad credit score; the average score for someone new to credit usually ranges between 670 and 700. That range is affected by whether you're an authorized user on an established account, the number of installment/revolving credit accounts you initially open, etc. But your first score shouldn't be below 670 which puts you in the "Good" credit rating category. Its what you do after obtaining that first score that determines whether you remain in the Good category, fall into the Fair/sub-prime range, or see an increase in your scores over time.

Re: New to the world of Credit.

Anonymous — Mon, 15 Jul 2019 01:00:36 GMT

First, Thank you for the replies.

Second, what exactly is a credit union and how exactly would joining one help me?

Third, the only credit union near me is Valley First Credit Union. Do you know if this is a good credit union? Would you join it if you were me?

Once again, Thank you for the replies.

Re: New to the world of Credit.

ChargedUp — Mon, 15 Jul 2019 01:20:48 GMT

@Anonymous wrote:
First, Thank you for the replies.

Second, what exactly is a credit union and how exactly would joining one help me?

Third, the only credit union near me is Valley First Credit Union. Do you know if this is a good credit union? Would you join it if you were me?

Once again, Thank you for the replies.

A credit union is kind of like a banking co-operative. Banks have share holders that they must provide a profit for. Credit unions are essentially funded by their membership and sometimes co-op with other credit unions for financial solidity. Credit unions are in it to provide services to their members vs. stockholders, so they typically can provide better interest rates when borrowing and sometimes investing.

I don't personally have any experience with Valley First, but go in and talk to a banker there and find out if their offerings suit your financial lifestyle. If not, I have several family members that use Golden 1 Credit Union, and they share roughly the same geographic footprint. They've always been happy banking with them.

Welcome to myFICO!

Re: New to the world of Credit.

SouthJamaica — Mon, 15 Jul 2019 15:33:45 GMT

@Anonymous wrote:
First, Thank you for the replies.

Second, what exactly is a credit union and how exactly would joining one help me?

Third, the only credit union near me is Valley First Credit Union. Do you know if this is a good credit union? Would you join it if you were me?

Once again, Thank you for the replies.

@ChargedUp gave you a good definition of a credit union. They are usually more friendly and have better customer service than banks. And they usually have better rates. I don't know Valley Credit Union but it looks like the typical, friendly, down home type of credit union. There are lots of good credit unions in California.

Re: New to the world of Credit.

CYBERSAM — Tue, 16 Jul 2019 03:56:56 GMT

If you direct deposit to your Credit Union, is very likely they may approve you for unsecured CC in short time. Low limit but its a start.

I know handful of young people that have done that with DCU.

You may also request it while your opening an account with them.

Re: New to the world of Credit.

pinkandgrey — Tue, 16 Jul 2019 15:23:56 GMT

SouthJamaica said it. Start with a secured card. Is it possible to have a cosigner for the car loan? An installment loan will be an excellent addition to your credit. If you can’t though, don’t worry about it. What I said above is how I did it. I had a cosigner for a car loan, and I started with the Cap One Platinum card. Mine was unsecured, which you MAY be able to get. The SL will be small either way, but it’s a great start. Within 6-8 months you’ll probably have made great progress.

Good luck!

Re: New to the world of Credit.

Anonymous — Tue, 16 Jul 2019 21:05:56 GMT

@pinkandgrey wrote:
SouthJamaica said it. Start with a secured card. Is it possible to have a cosigner for the car loan? An installment loan will be an excellent addition to your credit. If you can’t though, don’t worry about it. What I said above is how I did it. I had a cosigner for a car loan, and I started with the Cap One Platinum card. Mine was unsecured, which you MAY be able to get. The SL will be small either way, but it’s a great start. Within 6-8 months you’ll probably have made great progress.
Good luck!

Unfortunately a co-signer is not possible. As for the Capital One Platinum card, I went onto their website and the only card I pre-qualified for was their secured card.

Anyway, Discover just took my deposit out yesterday and I should be getting my card in a few days. With that said, would it be a good idea to get the Capital One secured card to go along with the Disco Secured card, or should I wait a little while before I apply for a new card?

Re: New to the world of Credit.

Anonymous — Tue, 16 Jul 2019 21:05:30 GMT

One more thing, what is a credit builder loan, how do I apply for one and who would you reccomend I go through for this loan?

Re: New to the world of Credit.

SouthJamaica — Tue, 16 Jul 2019 21:22:52 GMT

@Anonymous wrote:
@pinkandgrey wrote:
SouthJamaica said it. Start with a secured card. Is it possible to have a cosigner for the car loan? An installment loan will be an excellent addition to your credit. If you can’t though, don’t worry about it. What I said above is how I did it. I had a cosigner for a car loan, and I started with the Cap One Platinum card. Mine was unsecured, which you MAY be able to get. The SL will be small either way, but it’s a great start. Within 6-8 months you’ll probably have made great progress.
Good luck!

Unfortunately a co-signer is not possible. As for the Capital One Platinum card, I went onto their website and the only card I pre-qualified for was their secured card.

Anyway, Discover just took my deposit out yesterday and I should be getting my card in a few days. With that said, would it be a good idea to get the Capital One secured card to go along with the Disco Secured card, or should I wait a little while before I apply for a new card?

No, Discover is better than Capital One. Forget Capital One. Just wait.

Re: New to the world of Credit.

SouthJamaica — Tue, 16 Jul 2019 21:23:44 GMT

@Anonymous wrote:
One more thing, what is a credit builder loan, how do I apply for one and who would you reccomend I go through for this loan?

I don't recommend it at your stage. It's a small secured loan, just like a secured credit card. You don't need that.

Re: New to the world of Credit.

Anonymous — Wed, 17 Jul 2019 02:58:54 GMT

@Anonymous wrote:
Unfortunately a co-signer is not possible. As for the Capital One Platinum card, I went onto their website and the only card I pre-qualified for was their secured card.

Anyway, Discover just took my deposit out yesterday and I should be getting my card in a few days. With that said, would it be a good idea to get the Capital One secured card to go along with the Disco Secured card, or should I wait a little while before I apply for a new card?

If you need that car as fast as possible, don't get anything else now and just use that Discover card for a solid year. Use it every week, pay it off multiple times a month if you need to, and let the statement balance report somewhere between 0 and 9% utilization.

To see a few more points at the 6 months mark, keep it between 0 and 4% utilization. (Not necessary any other time, this is just to see your score as high as it can be at 6 months.)

I've done a lot of research on what to expect when starting from scratch with a new card or two, and a lot of people end up with FICO 8 scores around 750-760 at the 8th month mark with only one card. And it's almost always a Discover secured card or a card for students.

That's really starting from scratch, with no public records and no credit history at all.

Also, in January if you're curious and want to check what all 28 FICO scores are at the 6 month mark by using a 3B report from here on myFICO, wait about 5 days after you receive January's statement. Otherwise, the report might not show all possible updates to all 3 bureaus.

Re: New to the world of Credit.

Anonymous — Wed, 17 Jul 2019 21:28:44 GMT

@Anonymous wrote:
@Anonymous wrote:
Unfortunately a co-signer is not possible. As for the Capital One Platinum card, I went onto their website and the only card I pre-qualified for was their secured card.

Anyway, Discover just took my deposit out yesterday and I should be getting my card in a few days. With that said, would it be a good idea to get the Capital One secured card to go along with the Disco Secured card, or should I wait a little while before I apply for a new card?
If you need that car as fast as possible, don't get anything else now and just use that Discover card for a solid year. Use it every week, pay it off multiple times a month if you need to, and let the statement balance report somewhere between 0 and 9% utilization.

To see a few more points at the 6 months mark, keep it between 0 and 4% utilization. (Not necessary any other time, this is just to see your score as high as it can be at 6 months.)

I've done a lot of research on what to expect when starting from scratch with a new card or two, and a lot of people end up with FICO 8 scores around 750-760 at the 8th month mark with only one card. And it's almost always a Discover secured card or a card for students.

That's really starting from scratch, with no public records and no credit history at all.

Also, in January if you're curious and want to check what all 28 FICO scores are at the 6 month mark by using a 3B report from here on myFICO, wait about 5 days after you receive January's statement. Otherwise, the report might not show all possible updates to all 3 bureaus.

You can make multiple payments a month? I thought you could only make 1 payment per billing cycle?

So hypothetically, let's say when I first get my card and the first week I charge say 25 dollars for gas... I can pay it off right away? Then the second week I charge say 30 dollars for groceries and then pay it off again all within the same month?

Re: New to the world of Credit.

Anonymous — Wed, 17 Jul 2019 22:38:30 GMT

@Anonymous wrote:
@Anonymous wrote:
If you need that car as fast as possible, don't get anything else now and just use that Discover card for a solid year. Use it every week, pay it off multiple times a month if you need to, and let the statement balance report somewhere between 0 and 9% utilization.
You can make multiple payments a month? I thought you could only make 1 payment per billing cycle?

So hypothetically, let's say when I first get my card and the first week I charge say 25 dollars for gas... I can pay it off right away? Then the second week I charge say 30 dollars for groceries and then pay it off again all within the same month?

Yes, you can do that. When a charge goes from 'Pending' to 'Posted', you can make a payment for that charge.

Many people use the secured card like a 'delayed debit card' and put even more than $500 a month through it by just paying it off each week.

You could also charge $200 or $300 in one transaction to it, and pay that off as soon as it posts. Just try and keep the monthly reported statement balance between 0 and $45 (9% of 500). As long as you pay the statement balance by the due date, you won't have any interest to pay.

Re: New to the world of Credit.

pinkandgrey — Wed, 17 Jul 2019 23:35:57 GMT

@Anonymous wrote:
One more thing, what is a credit builder loan, how do I apply for one and who would you reccomend I go through for this loan?

I agree about holding off on Cap One. I personally don’t recommend having a ton of secured cards. One is good to build your credit to the point of getting unsecured cards. As for the credit builder loan, I wouldn’t do it. That’s just my personal stance on that though. I won’t ever take on a loan that I don’t need, regardless of my credit score. Good luck!

Re: New to the world of Credit.

Anonymous — Thu, 18 Jul 2019 18:05:57 GMT

@pinkandgrey wrote:
. I personally don’t recommend having a ton of secured cards. One is good to build your credit to the point of getting unsecured cards. As for the credit builder loan, I wouldn’t do it. That’s just my personal stance on that though. I won’t ever take on a loan that I don’t need, regardless of my credit score. Good luck!

My guess would be that if they're of any value at all, it's for people rebuilding from bad credit. A new person just needs to use their credit responsibily

Re: New to the world of Credit.

Anonymous — Fri, 19 Jul 2019 01:05:22 GMT

Quick question......

Remember when I said "I tried to finance a used car"? Well according to Experian, I now have 8 Hard Inquiries on my credit report, even though I only went to two dealerships. Why do I have 8 inquiries? Some of them are even from the same financing company(Capitol One), showing up as 2 distinct inquires with different dates. All of the inquires were made within a 5 day period. One of them is from Discover, but the rest are from known and unknown auto financiers.

Is this going to affect my credit? Will this make it harder for me to establish good credit? What should I do? What can I do?

Re: New to the world of Credit.

SouthJamaica — Fri, 19 Jul 2019 02:03:35 GMT

@Anonymous wrote:
Quick question......

Remember when I said "I tried to finance a used car"? Well according to Experian, I now have 8 Hard Inquiries on my credit report, even though I only went to two dealerships. Why do I have 8 inquiries? Some of them are even from the same financing company(Capitol One), showing up as 2 distinct inquires with different dates. All of the inquires were made within a 5 day period. One of them is from Discover, but the rest are from known and unknown auto financiers.

Is this going to affect my credit? Will this make it harder for me to establish good credit? What should I do? What can I do?

Car loan inquiries like that are grouped together, and will not count as 8 inquiries. It will be seen as much less within the scoring algorithms. Not to worry.

Re: New to the world of Credit.

Anonymous — Mon, 22 Jul 2019 20:58:54 GMT

Okay, I got some good news and some kind of weird news. First and foremost, I GOT MY FIRST CREDIT CARD! The good news is my Discover card arrived in the mail today and I'm about to activate it. The kinda weird news is, I also got a letter from "American Credit Acceptance". Supposedly they are one of the auto lenders that CarMax uses. Anyway, in the letter a credit reporting agency by the name of SageStream LLC says that my credit score is "444". They go onto say that scores range from 1 to 999. Which is weird becuase every credit scoring model I've seen ranges from 300 (the lowest) to 850 (the highest).

What exactly is going on? How do I have a score if I've never had credit? Futhermore, why wasn't this score on Experian?

I'm confused.