Any tips for an 18 year old building credit?

[Anonymous]

Hello everyone,
I am looking for possible options on building credit. I have literally no credit (no history whatsoever), and have a Chase student checking account (opened <1 month ago). Any tips on where to start? Thanks in advance.

[SouthJamaica]

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@Anonymous wrote:
Hello everyone,
I am looking for possible options on building credit. I have literally no credit (no history whatsoever), and have a Chase student checking account (opened <1 month ago). Any tips on where to start? Thanks in advance.

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1. Do not get or use a credit card unless you are prepared to pay the balance in full every month. Carrying a balance over, and paying interest, is anethema to your financial well being.

2. Join a credit union, start a savings account, and then get a secured Visa or Mastercard, secured by your savings account. After 6 months of usage  you'll have a FICO score.

[JVille]

Ditto the Credit Union is the best place to start. Due to your age you will likely need to start with a $300 - $500 secured account.

You can also jump start your Fico Score by having your parents add you as an Authorized signer on a Credit Card (assuming they have excellent credit and don’t have the card maxed out). I made both my college age kids authorized signers on a Visa account that I never used so Zero Balance. The intent was to make sure they had the card for Emergency use. Example: flat tire, car trouble, Travel etc. It worked well for our family. We also put college expenses on the card and paid it immediately off, but got airline miles for the spend.
Good luck!

[Anonymous]

A good way to protect yourself from getting into debt trouble with credit cards is to sharply separate the task of building a great credit score from the task of using cards to buy most of your stuff.  In this approach, you'd get a card (as per SouthJ's advice) but then only use it to buy one small thing per month (a tank of gas, some groceries, etc.).  Allow the statement to print with a positive balance, and then pay the amount on that statement in full (you can probably set this up to happen automatically -- it's a service most CC issuers offer called autopay).

All other purchases would be made with a VISA debit card tied to your checking account..

This approach prevents you from ever getting over your head in terms of debt.  By definition you are only able to buy something if you have money in the checking account right then to pay for it.

Six months after you open that credit card, you will have a true FICO score and can consider opening other credit cards.  (Again, you are opening the new cards not to use them to buy lots of stuff, but purely in aid of building a good credit score.)

Here's a reasonable plan:

(1)  Get a credit card now (or as soon as you feel comfortable doing so).  In the timeline that follows, I will call that month 0.  As indicated above, always buy one thing each month, always let the statement print with a positive balance, always pay that balance afterward in full.

(2)  At month 2, pull your credit reports and confirm that the card is appearing correctly on your credit reports.  A good free tool to access your EQ and TU reports is Credit Karma.  Ignore Karma's scores and any advice it gives you.  Karma's scores are not FICO scores.

(3)  At Month 3, implement the Share Secure Loan Technique.

(4)  At month 6, pull your reports and FICO 8 scores with the $1 trial offer at Credit Check Total.  Cancel your subscription as soon as you have the reports and scores.  Contributor Brutal Body Shots here recommends that you cancel by email.

(5)  You should now have very decent FICO 8 scores.  Apply for two more cards.  My advice is to avoid store cards and focus instead on major credit cards (VISA, Mastercard, Amex, Discover).  Do not apply for a Chase card until month 13.

(6)  Use each card for something small and let the statement report a positive balance, just like you have been doing.  At some point later (e.g. month 13) you will want to see how high your scores are.  Any time you are trying to squeeze out some extra points (e.g. before an important application for new credit) be sure to implement AZEO (All Zero Except One).  That means to have all cards reporting $0 except one.  You do not need to do AZEO every month -- just in the 40 days before you are trying to optimize your score.

(7)  At month 13, consider applying for a Chase card.  Chase has something called the 5/24 rule.  You will still be 5/24 compliant at this point, but if you add too many other cards you will not be.

Mid to longer terms goals would be to have five open credit cards and 6+ accounts total.  You will achieve this naturally without having to worry about it, so only open accounts that you really REALLY want.

[Anonymous]

Stay in school and study hard, a healthy and steady income/career is the foundation for a healthy credit profile.

[Anonymous]

Great post and advice from CGID above!

When starting out in the credit world, always remember 2 extremely important things.  One, never miss a payment.  Two, always PIF (pay in full) your statement balances and keep utilization low.  Keeping these two things in check means you are taking care of 2/3 of your FICO score.  That's huge.  The final 1/3 is made up of smaller factors, most of which are improved simply by allowing time to pass.

[Anonymous]

Have your parents put you as an authroized user. 

Start applying for credit cards, pay them in full. 

As others said too,the credit union cards as well.

[arkane]

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@SouthJamaica wrote:

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@Anonymous wrote:
Hello everyone,
I am looking for possible options on building credit. I have literally no credit (no history whatsoever), and have a Chase student checking account (opened <1 month ago). Any tips on where to start? Thanks in advance.

---

1. Do not get or use a credit card unless you are prepared to pay the balance in full every month. Carrying a balance over, and paying interest, is anethema to your financial well being.

2. Join a credit union, start a savings account, and then get a secured Visa or Mastercard, secured by your savings account. After 6 months of usage  you'll have a FICO score.

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I cannot stress the importance of #1 enough. When just starting out, treat your credit card as if it was a debit card, and only charge an amount that you already have the funds to pay it off in full. If you have literally 0 credit history,

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@Anonymous wrote:

Have your parents put you as an authroized user. 

Start applying for credit cards, pay them in full. 

As others said too,the credit union cards as well.

I can see the appeal in being an AU but personally I'm not too fond of it. I'd prefer starting with a secured card and putting up your own money for the security deposit. That really helps to drive home the point it's your money (instead of your parent's) on the line, and will provide extra incentive to be careful and responsible with credit usage.