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advice on establishing credit

post #1 of 28
Thread Starter 
Me and my husband are a young newlywed couple. Straight from our parents house into a house his grandma has given us to live in for the time being. We are having such a hard time establishing credit. We wanted to buy a new car, but we didn't have any credit, and now we are interested in buying a new home.. but are afraid we wont be able to since we have no credit. Credit card companies are reluctant to even give us a credit card because of it. Does anyone have any advice on an easy way to establish credit?
post #2 of 28
Try going to an electronics store or maybe Lowe's or Home Depot and buying something like a lawn mower or DVD player with store credit (if you can get it). When the bill comes, pay it off over two or three months. Then, go back and get a leaf blower or a few movies on DVD. When the bill comes, pay it off over two or three months. DO NOT charge more than you'll be able to pay off in a very short period of time.

You might also want to speak with the manager of your local bank to get some helpful tips/advise. Try and deal with the same branch of the bank every time you have a transaction to make to build up familiarity with the employees.

Slow and steady will win this race. Please, do not go crazy with your credit - a very easy thing to do.

Good luck!
post #3 of 28
Thread Starter 
Thanks for the advice.. we would really like to have our own house in the next 6 months though.. is there anything we can get like first home buyers credit or something like that?
post #4 of 28
hmm, I thought for when you buy a house you have to have atleast 1/4 of the price set aside so you can pay it off and then you can get a credit from the bank or such?

Do you or hubby have a bad schufer? (sp?) records??
Such as not paying off any telephone bills, having law bills ect? because that can really drag you down.

My bf isnt allowed to get a credit because of the schufer, and im not allowed to get any form of credit except for a visa because im in the consulate.
Do you both have an income?

I would say go to your bank and have a talk to the person who is in charge of your account.
post #5 of 28
if you have any money in the bank, put it into a savings account and ask the bank to giv e you a "secured" loan. that's a loan where they keep $ equal to the loan as collateral. they are easy to get, and if you pay them off "properly" you get points on your credit.

the advice about the store cards is a good one.

get a cheap used car ($1-$2 grand) and pay off the loan over time.

There are first-time-buyers plans, but keep in mind that the less credit you have, the more you pay, and 6 months credit history isn't going to impress any lenders.

Start doing research. Home lenders are more lenient then car lenders, because a home doesn't lose 1/3 of it's value the instant you start the engine and drive it off the lot.
post #6 of 28
The Federal Housing Authority (FHA) helps first time home buyers secure a mortgage.
post #7 of 28
I just wanted to say, Good luck to you!!

Me and my husband just went through that... luckily, being military, the BX on base has a Star Card program that they will give to just about anyone, and we took it, even though we had a $500 dollar limit...

we bought a couple of things, paid it off... then everytime we went to a department store we would apply for a credit card, if we would get approved, we would put our purchase on the card and right then and their pay it off again... then go home and hide the cards...

we re-financed the car once so we could get the financing out of my parents name and into ours... it worked and with a 5.5% interest rate!!!

and finally, my cell phone was in my moms name and they wouldnt let it be put in my name unless i paid an 800$ deposit... screw that! so i finally got approved, without the deposit...

it just takes one time... just apply EVERYWHERE that you can, if you get approved, by something on it and pay it off right then(make sure you can afford it though)

I have to say though, i have found, once you get a little... it adds up really quickly...once you get that first credit line it is downhill from their(well from our experience anyway)..

my best advice to you though it... once you get those credit cards... and you pay that one thing off... cut up all except one(for emergencies)... cuz using those credit cards can screw you over and ruin your credit just as fast as it built it up...
post #8 of 28
post #9 of 28
I've had to deal with cleaning up post-divorce poor credit, so I might be of some assistance.

You have to think of credit sort of like an employment history on a resume for someone without a degree. In most cases, if you have no experience, you ain't gettin' the job no matter how good you'd be at it . It takes time to build that experience... creditors look at your credit history to know if you're a risk for not paying on time -or- not paying at all. If you have no history, they can't tell and aren't likely to just trust you. Unfortunately, unless you have a large down payment or find some kind of assistance (maybe someone knows a specific program), it's just going to be tough. They've set up a total catch-22. I got out from under it by my "new" husband, who had better credit than I did, adding my name to his cards... as he paid on his debt, it registered on my credit, too. Within a couple of years my credit had improved probably 200 points.

You may not be able to get the house in the time frame you've set. A lot of companies will easily give a credit line of $500 (usually with high interest) for someone with no credit, so get one, put a couple hundred on it and pay like clockwork every month... don't pay it off too soon or you're not establishing history. Be very careful, though, because those high rate cards can get away from you if you're not careful and ruin what you're trying to build. Get another one or two to charge small things to that you pay off in a couple of months, but keep at least one with a manageable balance that you just pay monthly on.

It's not much, but it will get you started. Unless you find a resource for assistance to no-credit home buyers, it may be a year or two before you can convince a lender that you're good for it.

Oh yes, I have to disagree that you should apply to everything you see. Applications register on your credit, too, because your credit lists all the times someone has looked at it. Some creditors see that as negative. Do one at a time and just see if you're approved before you go to the next one and try. Credit is a funny thing, you gotta be super careful.
post #10 of 28
Quote:
Originally Posted by Sooz123
Be very careful, though, because those high rate cards can get away from you if you're not careful and ruin what you're trying to build. Get another one or two to charge small things to that you pay off in a couple of months, but keep at least one with a manageable balance that you just pay monthly on.
.
I agree with everything!! But may i add... if you wait till credit card companies offer like a 0% interest and no payment for 6 months... that could help you avoid the high rates... that is what me and my hubby have done with both our Sears card and our Jcpenny card... but we have made sure that we get it paid off before the end of the 0% interest time frame, cuz if you dont, well, it is nightmarish- trust me...
post #11 of 28
Quote:
Originally Posted by Peppersmommy
Thanks for the advice.. we would really like to have our own house in the next 6 months though.. is there anything we can get like first home buyers credit or something like that?
We were in the same boat when we were newlyweds that you and your husband are in. Fortunately, my dad is a retired banker - loan officer- so he knew what to do.

You need to go to the bank, speak with the loan officer and ask what formal procedures you need to complete before being approved. Here, I had to go to a class to "learn how to be responsible with credit / money". I believe that it was 3 or 4 meetings for an hour each. You should also have a little chunk of change ready for a down-payment........at least 10%, more would be better. You can figure that you need around $2500.00 for the closing costs and an additional 10% of the value of the house you wish to purchase.

There's a lot more to it, but for now, make that first step and contact the bank - speak with the loan officer in person.

If you need more guidance, feel free to contact me. (I'm only 28 and have already purchased 2 homes........going on my 3rd within the next year.)

Good luck!

post #12 of 28
May I also add:

stay away from credit cards. If you do get one to give you some "credit", get one such as Lowes or Home Depot with ONLY a $250.00 credit line.

What happens is, when you go to get a loan and have say, a "visa" with a $1500.00 credit line, is that the bank looks at that as "potential debt." And that $1500.00 credit line may keep you from receiving a loan.
post #13 of 28
Quote:
Originally Posted by catherine
May I also add:

stay away from credit cards. If you do get one to give you some "credit", get one such as Lowes or Home Depot with ONLY a $250.00 credit line.

What happens is, when you go to get a loan and have say, a "visa" with a $1500.00 credit line, is that the bank looks at that as "potential debt." And that $1500.00 credit line may keep you from receiving a loan.
what about like sears and jcpenny?? ... that is what i have meant when i say credit cards.... i will never NEVER NEVER have a regular credit card from visa or am. express or whatever...

but sears and penny's and military star are what we used to build up our credit
post #14 of 28
I worked credit for 10 years and included in that time, wrote the computer program to "score" people applying for credit cards.

Surprisingly, having nothing but small store or gas station credit cards is actually counted against you. Don't go that route. If you have no credit at all, the items that scored the biggest points were the length of time at your job and length of time at your residence. They are looking for stable, responsible people to offer credit to.

If you want to get a credit card, apply for a Visa or Mastercard where you have your savings/checking account (and pay them off each month). If you don't have bank accounts, get them set up immediately. Many banks offer package deals for folks that keep their money there. Also talk to them about what you would need to do to apply for and qualify for a mortgage.

I know a few young couples that have had their parents co-sign for their first mortgage. They refinance the loan in a few years once their credit is established to get it out of their parents name.

Good luck! My first credit card was thru Sears Roebuck, then Visa, then I went for the mortgage.
post #15 of 28
Hiya Cath,

I couldn't agree more that you should actually avoid credit cards... but in the beginning having a small one or two that you manage well can be a great start. I'm not sure anyone will give a limit larger that $500 anyway, but you make a good point. They don't like to see too many accounts, with a lot of free credit that you could turn around and run up to the limit as soon as you close.
post #16 of 28
Quote:
Originally Posted by mferr84
what about like sears and jcpenny?? ... that is what i have meant when i say credit cards.... i will never NEVER NEVER have a regular credit card from visa or am. express or whatever...

but sears and penny's and military star are what we used to build up our credit
Yes, "little" companies like that is ok. But I would still keep the credit line in the neighborhood of $250-$400 at the most.
post #17 of 28
Ya'll are posting faster than I can read! LOL... I think I will go watch LOST and catch up when the Idol reveal is over!
post #18 of 28
Sears and Penney's cards are not considered little company cards. I worked credit for one of those company's (to be unnamed) and saw their annual revenue from credit cards - bigger than most banks. Go with a bank card, or national department store chain card to start. If you don't want to keep it, they are easily destroyed with a phone call and pair of scissors.
post #19 of 28
Quote:
Originally Posted by catherine
Yes, "little" companies like that is ok. But I would still keep the credit line in the neighborhood of $250-$400 at the most.
okay, good... $400 & something is the most we have gotten approved for... and that is by all means fine... we just used ours a couple of times and paid them off... now they are put up, and i can honestly say, i have no idea where, so i couldnt use it if i wanted to...

my parents have astronomically good credit and believe me... i hear about 'bad' stuff that credit cards can do all the time...

my parents have always told me.... i you dont have the money to pay for it... then you DONT need it!!! i totally believe that!

however, it was actually thier idea to get the sears , star and penny's cards... and a good idea it was... it built up our credit at lightning speed... now we dont owe anything to anyone and we have great credit, and we are only 21!
post #20 of 28
Quote:
Originally Posted by Momofmany
Go with a bank card, or national department store chain card to start. If you don't want to keep it, they are easily destroyed with a phone call and pair of scissors.
arent sears and penny's national department stores... or do you mean like wally-world or something??
post #21 of 28
I don't know how it works where you are but just something to think about.

My husband and I recently moved (1 year ago) for a period of 6 weeks we actually owned 2 houses, the one we sold but which hadn't closed yet and the one we bought which had closed. We needed "bridge" financing but found out they offered what is a blended mortage. No problem.

What I found out when I went to the bank to get the papers completed is this. I had credit cards for Sears, The Bay, and a couple other department type stores but none had any balance and I hadn't used them in years - BUT, the bank considers the LIMIT on each of these cards as debt! As in, although I didn't owe any money on any of them, I could possibly have gone out the day after I got my mortgage and ran each card up to it's limit, thus the limit on each one was considered to be debt on my part.

My personal account rep told me that I would be best off to close all those accounts and carry only one credit card.

So, in summary, if I have 6 credit cards with a maximum allowable of $1500 each and nothing owing on any of them - the bank considers me to have $9,000 debt.

Just something to think about!
post #22 of 28
This is my area of expertise. You can send me a pm if you like, and I would be more than happy to help.
post #23 of 28
Due to my ex-husband's profligacy, I've been working on cleaning up my credit, for the past 4 years. In that time, I've been able to buy 2 new cars and last week, I was approved for a MasterCard.

As for the mortgage, there are programs for first-time buyers: the FannieMae is a Federal government program and you may want to look into HUD (Housing and Urban Development). Some of those HUD houses are pretty rough but, if they're structurally sound and you don't mind some fixer-upper work, they aren't bad starter homes. Some home loan programs will let you borrow extra $$ for renovations.
post #24 of 28
Thread Starter 
Thanks for all of the advice. How long would it take me to establish good credit if I did have a sears credit card?
post #25 of 28
Quote:
Originally Posted by Peppersmommy
Thanks for all of the advice. How long would it take me to establish good credit if I did have a sears credit card?
when we went to the bank for a loan, they told us we didnt have any kind of credit background, and i told her we had recently gotten a card and spent and paid off like $100... she said it would be about a month after the payment was received before it showed up on our credit report....

i dont know the exact amount of time it would take to establish 'good credit' but if you charge something and every month afterwards make your payments on time (you could even pay a little extra- that never hurts) within a few months it should start showing up... it took us 7-8 months before we started getting approved for EVERYthing(with a limited maximun of course)... no questions asked... but the first couple months after we had our first card, we still wernt able to do much...

GOOD LUCK!
post #26 of 28
This is also an area of expertise for me as I've worked in auto finance for 19 plus yrs.
Some good tips. The best thing is to be honest on any credit application. We see so many with inflated income. If you work less than a couple of yrs on your job we are going to contact your employer for job and income verification. Too many credit cards is a bad thing. They will "count" as available debt. Best to borrow a small We consider time on job/time at address. Looking for stable customers. But most likely if you applied for financing with us we would have for a co-signer on the note. Just remember though that if you don't pay your loan most lenders will look to the cosigner for payment. If they refuse to pay and for instance its an auto that gets repo'd. All signers on the loan will have there credit affected negatively. That is why it is not a good idea for a girlfriend/boyfriend to sign together for a loan. Or good friends either. Many times the relationships break apart. PM me if you have any other questions.
post #27 of 28
I got my first credit card with my mom when I was in highschool. It had a 300 limit or something and it was for emergencies and to build credit. But my REAL credit came when I was in college and applied for a student credit card. They expect students not to have any credit so no one is really ever turned down. I never carried a balance on it, I charged everything I bought and then paid it off every month. I was really careful about spending. When I went to get my first apartment they ran a credit check (and at that point I just had the card with my mom and my student card) and the woman said I had really great credit. I started getting store credit cards for the discounts but never used them after, which was bad I guess but at the time made sense to me. I never took out a loan in my life but I ran my credit at work and it's still great.

One of my friends is going through kinda the same thing though. She's 26 and never had any credit, and she thought she was doing a good thing but now can't even get a cell phone in her name and can't get an apartment. It's like you're damned if you do and damned if you don't. You are forced to get a credit card to live in society but then you are condemned when you overuse it.

I don't really have much advice but don't just get anything you can find. I would never take a card that has an annual fee but if that's the route you need to go I guess there's no choice.. But you don't have to carry a balance for it to count.
post #28 of 28
One thing to watch out for too...don't take just any offer for a credit card. There are a lot of predatory companies who are quite willing to take a chance on people with no credit....but it costs you a lot! Look at the interest rate. (BTW, the store credit cards are fine, but they do usually have an interest rate of 20-25%, which is terribly high. As long as you plan to pay it off every month, no biggie, but keep that in mind.) Look especially at the yearly fees, setup fees, additional fees that they have to disclose by law on an application.

And for goodness sake - if a company calls you randomly and offers you credit just hang up! Even if the company is big, there is a price to pay when they offer credit to anyone. Unfortunately, hubby fell for one of these when he was trying to establish credit. He accepted the card over the phone. It had a low limit of just $300. What they didn't tell him was that before he even got the card he owed them $150 for the setup fee. Oh yeah, and they didn't tell him that the yearly fees, inclusive, were $225. And that was on top of the 25% interest that was accruing from the time he said yes. Being new to the credit game, he didn't bother checking any of that either, so while he thought he wasn't spending too much, within a month he was over-limit. It was a downward spiral from there. We just couldn't get caught up fast enough to pay it off. That $150 that he actually spent on goods ended up costing about $1200.

Just because you're a risk doesn't mean they should take you for everything you have. Be careful!
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