establishing credit

[equalizer442]

im currently 17 years old turning 18 and i want to establish a good line of credit. what would be the best way? my thaughts are borrow about 5000 and build the grand national and then pay it off asap. ive have friends with credit problems and by looking at there mistakes ive decided to do it right any never get in to debt but theres one problem, if i never borrow any money i will have bad credit. whats all your thaughts, opinions, or experiances with this sort of deal?

 

[Little6pack]

Sounds like a good plan.

Actually if you pay a loan off ahead of time or too fast they will rate you worse than if you take your time.

It happened to me. I would send double payments in & the lender hated that. SOUNDS weird but true.

 

[gofastr]

hey man. I deal with credit criminals all day long, and the best advice I can give would be NOT to over extend your credit. If you want to get established, get 3 good lines of credit. Get 3 credit cards, and do not use them for credit. Use them for convenience. I would not borrow all that money right off the bat to build the car. If you are going to buy a turbo for 700 bucks, wait till you have the cash for it. Then, buy the turbo with your credit card, and send the money right in to the credit card company. Do this stuff continually with the 3 cards (you don't even need to spend 700 bucks, could be like 100) and you will establish good credit over the course of a year or so. My .02

 

[GN One Day...]

There's no need to rush, at 18.
Anyway, get your parents to cosign for a small loan, about $300-500 at a local bank, set up on 12 mos. When it's paid off, consider dong it again, but ask them to do it in your name only, even if it is for a lower loan amount. Explain from the outset that all you want is to establish credit. On those loans, be sure to pay ON the due date, not by the late fee date. Or, save up some money and get a secured credit card that will give you a line of credit up to that amount you put down. You don't need to jump in with a $5000 debt.
I'm assuming you have a job and income. Otherwise, don't even ask. There wouldn't be any reason to extend credit, and they might be at risk for predatory lending, so don't ask.
Learn saving first, debt later. You may have done that already, I don't know. Good luck, but don't be in a rush.

Think I'm hanging up my credit counselor hat for a while, probably outlasting my welcome.

 

[equalizer442]

problem is ive done upgraded all the small things plus the turbo and injectors, any thing from now on is most of the stuff is going to be 1000+. i was thinking about going with a front mount intercooler, 3.5 thdp with dual exhaust, stage 2 2004r, pro-pain injection. roll cage with leather racing bucket seats to match the stock gn seats, ect, ect.

i guss i could buy one peace at a time and pay them off accordingly but i think i would have a hard time getting a credit card with out any credit thats why i was thinken about a loan. once i establish my credit i might use the cars for something like a 50 buck game or a few dvds once every month or so to keep my credit up but i dont really want to use it much. only for emergiancy things like my doctor and hospitil bill after i build the gn

when i baught the gn i beleve i had it co-signed, im about 99% positive but i dont handle the bills, i just fork over the cash. im doubleing up on the payments when possable and ive nearly got it payed off.

 

[6PacktoGo]

Why do you want to establish credit? The only thing to buy on credit is a house, and you don't need to borrow a dime to establish credit. Pay cash for everything but a house, and pay cash for a house if you can. I can promise you I'll never borrow money for anything but a house ever again. I'll never have another credit card either.

Want to establish credit for a house? Easy. Rent while you save at least 20% down. Pay your rent and all your utilities on time or early for at least two years while you save for your down payment. Then so long as you have a job with sufficient income to pay for the house you want, you'll be considered an excellent credit risk, and be offered nearly prime lending rates. Do a 15 year fixed rate mortgage, and you're set.

Debt sucks, the borrower is slave to the lender. Credit cards and personal loans are a huge ripoff. High risk and high interest. Playing with snakes. And NEVER finance your hot rodding. That's asking for it for sure. Easiest way in the world to be FORCED to sell your beloved hot rod is to be in hock up to your eyeballs on it. Pay cash, and if you don't have cash, don't buy it. Wait. And save.

 

[turboscott]

First of all, you will be able to get a credit card at 18 yrs old. The big companies love 18 yr olds because they want them to get into debt at an early age so they will spend many years trying to pay it off. I would do a credit card and do the $50 purchases and make sure to pay them off right away. If I were you, if I did take a loan out, I would make it a $1000 loan at first and I wouldn't put it into the Buick I would start yourself a Roth IRA. Since you are borrowing the money to build credit you might as well do something smart with it. If you start saving for your retirement now you will be in good shape by 30 yrs old. I would save the cash for the Buick stuff. Just my opinion.

 

[BLACK6PACK]

Establishing credit is essential. I have to dissagree with 6packtogo. I work with and I am around a lot of big time millionaires. Do you think with all the money they have, they don't borrow. Borrowing money is the easiest way to make money. The owner of my company is worth around half a billion, but when he builds a new downtown office building it is done with investors and bank loans. If you run accross some good investments, you'll need a line of credit to take advantage of it. Hell, you can't even rent a car or a hotel room without a credit card. Credit is how this country works.

I say get a couple of credit cards, buy small things on them, and pay it off as soon as you get the bill. I'm only 31, and I have banks trying to throw $100-200k worth of credit at me. Pay your bills and keep things up to date. The main thing is to live within your means. I can afford to drive around in a new camaro SS or mustang cobra, but I drive a 95 eagel talon turbo that is paid for.

 

[equalizer442]

The only thing to buy on credit is a house

BINGO, nailed it right on the head. my faimly has been involved in rental houses for YEARS, we currently have 3 and i wanted to expand and buy me a couple duplexes. my plan is to borrow the money once i establish good enough credit and then let the rent money pay the loan off. after that, besides maintence, it will be 750-1000 bucks per month per house and 1500 to 2000 per duplex once i pay for one off i will buy me another and start again.

 

[GNX Guy]

If you have to borrow $$$ to pay for non essential items for your car, I think you are starting off on the wrong foot. If you can't pay cash, your probably really don't NEED it.

Joe

 

[equalizer442]

If you have to borrow $$$ to pay for non essential items for your car, I think you are starting off on the wrong foot. If you can't pay cash, your probably really don't NEED it.

read the thread alittle more. ive got the money to buy most of the parts i need/want BUT im trying to establish a good credit line so i can expand the faimly bussiness.

 

[GNX Guy]

Did not see where you said you had the money. Could you point me in the right direction in your post?

BTW, not borrowing money will not give you bad credit as you claim. It may however give you a lack of credit history.


Joe

Originally posted by equalizer442
read the thread alittle more. ive got the money to buy most of the parts i need/want BUT im trying to establish a good credit line so i can expand the faimly bussiness.

 

[equalizer442]

Did not see where you said you had the money. Could you point me in the right direction in your post?

sorry

BTW, not borrowing money will not give you bad credit as you claim. It may however give you a lack of credit history.

well. bad credit/lack of credit would keep me from my goals. my granddad never even had a credit card and it pretty much killed him in his older years. i just want to start as soon as possable and make the right choices so i can build my self a nest egg

 

[zam70]

Lack of credit History is the WORST credit you can have. You're esentially a non-existant person when you have no record.

I've got a friend who is 30. Makes 100,000+ a year but has never had any type of loan, credit card etc. Always paid cash for everything...He decided to buy a car. He could have paid cash but I talked him into borrowing half just so he could establish some type of history (he spoke of buying a house in the future). NO one, not one single (reputible) loan company (bank) would work with him. Why? no history. He ended up getting a high interest loan just to establish some history. It's sad actually.

I'd get a small loan. Make your payments ON TIME for most of the duration. Not early, not double. If you want to throw a little extra in on every payment, fine. Just don't pay it off to quick. The banks are looking for a reliable pattern. They want to know if they can count on you over a long period of time. That's how they judge credit (and your debt ratio of course)

Credit is essential. Around here they run credit checks for ANYTHING that will require a repeat payment (utilities, rental property, renting cars etc...)

It'd be great to pay cash but in the business world, you are high risk on a long time deal if you do that. Establish a good solid history (pattern) and you'll have no problems. The IRA was an excellent suggestion. Get your cake and eat it to with that plan.

 

[GN One Day...]

Another way to establish credit is if your work place is associated with a credit union. They'll make the loan, since you'd be a depositing member first, and then because the payment would most likely be on auto draft from your workplace.

For buying a house with no credit, as in there is no score because of a total lack of tradelines, it is possible to build a credit history. You need a broker or bank that is willing to do this, but it's not necessarily hard to do. You need to have 4 sources of regular monthly payments to fully document:

-Phone bill
-Cable bill
-Insurance, car, life, renters
-Power bill
-Retirement (maybe, good to throw in since it's also a verifiable asset)
-Cell phone
-Rent for 12 mos. ***

Gather your cancelled checks from your billing statements, bank statements for the last 12 months and present those--with no gaps--and they can work off of that in most cases. May or may not apply to non-owner occupied property, ask the lender about their underwriting guidelines.

There you go. Another reason that you always keep statements, pay stubs and copies of anything you do involving money.

Not having a credit score is FAR FROM the worst case scenario. You are only a tradeline or two from having a credit score to die for. The way scores work is that you start out at the top and screw it up from there. You can be at the top and stay at the top if you manage yourself with care. The worst would be, say, letting a bunch of debts charge off and never doing anything about it. (j/k!)

 

[choppers4life]

start a company and ask for a $380,000 loan thats what i did... i will never revel how i di it, but it's a start... are you white witha white mother over 40?

 

[gnXfan]

A) Have a checking account with X dollars in it.

B) Apply for a credit card, even a crappy Discover card

C) Any time you would use cash or your debit card - don't - use the CC.

D) Pay off the CC every month with X dollars.


After your credit gets better - try for a card with a nice fixed low rate. My current card is 5.99 percent - not too shabby. Then, if you make a larger purchase (one that exceeds X), the interest is not a killer and you can pay it off.

I had lots of CC charges due to me purchasing some crowns (teeth, not head). I paid them all off last month. Now I've got money in the bank and I am DEBT FREE. You are DEBT FREE now - try and stay that way.

I currently have a Amex Biz Card which you have to pay off every month. That for my Biz and a debit card for basically everything else. Get involved with online banking. Then, if you have to use your CC somewhere (for instance, the online purchase that doesn't take debit cards), you can log in and transfer the money as soon as its due.

You'll do fine. The whole point that you are 'asking' proves that!

_BOB

 

[6PacktoGo]

There is NOTHING in this world you NEED a credit card for. You CAN do anything with a check/debit card you can do with a credit card, EXCEPT go into debt. You can rent cars, rent hotel rooms, buy anything you want so long as you have MONEY. I do not have and have not had for 8 years, a credit card. I go wherever I want to and rent cars and hotel rooms. I pay for anything I need with a check/debit card. If I cannot pay for it, I don't BUY it.

Paying cash in business is a RISK? A long term risk? WHERE? Show me this risk. If you pay cash for what you purchase, it is YOURS. You owe no one. There is no risk. And if you use a Visa debit/check card, you have the EXACT same fraud protection as a credit card holder does.

Anyone who has enough money to pay cash for something and instead takes out a high interest loan for it just to establish credit is a fool. There is NOTHING to be gained by paying interest. Pay cash = zero interest and zero risk.

The average millionaire in the US has ZERO debt, drives a five year old or older car (that they paid cash for), lives in a paid for home, has enough invested to retire on ten years before they are even eligible to retire, and is a first generation millionaire, meaning they EARNED, it they didn't inherit it.

Personal and small business bankruptcy is at an all time record high in America, and the rate of filings is only increasing. The NUMBER ONE reason for personal bankruptcy is CREDIT CARD DEBT. The number one reason for business bankruptcy is cash flow issues vs. debt. If the business wasn't so deep in debt the cashflow issue wouldn't cause bankruptcy.

Simply put, DEBT=RISK. If you owe on it, the loan can be called in or you can run into a cash flow problem and lose it.

Regarding rental houses. What do you do if there is a local recession, and you can't get tenants for your rental property? You still have to pay the mortgage, renters or no renters. Can you pay YOUR personal bills AND pay the mortgage for a period of twelve months if no one rents the house?

Well, it's your money and your life, you do what you want. I don't know of too many people who made their fortune by borrowing money for a "nest egg". You can "establish credit" with any credit card company, they'll be thrilled to loan you money at 22%. But if you really want to know what a mortgage broker really wants to see, I'll let you in on the secret. They want to see that you pay all your regular bills ontime or early, for at least two years. They want to see you have at least 20% down, they'd rather see 30%. They want to see that you can pay the payments with 25% of your monthly income, and they want to see that you have no other debt to make you a high risk borrower.

I'll not argue this point further. Do as you please.

 

[BLACK6PACK]

I'm not trying to argue anything. Just pointing out a few things that don't quite work in your "no debt" mindset. Economics 101 shows that there are times to be in debt and times for people to be in debt to you. Right now its time to be in debt due to the low interest rates. Oh, the average millionaire isn't living in a house thats paid for. It just doesn't make sense right now.

Here is a perfect example of where it pays to be in debt. You have a $1,000,000 in investments making 9% interest. You decide its time to stop paying rent and buy a house for $1,000,000. With your plan you'd take out the million dollars and pay for the house so that you have no debt. I on the other hand would get a $1,000,000 loan. Why you ask. If i leave the $1,000,000 at 9% interest in investments, and get a loan at 5% to pay for the house. By doing this I'm making 4% a year off of $1,000,000 ($40,000 a year) off of the money that is still in the bank. You on the other hand are not making anything.

You are right about the debit cards though. I have 3 credit cars with about $45,000 worth of available credit. I have a $0 balance on those cards and all are at 8.99% interest. I agree that credit cards are a ripoff, but credit is a very valuable thing to have. I have built up enough credit that when a good real estate deal presents itself, I can jump on it, invest a little money in it, and flip it for a tidy profit and do it all with other peoples money.

Not trying to argue, but credit used properly is a very good thing.

 

[turboscott]

Adding to that point. You also get major tax benefits from the interest paid on your mortgage. So, in addition to the money you are making by keeping your money in the bank you get better tax benefits as well.

As far as businesses go, I work for an insurance company and they are currently putting up a new building and they took loans out to do it. Do they have enough to pay cash? Of course they do! Why don't they? Because they can use the loan to their advantage by claiming it as a debt. Once again, helping on taxes!!!

Having said all this, my goal is to be debt free by 40 years old, I am 30 now. 3 years ago I had a lot of debt. I paid off all my credit cards and useless debt. I now have my cars but very low interest rates and I simply didn't have enough cash to buy my cars. but, they will be paid soon and once they are I will drive them into the ground and pay cash for my next cars. I have my student loans but those provide tax relief in addition to giving me the opportunities I have now. Without college I wouldn't be nearly as well off as I am now. Then I have my house. I have been in the house less than a year and I am going to refinance soon to a 15 year mortgage and pay extra on that to get it paid off in my 10 year goal.

Some debts are better than others and some are just unavoidable. Credit card debt is something you can avoid. For example, if you can't afford to pay cash for the new wheels, bigger turbo and injectors, or whatever, go without.

Just to clear up something I said earlier. I don't think he should take out a loan either, invest the money in the stock market, or put it in the bank. I am just saying, if he did take out a loan put it toward something more sensible like a Roth IRA. At least let the money you borrow work in your favor. Buying stuff for your car won't help in any way.