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I don't think I saw it mentioned in here, creditkarma.com is a really helpful site and there is a smartphone app that goes with it. It will give you your credit score plus a credit report card that 'grades' you on various areas of credit use. If you pay attention to what it tells you you can increase your credit that way too. There is a lot of useful advice in this thread. Use the advice, monitor it with creditkarma and watch your credit grow.

ok, looks like this thread has derailed a bit from the OPs original question so let's reign it in folks. It's not a credit vs. non-credit debate here.

To the OP, congrats on thinking about credit so early in your life. Most don't ask this question until they encounter their first need for credit and by then it's too late.

First my credit story. I got my first credit card when I was 18 during one of those school fairs in college. It had a $500.00 limit and 0% APR (those days are long gone). I knew the basics like you:

1. Don't go over the limit, always make my payments, on time. I figure that if I just follow these rules, my credit will be perfect.

Over the years, I've learned quite a few new things about my credit score which I would like to share with you. For credibility, I would tell you that I have a credit score of 841 out of a possible 850 points on the FICO scale. I'm 31 years old.

I would like to divert you to this link to read about the factors that influence your credit score:

http://finance.yahoo.com/education/l...r_credit_score

http://www.investopedia.com/ask/answ...fico-score.asp

There are three companies that calculate your credit score/history. Equifax, Experian, and Transunion. They all have their own slightly different measures for it but it all comes out about the same.

I would also advise going to this site creditkarma.com and signing up so you can view your history and score. It's free and completely legit. The score isn't the FICO score but will give you a rough estimate.

Building credit isn't a race, it's a marathon and it takes a long time, but the rewards are great. Credit comes into play in lots of areas that you might expect but also others you might not. For example, you know that your credit score affects whether you can take a loan and what interest rate you get, but did you know it also determines whether or not you can rent an apartment?

Your credit history/score is a LIFE indicator of your trustworthiness when it comes to money. Don't let ANYONE convince you that credit isn't necessary.

Things I learned that aren't always told to you when you first build credit:

1. Credit cards aren't the only credit building items. Loans are great too, especially stable ones like student loans and car payments.

2. There's a difference between paying off your credit card each month and paying the statement balance. You only need to pay the statement balance. Which is the amount you owe when the statement closes.

3. Credit checks only affect your credit score by <5 points.

4. Open a credit card and keep that one forever. The average AGE of your credit is a large factor in your score. I still have my first credit account open.

5. Your age isn't a large factor but your length of history is. The main reason I don't have a a perfect FICO score is that my history is too SHORT. I once asked how long and was told > 20 years.

6. If you miss a payment it's ok. Call the bank and ask for forgiveness. Usually they will not report to agencies until 30 days past due. If you are nice they will also waive your first late fee.

7. Learn the difference between a charge card (no limit, Amex Green) and credit card.

8. Always check your credit history to make sure there are no discrepancies. Identity theft is far more common now.

9. Remember it's a marathon. Don't stress about it. Develop good habits.

10. Finally, start building early and you'll find that by the time you're in your mid twenties and early thirties, you'll be way far ahead of the game.

Feel free to PM me if you have any other questions.

Quote:

Originally Posted by Obsidiank (Post 1119590)

Your credit history/score is a LIFE indicator of your trustworthiness when it comes to money. Don't let ANYONE convince you that credit isn't necessary.

lol. I couldn't dissagree with you more. To each their own, I guess.

Quote:

Originally Posted by suaveflooder (Post 1119628)

lol. I couldn't dissagree with you more. To each their own, I guess.

You can disagree all you want....but you need to stop arguing facts. There are certain things in life that don't work well without credit. I can tell you as an landlord (I own two rental units). I check the credit history of my tenants before I rent to them.

If you have bad credit/no credit you are not renting my apartments. You're not living in my building.

If you're a millionaire you can buy the whole building. We aren't all millionaires.

Quote:

Originally Posted by Obsidiank (Post 1119695)

That doesn't seem backward to you? You wouldn't rent to someone who could buy your whole building and has no credit score?

I am living in an 800 sq/ft condo with attached garage, in unit washer and dryer and had no credit check. You don't need credit. It will make some things a little easier but it can be done

Quote:

The OP was asking how to build credit, so naturally a credit card is in order.

Quote:

Also, 88% of people who sign on to one of those “90 days same as cash” deals or “nointerest for 18 months” tend to defaultand roll over into payments with interest between 21% and 31%, basically 9 outof 10 people. It is great that you personally can do it, butstatistics show that you are in the minority. Odds are not in the favor of the borrow (It’s almost as if the bank/lenderknows this ;) )

You seem like a smart guy -- so surely you've figured out by now that the vast majority of people in the world are, to be frank, pretty fucking stupid. Just because they get screwed over by credit, doesn't mean that I should avoid it. It means that you need to learn how to not be one of those stupid people. I don't think anyone here was telling the OP at 19 to run out, get a credit card, get a $10,000 limit, and run it up on Day One -- quite the contrary, all the posts were about how to pay it off before the end of the month so as to avoid paying a dime of interest.

Of course the lenders know that most people are going to mess up. That's precisely why I can get the money so cheap. If so many people didn't end up costing themselves a ton of money, they wouldn't give out the credit so freely.

But if most of the people in the country are going to be stupid, I'm going to make the most of it myself. It's stupid not to. The sheer amount of stupid people in the country cost me lots of money in other ways, at least I can use this to my advantage.

And to be clear, I'm not talking about predatory lending, where creditors out-right bald-faced lie to people or specifically take advantage of people in hardship conditions. That's abhorrent and a far cry from people just being stupid with their money and buying stuff they have no business buying.

Quote:

As far as the unconventional loan is concerned, it can completely be a win win situation...
...I can take out a 15year fixed rate mortgage if I need to using a unconventional loan option (If I had a zero credit score), andsave more money vs the 10% down 30 year loan! That would be paying for a house in18 years and saving hundreds of thousands of dollars, all of which can beturned around and invested.....
....Buy a 225,000 house (high 6% APR)

Payments for a 15-year mortgage is $1899/month

Payments for a 30-year is $1,349/month

After paying for 10 years, the 15 year mortgage balance isat $98,210 while the 30 year is at $188,292!!!! ALMOST DOUBLE!....

That's not really a win-win. And the single variable of how long it takes to pay off the mortgage, and what you can do with the money afterwards, is only one very small part of deciding when to take a15-year note or not.

It's not nearly so cut and dry as to say that after 10 years you'll owe an extra $90,000 on the 30-year note.

So let's do some math....

"Unconventional" 15-yr note at higher interest:
$225,000 - 15yr @ 6% w/ 10% down.== $1708/month

Now we have someone who put a modicum of work into maintaing a decent credit score. Didn't require much other than a small open credit card and the occassional auto/personal loan. And they go buy a house...

"Conventional" 30-yr note @ standard interest with $0 down (just did this myself a a year ago)
$225,000 - 30yr @ 4% w 0% down == $1,074/month

Now -- you look at that and say: "Look, I'll have my house paid off twice as fast as you and then I'll have all that money to invest". Great point, you're absolutely right.

But you're forgetting about the power of compound interest. As much as the anti-debt crowd love to tell people about the dangers of compound debt (VERY valid), they totally forget to mention how you can make it work FOR you too.

The "conventional" debtor has the $22,500 he didn't use as Down to start off his investing, plus for 15 years he's got $700 every single month that can be invested.... Guess how much that adds up to with an 8% ROI:

$316,000.

By the time the 15yr note "unconventional" guy has paid off his house, the 30yr guy has saved up enough to buy another entirely new home (or whatever) and with cash to boot. All because you borrowed someone else's money when it was cheaper than your own.

But, now the 15yr guy has 15-yrs of no mortgage, right? Perhaps he can "catch up"...

In another 15 years, the 30yr guy has $1,289,000 in the bank. The miracle of compound interest.

In 15 years, the 15yr note guy can put a ton more money in the bank every month (his former $1789 mortgage), but he's behind the compound interest eight ball -- he'll only have $619,000 in the bank.

After 30yrs both people have paid off homes, but by borrowing someone else's money when it made sense, by doing a very small amount of effort to ensure that he got the 4% note instead of the 6%, and could get away with 0% down rather than 10% (or more) before he went to get a home, the 30yr guy has an extra $650,000 in the bank. That's one HELL of a difference in retirement.

Quote:

I'm not going to be the popular one here and I am fully aware of that. I'm not trying to win an argument, just offer another option.

And it's a perfectly valid option. The no-debt method of living is certainly a more carefree, less stressful one. But, as with anything else, with less risk comes less reward. Period. There's absolutely nothing wrong with that style of living and I truly wish you the best at it, and I admire those with the self-control in the culture we live in to make it work for them.

But making blanket statements about debt of all sorts being bad is, IMHO, not the answer. It's no more the answer than the "Use debt for everything!" that's got a substantial portion of the country into the mess that it's in. It's just one extreme to the other. As with most instances where people try to make that "one-extreme to the other" approach work, it usually results in failure.

The correct thing to do is teach people, particularly young people, how to manage debt effectively. Learn when to use it and, more importantly, when not to.

Quote:

Originally Posted by SigmaHyperion (Post 1120231)

It's not "naturally" in order at all. It's one way, but not the only way.

I was able to get the super low interest rates at the age of 20, not because of credit cards, but because I learned how to manage my credit at a young age. I started with secured loans, then unsecured loans, then finally moved on to credit cards but that was several years later, after I learned how to manage my money effectively.

Credit cards are really not a way to learn how to effectively manage money unless you get one with a really low limit (like $500) and you specifically request that they absolutely not raise it on their own volition (because they will, hoping to suck you in to a trap).

You seem like a smart guy -- so surely you've figured out by now that the vast majority of people in the world are, to be frank, pretty fucking stupid. Just because they get screwed over by credit, doesn't mean that I should avoid it. It means that you need to learn how to not be one of those stupid people. I don't think anyone here was telling the OP at 19 to run out, get a credit card, get a $10,000 limit, and run it up on Day One -- quite the contrary, all the posts were about how to pay it off before the end of the month so as to avoid paying a dime of interest.

Of course the lenders know that most people are going to mess up. That's precisely why I can get the money so cheap. If so many people didn't end up costing themselves a ton of money, they wouldn't give out the credit so freely.

But if most of the people in the country are going to be stupid, I'm going to make the most of it myself. It's stupid not to. The sheer amount of stupid people in the country cost me lots of money in other ways, at least I can use this to my advantage.

And to be clear, I'm not talking about predatory lending, where creditors out-right bald-faced lie to people or specifically take advantage of people in hardship conditions. That's abhorrent and a far cry from people just being stupid with their money and buying stuff they have no business buying.

That's not really a win-win. And the single variable of how long it takes to pay off the mortgage, and what you can do with the money afterwards, is only one very small part of deciding when to take a15-year note or not.

It's not nearly so cut and dry as to say that after 10 years you'll owe an extra $90,000 on the 30-year note.

So let's do some math....

"Unconventional" 15-yr note at higher interest:
$225,000 - 15yr @ 6% w/ 10% down.== $1708/month

Now we have someone who put a modicum of work into maintaing a decent credit score. Didn't require much other than a small open credit card and the occassional auto/personal loan. And they go buy a house...

[/SIZE]"Conventional" 30-yr note @ standard interest with $0 down (just did this myself a a year ago)
$225,000 - 30yr @ 4% w 0% down == $1,074/month

Now -- you look at that and say: "Look, I'll have my house paid off twice as fast as you and then I'll have all that money to invest". Great point, you're absolutely right.

But you're forgetting about the power of compound interest. As much as the anti-debt crowd love to tell people about the dangers of compound debt (VERY valid), they totally forget to mention how you can make it work FOR you too.

The "conventional" debtor has the $22,500 he didn't use as Down to start off his investing, plus for 15 years he's got $700 every single month that can be invested.... Guess how much that adds up to with an 8% ROI:

$316,000.

By the time the 15yr note "unconventional" guy has paid off his house, the 30yr guy has saved up enough to buy another entirely new home (or whatever) and with cash to boot. All because you borrowed someone else's money when it was cheaper than your own.

But, now the 15yr guy has 15-yrs of no mortgage, right? Perhaps he can "catch up"...

In another 15 years, the 30yr guy has $1,289,000 in the bank. The miracle of compound interest.

In 15 years, the 15yr note guy can put a ton more money in the bank every month (his former $1789 mortgage), but he's behind the compound interest eight ball -- he'll only have $619,000 in the bank.

After 30yrs both people have paid off homes, but by borrowing someone else's money when it made sense, by doing a very small amount of effort to ensure that he got the 4% note instead of the 6%, and could get away with 0% down rather than 10% (or more) before he went to get a home, the 30yr guy has an extra $650,000 in the bank. That's one HELL of a difference in retirement.

And it's a perfectly valid option. The no-debt method of living is certainly a more carefree, less stressful one. But, as with anything else, with less risk comes less reward. Period. There's absolutely nothing wrong with that style of living and I truly wish you the best at it, and I admire those with the self-control in the culture we live in to make it work for them.

But making blanket statements about debt of all sorts being bad is, IMHO, not the answer. It's no more the answer than the "Use debt for everything!" that's got a substantial portion of the country into the mess that it's in. It's just one extreme to the other. As with most instances where people try to make that "one-extreme to the other" approach work, it usually results in failure.

The correct thing to do is teach people, particularly young people, how to manage debt effectively. Learn when to use it and, more importantly, when not to.[/FONT]

[/FONT]

First off, I want to say, excellent post :clap::clap: Truely....well written and thought out ideas. If the majority of people were like you, I honestly woudln't be so passionate about getting rid of debt. It can absolutly be a tool for the good, but like you mentioned, people tend to be stupid. I will sadly include myself in this "stupid" catigory as I made stupid decisions that I am paying for (literally) as we speak. I have chosen my rout because, I like stuff. I bought into the whole "I deserve it because I work so hard" idea and let my credit card get out of control. Oddly enough, I did it and to this day I have "excellent credit."

My FRS is the last purchase that I made on credit and will hopefully be the last (save for a house) purchase that I make using credit for the rest of my life. I have chosen to stay away from my "drug" so to speak, and pay for things in cash.

As far as the house is concerned, I will be saving for a couple years to put 50% down or so on a house, WHILE investing 15% of my income into diversified mutual funds, so my compund interest will accumulate as well as allow me to round out my finances (college for kids, house savings, insurance, retirement) in the mean time. After the house is paid off (I should be around 45-50), I plan to dump the extra into investments. I mentioned this above. If my math is right and I never get a raise, I will retire with 3 million in the bank. Not as hefty as some, but better than most. I'm hoping to do better, but only time will tell.

Thank you for your post! Wise words and great information! :happy0180:

Quote:

Originally Posted by suaveflooder (Post 1120346)

There are few assuptions wrong here. First of all as soon as you get one or worse - two kids, forget about any significant savings. You think that you need money for colledge - no you need that amount - at least $30k/year from almost day one when you have your first kid. Then consistent 7-8% return on investment after tax is a pipe dream. You will have to actively (I mean daily) manage your portfolio and be lucky to have anything like that. More likely is 3-4% or less over long (decade) term. Again when you have kids, you would need bigger house and in much better school district (which means 20-30% price premium and corresponding property taxes).

Quote:

Originally Posted by suaveflooder (Post 1119386)

I can get free money by investing. They offer cash rewards so you spend more and use their card. The hope is that you default and go into payments with interest. Once again, I'm not saying everyone will, but the chances are pretty high.

Just out of curiosity, what is the interest rate on that card if you don't pay it every month?

I don't know because I use it like debit. It's probably sickening. As long as you remember that the card doesn't give you more money than you had before, it's a win.

Quote:

Originally Posted by avp1 (Post 1120400)

Skim the book "Complete Guide to Money" by Dave Ramsey OR look at "Financial Peace University" That is basically the plan I'm going for. It's all covered.

Dave Ramsey filed for bankruptcy in the mid 80's and is currently worth 55 million. No, I do not work for the company, but I was impressed with him and have had friends go through his "Financial Peace University."

I went through the course in february (started two days after I bought my FRS) and had to step back and examin my life. I had crazy good credit, a fun NEW car and life seemed good, but I was going nowhere! I had no extra money and had NO CLUE where my wife and I were loosing $45k-$50k a year!!

I read Dave Ramsey's book, "Total Guide to Money" then "Secrets of a Millionaire Mind," and just now I'm about to finish up "The Millionaire Next Door." Next on my list is "Stop Acting Rich" These books have totally changed my view on money.

There are no assumptions with my future. I control my money and know where every penny is going. I know what a realistic return is (and I would get rid of the person who is getting you 3-4 percent because I have people around me consistently earning 6-7 or MORE in some cases and have been for many years), as well as how to plan for my future. Like I mentioned before, I don't know everything, but for the first time, I am in control of my money! I check my account twice a month when I do my budget and that's it. I don't need to look at it otherwise and that is incredibly empowering.

Quote:

Originally Posted by suaveflooder (Post 1120621)

I recall Maidoff offered something like 10%. Too good to be true. Look at hedge funds reports over 10 years. It will give you an idea what the limit is. The only way to get more is open your own active business - where you sell products to customers. Any passive strategy (when you invest money, but have no controlling interest) is a way to loose in the end. There is always someone with more resources to push you away or simply outcheat.

Quote:

Originally Posted by avp1 (Post 1120710)

Please read Dave Ramsey's book. All outlined (although he is very optimistic with an average of 12% over 30 years...like I mentioned I see more 6%-8%. I was told 7% is what to shoot for). I'm done for the moment thread jacking the OP's thread. Pretty sure he has enough information to make an informed decision. :happy0180:

PM me if you want to keep talking :thumbsup:

Too many posts too many long stories.
Let me start off by saying that I'm currently employed by a big bank as a personal banker. In no legal way may I give financial advice but from my experiences, from what I've seen and what I would tell you as my buddy is as follows...
Get a credit card preferably from a bank but capital one is pretty good lender that will give cards to almost anyone with decent amounts and reasonable rates. Rule of thumb though, never pay more than 50% of your available limit. Try and keep it under 40% is possible. i.e. if you're limit is $1,000 try not to go over $400-500. Some people may say it's best to pay off your balance every month but that is not true. That shows credit companies that you're not responsible and can't handle a balance. So it's actually best to keep a balance. Again, i.e. your $1k credit card, have a balance of let's say $300 and make $100-200 payments to pay it down. Yes, you WILL be charged interest in months but it's the price to pay to play the game. Your credit score will sky rocket after that. If you're too cheap and or don't want to pay interest, you can pay it off in full and save yourself a couple bucks here and there but your score won't go up as quick and as much.
That's just for revolving credit though, that's the easiest to establish and can constantly build. Get a loan for your car loan or whatever other type of loan and accelerate your payments. Never pay the minimum on any credit product. Regardless of being for a credit card, a loan, line of credit etc always try and pay more than the minimum.
If anybody wants advice or for me to respond to this thread, quote me or tag me.
TL;DR
No credit is bad credit. Debt free hurts your credit. Always pay more than the minimum payment on any credit product you have. Always try and keep you debt to credit under 40% (if you have 10,000 of available credit on credit cards, keep it under 4k)

My advice to you:
1) Credit length of history is an important factor. If you are just starting out building up your credit, I would suggest you get 2 credits cards now at the lowest interest possible (these 2 will pull up your average credit history relationship length later on). Apply for REAL credit cards (like Citi or VISA), not a store card. Credit scores often differentiates between these.

2) Use these cards once a month for something like gas. Never go above 25% of your total credit limit.

3) NEVER be late on a payment (direct deposit is a good option if you are concerned about this).

4) Also sign up w/ a service like Experian and pay less than $10 to monitor your credit and learn more about how your decisions affect credit. Even better yet, don't use one of your credit cards and just have the Experian service charge to that credit card to keep it active.