Things to know about the adult world.

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  • taxidermist15
    taxidermist15 Posts: 677 Member
    Can anyone explain to me credit scores?

    Im 21, and so far I have paid everything off in full.

    car, rent, food, groceries, holidays everything paid IN CASH

    however next up on my list is a house. I dont have a credit score, and so they wont give me a loan ( I assume..)
    how do i get around this? and do i HAVE to put stuff on credit (they pay it off straight away) just to get a good score?

    I have been in the banking industry for over 25 years, primarily commercial loans. I have also taught basic financial principles to 16-19 yr olds. First, do some research as suggested by other posters before going into a bank. Some banks pay employees incentives to open certain types of accounts. I find this highly unethical, but it happens.

    Next - credit scores are determined by an equation based on four factors:

    How long you have had credit - young people are at an automatic disadvantage here
    Payment history - credit bureaus usually report 24 months
    The types of accounts you have - installment loans (like for a car), revolving (credit cards)
    The difference between how much credit you have available (limits on credit cards) and what you owe. The bigger the difference, the higher the credit score.

    Whether you borrow much or not, you need a good credit score to get the best rates on loans, lowest premiums on insurance, and maybe even a job.

    so im at a disadavantage because ive paid everything off in full.. well thats just not fair.
    how do yo recommend starting to get a good credit score?
  • soccermoma11
    soccermoma11 Posts: 126
    Can anyone explain to me credit scores?

    Im 21, and so far I have paid everything off in full.

    car, rent, food, groceries, holidays everything paid IN CASH

    however next up on my list is a house. I dont have a credit score, and so they wont give me a loan ( I assume..)
    how do i get around this? and do i HAVE to put stuff on credit (they pay it off straight away) just to get a good score?

    I have been in the banking industry for over 25 years, primarily commercial loans. I have also taught basic financial principles to 16-19 yr olds. First, do some research as suggested by other posters before going into a bank. Some banks pay employees incentives to open certain types of accounts. I find this highly unethical, but it happens.

    Next - credit scores are determined by an equation based on four factors:

    How long you have had credit - young people are at an automatic disadvantage here
    Payment history - credit bureaus usually report 24 months
    The types of accounts you have - installment loans (like for a car), revolving (credit cards)
    The difference between how much credit you have available (limits on credit cards) and what you owe. The bigger the difference, the higher the credit score.

    Whether you borrow much or not, you need a good credit score to get the best rates on loans, lowest premiums on insurance, and maybe even a job.

    so im at a disadavantage because ive paid everything off in full.. well thats just not fair.
    how do yo recommend starting to get a good credit score?

    I use my credit card for gas, and than pay it off every month online. Its not much, I know I can afford it, It wont put me over my limit but it will help to build your credit score. Just never ever ever miss a payment! Always pay it off in full. It seemed daunting to me at first as i would rather just pay cash for everything but its become a habit now, so paying it off isnt a big deal.
  • elenathegreat
    elenathegreat Posts: 3,988 Member
    Avoid debt as much as possible. If you can't afford it, you don't need it, end of story.

    ^^^Best financial advice there is!

    I will second this! If you have no debt, you don't have to worry about interest rates.:bigsmile:
  • Doing_The_Unstruck
    Doing_The_Unstruck Posts: 241 Member
    Just give your money to me and let me worry about it :laugh:
  • Jezebel9
    Jezebel9 Posts: 396 Member
    There is this movie called 'The Corporation" it explains some interesting things about finances, banks, corporations etc. But this is further than answering your basic question about interest rates. :drinker:
  • nichalsont
    nichalsont Posts: 421 Member
    Can anyone explain to me credit scores?

    Im 21, and so far I have paid everything off in full.

    car, rent, food, groceries, holidays everything paid IN CASH

    however next up on my list is a house. I dont have a credit score, and so they wont give me a loan ( I assume..)
    how do i get around this? and do i HAVE to put stuff on credit (they pay it off straight away) just to get a good score?

    I have been in the banking industry for over 25 years, primarily commercial loans. I have also taught basic financial principles to 16-19 yr olds. First, do some research as suggested by other posters before going into a bank. Some banks pay employees incentives to open certain types of accounts. I find this highly unethical, but it happens.

    Next - credit scores are determined by an equation based on four factors:

    How long you have had credit - young people are at an automatic disadvantage here
    Payment history - credit bureaus usually report 24 months
    The types of accounts you have - installment loans (like for a car), revolving (credit cards)
    The difference between how much credit you have available (limits on credit cards) and what you owe. The bigger the difference, the higher the credit score.

    Whether you borrow much or not, you need a good credit score to get the best rates on loans, lowest premiums on insurance, and maybe even a job.

    so im at a disadavantage because ive paid everything off in full.. well thats just not fair.
    how do yo recommend starting to get a good credit score?

    Start with a credit card with a limit no higher than $2,500. Use it occasionally and always pay it in full. Keep adding to a savings account. When you have decent amount, put it in a CD and borrower against it (use the CD as the collateral for the loan). This will introduce a different kind of credit to your history, an installment loan. Pay it back in as short a time as the bank wiill allow based on your income. The interest rate will probably only be 2% or so more than your CD earns. Also, you may not need a co-signer since the loan would be 100% cash secured. Hope this helps.
  • Redbird99ky
    Redbird99ky Posts: 305 Member
    If you're winning with money such that you can afford to save up and pay cash for everything except for a home, you DON'T need to have a credit score. As I said, pay your rent early or on time for at least two years, and you're bankable for a conventional mortgage at a competetive rate by a company that does manual underwriting.
    As for insurance, yes, it's true that most insurance companies base part of their premium on your credit score, but the difference between having a low / no credit score and having a high credit score is not likely to be worth the interest and fees you would end pu paying on your credit card you're getting to establish credit.
    Again, talk to your insurance agent. Chances are that if you are winning with money (have an emergency fund in the bank of 3 to 6 months, that will count for "financial responsibility" and you'll get a better rate on your insurance than someone who is a bankruptcy waiting to happen.
  • ZebraBri
    ZebraBri Posts: 60
    Credit cards....actually seem unappealing to me. It kind of sounds like trouble So if I gave people documents, showing proof I've paid all my bills on time, would that be good enough to get something major, like a house? Or do I need to get a credit score? I think someone may have said something similar to this earlier, but I just want to get it clear.

    And I'm already going to be so much in debt...and I'm a social work major! While I am not doing my job for the money, it's also a bit unfortunate that it's one of the lowest paying jobs when I have so much to owe back when I'm finished with school.
  • Redbird99ky
    Redbird99ky Posts: 305 Member
    Credit cards....actually seem unappealing to me. It kind of sounds like trouble So if I gave people documents, showing proof I've paid all my bills on time, would that be good enough to get something major, like a house? Or do I need to get a credit score? I think someone may have said something similar to this earlier, but I just want to get it clear.

    And I'm already going to be so much in debt...and I'm a social work major! While I am not doing my job for the money, it's also a bit unfortunate that it's one of the lowest paying jobs when I have so much to owe back when I'm finished with school.

    If you show that you pay your bills on time, you should be bankable for a good rate on a mortgage with a company that does manual underwriting. Just ask the lender if they do so.

    That being said, your student loans that you have taken out will count toward your credit score. make sure you pay aunt Sallie Mae on time also. then, once you get going, pay her off as quickly as possible and kick her to the curb!
  • ZebraBri
    ZebraBri Posts: 60
    Credit cards....actually seem unappealing to me. It kind of sounds like trouble So if I gave people documents, showing proof I've paid all my bills on time, would that be good enough to get something major, like a house? Or do I need to get a credit score? I think someone may have said something similar to this earlier, but I just want to get it clear.

    And I'm already going to be so much in debt...and I'm a social work major! While I am not doing my job for the money, it's also a bit unfortunate that it's one of the lowest paying jobs when I have so much to owe back when I'm finished with school.

    If you show that you pay your bills on time, you should be bankable for a good rate on a mortgage with a company that does manual underwriting. Just ask the lender if they do so.

    That being said, your student loans that you have taken out will count toward your credit score. make sure you pay aunt Sallie Mae on time also. then, once you get going, pay her off as quickly as possible and kick her to the curb!

    Thank you so so much, you've been a big help!
  • 10acity
    10acity Posts: 798 Member
    Avoid debt as much as possible. If you can't afford it, you don't need it, end of story.
    Yes.
    There is alot to know about finances, and alot of it is highly complex, search Dave Ramsey he has amazing financial advice and a class that is so helpful. It walks you through things and explains it well.
    And yes. It is a lot of information and it's easy to get confused. I know more than one person who has worked their way out of mountains of debt to financial stability & freedom by following Ramsey's advice. It's good advice, and he's good at breaking it down for the average person.
  • angryguy77
    angryguy77 Posts: 836 Member
    You'll find out what and interest rate is once you get your first student loan bill.
  • kyodi
    kyodi Posts: 376 Member
    Can anyone explain to me credit scores?

    Im 21, and so far I have paid everything off in full.

    car, rent, food, groceries, holidays everything paid IN CASH

    however next up on my list is a house. I dont have a credit score, and so they wont give me a loan ( I assume..)
    how do i get around this? and do i HAVE to put stuff on credit (they pay it off straight away) just to get a goos score?

    I wish I had done what Dave suggests for getting a house without relying on the credit score:
    http://www.daveramsey.com/article/the-truth-about-your-credit-score/lifeandmoney_creditcards/

    He also has really good advice on finance in general (personal and business).

    To OP: The book "The Total Money Makeover" by Dave Ramsey is great. Strongly suggest it!!
  • stevepierson
    stevepierson Posts: 119
    Avoid debt as much as possible. If you can't afford it, you don't need it, end of story.


    This is possibly the best advice you could get!!

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