Financial question... random I know.

jlprovost
jlprovost Posts: 109 Member
edited September 26 in Chit-Chat
I know this is a little out there for MFP... but it's something I truly need help with. I am 21 and at the moment I do not have a credit card. I've been told my numerous people that I need one to help build my credit so when I graduate I can take out loans for cars, houses, etc... but I've also heard that having a credit card isn't a big deal and if i pay back my school loans I can acquire enough credit that way.

I've talked to numerous people, and every time I go to the bank they try to get me one, but I always think the bankers don't really care about my credit they are just looking for getting some sort of commission out of it.

I just need to know if it is beneficial for me to buck up and just get a credit card or just stick with my trustee debit card.
Any help on this subject is greatly appreciated

Replies

  • RoadDog
    RoadDog Posts: 2,946 Member
    You can live without one. Open up an account that has a debit card. Make payroll transfers to it. Use it like a credit card. Make the credit card payments up front, without interest.

    Sure, there are many times that it seems easier to go for the credit rather than wait, but few people can manage their credit without running the card to the limit. Once you have done that, you have no credit AND you have a monthly bill.

    Lots of people are going to tell you you need to build up your credit or it's impossible to book hotels/cars/vacations without one. They are wrong.

    I do it everyday.
  • mikeyml
    mikeyml Posts: 568 Member
    It's in your best interest to have a credit card, even if you don't use it regularly. There are different types of credit: revolving (a credit line or card), installment (loans like a car or school), and a mortgage. Your credit report keeps track your payment history, length of credit history, balances, and available credit for all different types of credit. If your report shows that you don't have enough credit available then it will negatively affect your score. Revolving credit (credit cards) is the best way to show you have plenty of credit available - as long as you don't keep high balances on the cards. Basically the best thing you could do is get a credit card and keep it open for as long as possible. Use it once every 6 months for a small purchase and then pay it off that month. Try not to carry a balance higher than 20% of your total credit line to increase your credit score. If you keep the account open, use it responsibly, and increase your credit limit over time then it will really help your score. Also look for cards that don't charge an annual fee....like a student card through capital one or something. .
  • sarahs440
    sarahs440 Posts: 405
    If you can limit the use of your credit card to a small amount each month, an pay it off every month, go for it. But if you like to shop, I wouldnt. It is way too easy to use a credit card. I would get one with a limit of $200. Seriously. use it for gas, pay it off immediately. We use our credit card, then come home and pay it off that same day. It helps our credit and earns us reward points :) But please be careful. Keep that limit LOW!!
  • nielsh22
    nielsh22 Posts: 17
    I work in finances. It is true that when you go to buy a car or a house or other large item the bank wants to see that you are a reliable person to loan money too. If you dont have any credit other than student loans it doesnt show them that you can handle the line of credit you are applying for. If you are disciplined with your money one thing you can do that will really boost your score and make you look good to the bank is to take out a credit card and every month use that card to pay for as much as you can (Just dont go over 60% of your credit limit) use it for bills, food etc. but make sure that you can still pay the credit card off at the end of the month before the bill comes due. If you pay it before it comes due you pay NO interest on the card and it makes you look really responsible to the bank.

    This is only a good strategy if you are discplined to use that card only for things you are already paying for on a monthly basis. you need to be able to pay the card off 100% at the end of the month. One more thing the bank will look at is how long you have had credit most of them want you to have 2 years credit experience before they will loan you money without a co-signer.

    Hope this helps!
  • JJtexasgirl
    JJtexasgirl Posts: 106 Member
    Having, using and paying a credit card balance responsibly are all ways to build your credit score. As someone else said, lenders (especially in today's financial market) are looking for safe risks. One way to prove you are a safe risk is to have different types of credit and be in good standing with all of them. If you decide to get a credit card, get one with no annual fee. Use it once a month or every 6 weeks, then pay off the balance as soon as possible (that helps to not accrue interest too).

    if you're worried that you'll use it all the time, do what my sister did. She put her credit cards in a tupperware bowl, filled it with water and froze it. That way, if she wanted to use a card, she had to wait for the ice to melt. That usually gave her time to really think about the purchase and most of the time she realized she didn't really want or need it anyway.
  • LeeShirreffs
    LeeShirreffs Posts: 16 Member
    Ive got one but i purely only use it to buy Petrol :wink:

    Got it set up to take out the full amount due when the bill comes round.

    I was also told to get one to 'Boost' my credit rating. As long as you use it and pay it back then its ok. Use it on something small, just like i do with the petrol :smile: Know lots of people who have got one and then maxed them out!

    :smile:
  • jlprovost
    jlprovost Posts: 109 Member
    Thank you all so much... all this information has really helped. I am usually very responsible with my money (which is why I have been weary about getting a credit card in the first place) but in order to make myself seem like a "safe risk" I should probably look into getting one.
  • JJtexasgirl
    JJtexasgirl Posts: 106 Member
    Ive got one but i purely only use it to buy Petrol :wink:

    Got it set up to take out the full amount due when the bill comes round.

    I was also told to get one to 'Boost' my credit rating. As long as you use it and pay it back then its ok. Use it on something small, just like i do with the petrol :smile: Know lots of people who have got one and then maxed them out!

    :smile:

    I love that I can "hear" your accent through your posts! :)
  • emmigirl429
    emmigirl429 Posts: 42 Member
    I would recommend it. I'm a student with (A LOT) loans and decided to get my first credit card March 2010. Sadly, my poor car died in December and when I tried to get a car loan (and I don't have anyone who could cosign) in February 2011, many lenders said no because of my lack of credit history. I recommend to everyone I know to get a credit card, just to have - not to abuse!
  • koosdel
    koosdel Posts: 3,317 Member
    NO! No! No! You don't need a credit card to build credit. You don't really even need to build credit if you have a decent free income. Having excessive credit will reduce your free income.

    If you do need to borrow money, patience and cash in the bank is the key to a decent loan not credit.

    Personally, if I don't have the money I don't get the stuff.
  • believetoachieve
    believetoachieve Posts: 675 Member
    NO! No! No! You don't need a credit card to build credit. You don't really even need to build credit if you have a decent free income.

    Untrue. Most people (especially a student) is NOT going to have the income lying around to just buy a car or house. And one day when she wants to put a down payment on a condo/home? She's going to need a loan, which she's NOT going to get (or will get at a high cost!) because of her lack of credit. Additionally, credit is important for more than simply making purchases.

    OP, I got my first credit card the day I turned 18. I'm 22 now, with squeaky perfect credit. I've never maxed out my card, never paid late, and I always pay in full. Especially if you choose a card with NO annual fee, you have literally nothing to lose (and everything to gain!). Some cards even give you 1-3% back on your purchases. :smile:

    Source: both parents are in finance, dad retired to the caribbean at age 50, and I'm a business major! :flowerforyou:
  • hroush
    hroush Posts: 2,073 Member
    I have a discover card and have accumulated at least $500 cash back over 2 years. Even better is that I have never paid interest on this card )or any other card), as I pay on it a couple times a month. You can also set up the card to automatically pay the full amount when the bill is due. I did this on another card I use seldomly just so that I don't have to pay interest on it.

    I've read the optimal number of credit cards (bank, shopping, etc.) is 7 - 10. They not only look at how much you owe on the cards, but also at your limit on the cards to calculate your credit score.

    Make sure when you get a card that their isn't a yearly fee, non-usage fee, or any other little small fees that they don't like to tell you about.
  • dorairwin
    dorairwin Posts: 210
    Yup, you can live without one dont need .. Trust me extra debt :smile:
  • believetoachieve
    believetoachieve Posts: 675 Member
    Yup, you can live without one dont need .. Trust me extra debt :smile:

    You can have a card, without the debt. Don't spend more than you have in the bank! :laugh:
  • rule3451
    rule3451 Posts: 6
    In order to build your credit score you need to be making payments on -something-, whether it's a car, credit card, student loan, etc. If you're perfectly happy with the way you run your finances now but want to build your credit score, I'd get a store card (like the gap/banana republic card) and, as someone else said, just pay it off every month and don't let the interest accumulate.

    And you're right about the personal bankers; most have quotas for various types of products/accounts they need to open, so they're under pressure to sell. If you're fine without a card from them, best to stay without it.
  • Ty_1227
    Ty_1227 Posts: 40
    I've had the same question and am about to get a credit card myself in the next few months to build credit. However, in my case I'm only working freelance right now as a graphic / web designer. I'm doing well but even with my best planning my income will fluctuate so I ended up striking a deal with my parents as a sort of buffer just as insurance should things get tighter than I plan. Basically, the goal is to set my own very very modest self-imposed "credit limit" with them and swap out my credit card for my debit on small basic things like groceries. Sure it's a bit more complicated to pay them, but it keeps me from having to worry if I finish one project up and don't have the next immediately lined up.
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