Credit Card for someone with no credit??

KnifeAddictAK

KnifeAddictAK

Joined
Nov 17, 2003
Messages
13,507
Alright. I need to pick a C.C. for a couple reasons that I won't go into. I am 21, and have yet to establish credit. What would be a good choice for a credit card?

I am well aware of the responsibilities and handling of a C.C. I am not looking to use this as a "Hey, I'll buy it and won't have to worry for 30 days, etc.". So what should I do? This is a serious inquiry and I appreciate your help.

Already tried gas stations...
 
Do you bank? Your bank would likely have a credit card they can issue you. If you're a college student, there should be plenty of available student cards. I have a Citi one.

If you've had a checking account for a while, you should already have some credit established (good credit, assuming you haven't overdrawn or bounced checks). Stick with a well known insitution (Citi, Providian, etc).

You can also get CCs from stores, like Best Buy, Sears, Amazon, even PayPal (I have one).

As for different types, I don't know that you'd have much choice right now. Visa and MC are interchangable, but I wouldn't go with a Discover or American Express for a first card. AE has some very different terms, and Discover isn't used everywhere. With a first card, it's unlikely you'd have things like cash-back, FF miles, etc.

Some other tips:

Get a card with a low minimum finance charge. Usually these are between $.50 and $1.50. Get the lowest you can. I know you're saying to yourself "but I'm never going to charge $.50 to a card", but you never know. I've seen them as high as $2.50. This means a 50 cent can of soda will cost you $2.50,

Stick with fixed rates.

Don't be fooled by offers that say "as low as" a certain percent, because it's almost gauranteed that you won't get that rate.

CCs are almost essential to have for emergencies, but also have emergency funds in your savings/checking account. That way, if you need a quick $300 cash (actual cash, not a purchase), you won't be charged 24% for an advance.

Once you start using the credit card, you'll get flooded with offers for more. Don't ignore them. Look for one that has really good rates and terms. Find the best, and send off for that one too.

But, when you get the better card, don't cancel your other one. Having long term accounts benifits your credit rating, even if you don't use it.

Finally, even if your card has in introductory "6 months no interest" thingy or something like it, pay it off quickly anyway. It can add up quick.
 
First, use caution by going out and applying for a number of credit cards. Every time you apply for credit, you receive a check mark from the credit bureaus (i.e., Equifax, TRW, etc.). Too many check marks in a short period of time will allow companies to decline your credit applications.

There are several ways to obtain credit. . .and gas credit cards are ka-ka when it comes to establishing credit. Simply, they usually aren’t revolving (cannot carry a balance forward month-to-month).

If you haven’t or don’t have one. . . .the first thing to do is to open a checking account or savings account, or acquire a debit card. These do not create your credit file, but their existence will indicate that you have money and show something about how you manage it.

One way to establish credit is to have someone “co-sign” a loan for you. The amount does not have to be substantial. Keep in mind, if you default on the loan repayment, the co-signer is stuck with the bill so to speak. You can pay the debt in full when the first bill arrives, but not before. Completion of the full billing cycle is important for a "pays on time" report card to be established. Sometimes paying off a loan is good enough to establish enough credit to obtain more credit, but using only your name. Sometimes it’s not. If not, ask the co-signer to repeat his generosity. Again, create a debt, wait until the first bill comes, and pay it off in full. Keep repeating until you no longer need the co-signor. Your credit history is now established.

Another method is called a “secured credit card.” You open a savings account with a banking institution who offers this type of card. Typically, it only take $100 to set-up the account and you are then issued a normal credit card. There are two drawbacks. . . (1) you can only charge the amount that you have in the savings account (2) your will be charged interest. What you do is create a debt with the card. When the first bill arrives you pay the bill off in full. Once it’s paid off, create another debt with the card. Again, paying the bill off after the first bill arrives.

Finally, you can also do the department store credit card. Make sure that it offers revolving credit (carries a balance forward month-to-month).

DO NOT accumulate credit cards for two reasons. . . .(1) it's easy access to purchasing, which can get people into financial trouble (2) having access to a large line of credit will raise a flag and cause people not to loan you $$ (in other words you credit line is too large and you will be considered a risk).
 
It's not that hard to get credit cards these days. It seems like every other week we hear about someone's dog being issued one.

First, talk to your parents. Their credit card company should be more than willing to issue you a card.

Second, talk to your bank. As Mr. Planterz points out, they should be able to get you a Visa or Master Card. It may start with a low limit, but that's where you've gotta start.

Third, recognize that with no credit history, you may have to pay a fee (no more than about $25) for your first year or two (no more than two years), and accept a low limit and a high rate, and settle for one with high fees for late payments, etc. But, you're not going to be making any big-ticket purchases with this card nor are you going to be carrying much balance month-to-month, nor are you going to miss a payment. After a year, your CC company should increase your limit. After two, you will have an excellent credit rating and can switch to one of the best cards on the market.

Once you get that first card, use it responsibly, but use it. You want something on it every month so that the credit reporting agencies get a report every month. And you actually do want to carry a small balance from one month to the next once or twice a year. Yes, you pay a little interest when you do that, but what you are doing is buying credit rating that way. What you do not want to do is ever miss a payment or be late.
 
Thanks for the help guys. I'll do some research and check with my bank. As for the parents, I'll living alone doin' that job thing :D ;)
I'll probably have to open a checking account and see about doing a Visa through my bank. Just wanted to check with you guys here, seeing how helpful you all are on many topics. Thanks again and if you think of anything else, Thanks in advance :cool:
 
Best bet is to get non-revolving credit first like a car loan or a personal loan. Non-revolving credit is better for your credit rating because the banks report every payment so your Fair-Isaac (FICO) score will get a 5 point bump every month. Revolving credit sucks in this regard because you don't get FICO credit until you bring the balance to zero, so you only get a single 5 point bump when it is paid off. If you only use the card for, say, buying gasoline, and you pay if off completely every month then you get a 5 point bump each month. Having credit cards with zero balances does not help your FICO score. Having revolving credit where you have an outstanding balance greater than 50% of your credit limit is a derogatory and will subtract FICO points (as will any late payments).

So - my advice is get a car or personal loan first and have a good payment history. Otherwise, get some revolving credit (unsecured helps your FICO score more) and pay the entire balance every month. Once you get a good payment history going and have a good FICO score (700+) you can be real aggressive in demanding good interest rates.
 
I bank at National Bank of Alaska. I think there is a branch just down the street from your knife shop. I use their Master Card debit card for most transactions that cannot be accomplished with cash. If you have bad credit they have a collateralized card that you can use until you get your credit built up. As you probably know from working it a store almost every one up here uses a card that gives them Alaska Airlines miles. I get enough miles every year to make a trip outside once a year. By the way how cold is it down there in Anchorage? it is -47 here in Fairbanks this morning.
Chuck
 
I worked through an expensive University (Emory) and once I got out, even though I held my own without loans it was difficult to get credit.

One of the first things I did was talk to my bank. They agreed on a 5K loan as long as I took the 5K and purchased a CD in their bank. The cost is the interest you pay minus the interest on the CD plus the time value of the money you are paying out on the loan. It was one of the better financial moves in my life. Treat credit with all your wisdom at all times.
 
something not mentioned here is a "secured" credit card, this is where you make a deposit say 100-800 dollars and the credit company issues you a card for say 1000 dollars if you deposit the 100, your bank would be a good place to ask for one of these as well, just gives you a couple more options and secured cards used to be easier to get, and no these are not "pre-paid" credit cards.

Dave
 
akivory said:
By the way how cold is it down there in Anchorage? it is -47 here in Fairbanks this morning.
Chuck
Click to expand...

Cold to me. I know it will sound sissy, but it's -3 with windchill it's -11. So not too bad :D
 
Planterz suggested keeping 2 cards even if you're only using one. It may not be a bad idea, but be aware and try not to keep all of your 'bankable' credit limit on cards. Having 'access' to a lot of your available credit can hurt you for things such as mortgages and car loans. Having too many cards even without balances make lenders nervous because they know you can over-extend easily.



regards,
bill o.


....edit: Sorry, but I missed that Gig gave the same advice at the end of his post.
(but is good thing to repeat anyway, I think)
 
akivory said:
I bank at National Bank of Alaska. I think there is a branch just down the street from your knife shop. I use their Master Card debit card for most transactions that cannot be accomplished with cash. If you have bad credit they have a collateralized card that you can use until you get your credit built up. As you probably know from working it a store almost every one up here uses a card that gives them Alaska Airlines miles. I get enough miles every year to make a trip outside once a year. By the way how cold is it down there in Anchorage? it is -47 here in Fairbanks this morning.
Chuck
Click to expand...

Chuck, Off topic, but can you help this guy out??

http://www.bladeforums.com/forums/showthread.php?p=2864145&posted=1#post2864145

It's regarding/identifying ivory :D ;)
 
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