1) Length of credit history - I can't do anything about this, I'm only 22 and my (one) credit card has been open since I turned 18.
2) Amount of credit lines - I can do something about this, as I only have one line of credit (my super low-limit credit card).
My question is this: What's the best way to go about opening more credit lines? Should I just wait until I get a mortgage? Should I open a new credit card or three and just rarely use them? Should I take out a loan for nothing?
Thanks for any help.
Pretty much, you don't need a giant bucketload of credit cards or anything to have 'good' credit. One card that you've routinely paid each month and carry a small balance on should be more than enough. You'll get very favorable credit rates and such provided you have a decently paying job.
Unless you need credit for something, don't get more than one card. MAYBE get a gas card and pay it off monthly or something, that should have a low limit. Just don't get a store card (like, say, from Target). Those tend to look bad, from what I've seen.
But, really, time and responsibility are the best ways to raise your score.
Another factor can be history with your bank. If you have a good, long-term relationship with your bank, they'll treat you much better when it comes time to sign a loan for a house or car.
Finally, while the credit score is important, for major purchases (house, car) it's just as important to have a good income and some savings. I know it sounds obvious...but the overriding concern is your ability to pay it back, not your credit score. Unless it's abysmally low, it won't disqualify you, but simply cost a few points in interest that you can usually make up for with additional payments. But even if you have perfect credit, no one will loan you the money for a Ferrari on a $20K salary.
--Satan, quoted by John Milton
Thanks guys!
Step 1: save $1000 emergency fund.
Step 2: Debt Snowball (pay off smallest bill first, roll that amount into next biggest, rinse, repeat)
Step 3: Save 3-6 months income (Put it in a mutual fund or something. Somewhere you can access it quickly without paying fees for doing so)
The rest of the stuff can be found here.
He's a religious guy, but all of his stuff works! I've seen people I know pay of 10's of thousands of dollars in debt in no time.
anyway, good luck with that.
Blindy. fucked around with this message on 01-01-2012 at 11:05 AM.
Also, it's bad advice to avoid credit cards altogether, unless you have no willpower and habitually abuse them. If nothing else, paying for something with a credit card gives you legal recourse if you get ripped off, in some cases, which you won't have by forking over cash. And, properly managed, cards are a smart way to consolidate purchases and keep records of them.
And OBTW, $1000 is sort of a pitiful "emergency fund." I can't think of too many events I'd categorize as an emergency that can be fixed for less than a grand.
--Satan, quoted by John Milton
quote:
Bloodsage must read alot of poetry:
And OBTW, $1000 is sort of a pitiful "emergency fund." I can't think of too many events I'd categorize as an emergency that can be fixed for less than a grand.
$1000 is a pretty shitty emergency fund, but it's dumb to have a big emergency fund when you're paying 30% interest on debt. You can use the credit cards as your emergency fund.
The most important thing about getting out of debt is realizing that you can't buy anything new that you don't need until you pay off the things you already bought.
quote:
Bent over the coffee table, Blindy. squealed:
$1000 is a pretty shitty emergency fund, but it's dumb to have a big emergency fund when you're paying 30% interest on debt. You can use the credit cards as your emergency fund.The most important thing about getting out of debt is realizing that you can't buy anything new that you don't need until you pay off the things you already bought.
Tru dat. Gotta prioritize the goals--tough to pay off debt, build an emergency fund, and save 6 mos salary all at the same time (effectively).
--Satan, quoted by John Milton
This use of credit cards is completly alien to me.
quote:
Bent over the coffee table, Tarquinn squealed:
Most people in the States use their credit cards to buy stuff they don't have the money for? Do I get this right?This use of credit cards is completly alien to me.
Some people do. Not everyone, by any means.
--Satan, quoted by John Milton
quote:
Tarquinn must think they're pretty smart:
Most people in the States use their credit cards to buy stuff they don't have the money for? Do I get this right?This use of credit cards is completly alien to me.
I would say that the majority of people in the United States do not understand that the minimum payment will not actually pay off your debt in any reasonable amount of time. They buy a $2000 TV or whatever, then pay 100 bucks a month towards it for 5 years.
A recent regulations change required creditors to print on your bill how long it will take you to pay it off at the minimum payment as well as how long it will take at a slightly higher payment, so maybe some people are getting it now, but I doubt it, because our public schools are terrible and we're prioritizing teaching our kids intelligent design over how personal finance works.
quote:
Blindy. startled the peaceful upland Gorillas, blurting:
I would say that the majority of people in the United States do not understand that the minimum payment will not actually pay off your debt in any reasonable amount of time. They buy a $2000 TV or whatever, then pay 100 bucks a month towards it for 5 years.A recent regulations change required creditors to print on your bill how long it will take you to pay it off at the minimum payment as well as how long it will take at a slightly higher payment, so maybe some people are getting it now, but I doubt it, because our public schools are terrible and we're prioritizing teaching our kids intelligent design over how personal finance works.
Nice baseless rant, dude. I'd argue the majority probably do understand how credit cards work; it's just not fashionable to put them on the news, so you don't hear about the millions of people who use credit responsibly. I'd also be willing to bet a substantial sum that the vast majority of public schools don't teach ID, nor is it a national priority to add it.
Honestly, other than a warm wet feeling of superiority to a straw man of your own construction, what's the point of drivel like that? Hoping Dorothy will skip by and help you get a brain?
--Satan, quoted by John Milton
The facts are that 15% of the country has a credit score of less than 550, which is pretty hard to get without being completely over extended or missing payments left and right. The average US credit score is 692, which represents a mid to high amount of debt and making payments on time, or a reasonable amount of debt and a few missed payments. Only 13% of Americans have credit scores of over 800. Blindy. fucked around with this message on 01-02-2012 at 08:54 AM.
--Satan, quoted by John Milton
Although I appreciate your trying to help, Norim!
quote:
Gadani likes to say stupid stuff like:
I have way more than $1,000 in savings. I put away savings (or an "emergency fund") every paycheck. Also I have no debt.Although I appreciate your trying to help, Norim!
These things effect your credit score. They're roughly ordered by importance.
- Available Credit. It should be high enough to show that you aren't the kind of person who maxes out your credit cards all the time, but not so high that there is a risk you will overextend yourself, or that if you got another line of credit it would put you in that situation.
- Payment History. Don't miss any payments. If you have missed payments in the last 5 years but are in good standing with your creditor, sometimes you can call them and get them to remove the late payment record.
- Average Age of Accounts. The older the better. Brand new accounts will lower your score.
- Number of accounts. You want more than one credit account in good standing. Ideally somewhere between 3 and 8.
- Types of accounts. It's good to have at least one credit card or revolving debt account as well as one traditional loan account (I.E. Car Loan)
- Number of recent inquiries. Every time a creditor checks your credit score, you will take a slight ding for a month or so.
