Understanding your credit rating

[SongsOfDragons]

If/when the time comes that you wish to buy a car or a house, unless you are prepared to pay the full amount in cash, then yes, not having a credit history can bite you in the butt. No credit history may also be used against you when applying for insurance and/or jobs. It sux, but it happens.

The answer's probably so glaringly obvious that I missed it, but what can I do about it?

[greensinestro]

I don't particularly want to get a credit card because I like the swiftness of my debit card.

Is that good or bad? Is my not wishing to get credit putting a ? on my record and will it screw me over?

Actually, it[I] can [I]be bad. I went to high school with a lady whose parents flat out refused to get any kind of credit card. They always paid in cash, yet always had a hard time getting a new home or car because of it.

[draftermatt]

The answer's probably so glaringly obvious that I missed it, but what can I do about it?

Get a department store credit card. Get someone to cosign for it if necessary. (Seriously, my mother was on my first credit card because they wouldn't give me one).

Use it to buy a pack of gum, or some socks, small stuff each month. And have it for emergencies (for that store only). After 6 months to a year apply for a real credit card through Washington Mutual. They are pretty good at getting cards to people and they always raise your rates reguarly.

Again, don't use it except for sparingly if you don't want to. Getting into the habit of charging everything is bad. But not having a credit history hurts you because most banks won't lend you money without collateral, credit history, or they know you really well.

Then you start your way to a nice credit rating.

As to the person who couldn't believe they kept raising your rate, there's a good reason for it. They wanted your money. The more you charge, the more your interest fees keep piling up, so the more money they stand to make. That's why they raise your rates, call you when you don't use it in a while, send you coupons and stuff so you go spend money, etc.

[protege]

My grandparents never had credit cards. Everything (cars, things for the house, etc.) was paid for in cash, which meant they had very little credit. In their town, most business deals were done over a coffee and a handshake. Eventually, they had to get one. I don't remember why though.

[Gurndigarn]

I'm probably rated as a young'un on this site, being only 20 years old. I only have a debit card - I had one on my previous account before that was closed for my student account. I've never been overdrawn

That's a good start.

though I do have the safety net there

That's even better.

I've never had to do anything like mortgages or loans except for my standard student loan. I don't particularly want to get a credit card because I like the swiftness of my debit card.

Is that good or bad?

Good, generally. It shows you have the crucial basics of personal finance down: don't spend more than you earn. You wouldn't believe how many people miss that one. Banks love these people.

Now, unless you're planning on buying a house as soon as you leave university, you don't have to freak about building a credit history quickly. Your student loan will be a start on it, and if you actually save enough money for a traditional down payment (20% of the total house cost), that will balance not having had many loans during your life.

[Seshat]

Actually, simply being a regular payer of bills let my husband and I get a home loan.

Neither of us owns a credit card, but we have a paper trail of paying bills on or before their due date except for rare, genuine financial crises. And then we have a paper trail of contacting the company in advance of the due date and making an arrangement.

However, we were lucky and could provide a sizeable deposit, and bought a cheap house. Which doubtless also factored in - our repayments are less than our rent in the previous house.


Pretty much everyone's right, though. Want a good credit record? Pay your bills on time every time, or call in advance of the due date and make arrangements. Get some sort of low-limit credit, use it for teeeny purchases and pay it off every month, keep the rest of the balance free for emergencies. (And pay that off if you do use it!)

[Pinkie]

The plus side to having sucky credit (yup, that would be me!), is that no one wants to steal my identity!!

[trunks2k]

I've never had to do anything like mortgages or loans except for my standard student loan. I don't particularly want to get a credit card because I like the swiftness of my debit card.

Is that good or bad? Is my not wishing to get credit putting a ? on my record and will it screw me over?

(I am not a credit expert)

AFAIK, essentially, you have no credit, which is better than bad credit. You have credit lying in wait until you graduate (your student loans) those will show up on your credit report but they don't really have an effect on your credit score because they aren't due to be paid off yet. It'll just list you as having a debt. If you make the loan payments on time, it will look marvelous on your credit report once the loan is due.

Now, the potential downside to not having built any credit, is that when it comes to when you want to get a loan or anything, you are less likely to get a good rate and/or you will need someone to co-sign the loan. Some landlords and the like might even look at your credit history to see if you are likely to be a good tenent (bad credit report == high potential of no payment).

Personally, I'm what credit card companies apparently call a "moocher" or a "leech". I (almost) always pay off my credit card fully every month, so I get no interest or extra charges. But, I get all the benefits of having the card, like reward points or money back depending on the card I use.

If you can controll your spending, it's a wonderful tool.

[ShortTemperHatesStupidity]

The answer's probably so glaringly obvious that I missed it, but what can I do about it?

Even better than getting a department store card-get yourself a secured credit card. Basically this is a card that you put down the "limit" on.

Lets say you save up 700 bucks. You put that on a secured credit card. You now have a credit card with a $700 dollar limit. To all reporting agencies, this looks like a regular credit card. Use it for small purchases which you can pay the entire balance off immediately (gas, snacks, etc.) Also, paying any bills on time (cell phone, utilities, rent) can help. When you go to apply for things like a house, you can usually submit a letter of good standing from your apartment complex to verify that you're an on-time payer.

[SongsOfDragons]

Thanks, guys. You've been really helpful - I'll go and query the parentals as to what they would help me do whe I go home for Easter, but you've helped me understand the basis of the whole thing.

[CrazedClerk]

Here in Canada we do not have numerical credit ratings (I don't think...)

But your Credit counts for quite a bit.

Of the 7 years I've been with my wireless company, I've had two missed payments, both were paid in the full the following month.

On my credit card, I'm usually running a balance, but I have never missed a monthly payment.

My thought on credit is that it's useful for the BIG things: A car or a house.

With an exception to those who have student loan debt, any other time you find yourself in debt is in my view of case of living beyond your means and we've bred a whole society of this because credit cards are so damned easy to get.

I'm moving to the U.S. later this year so I'm going to have to start from scratch as far as credit goes. Wish me luck...

[hawkchick11]

Wait a second.. so you can go over your credit report, and get stuff removed off of it? Like if someone did a credit check on you?

I really need to look into this more, I know my credit rating isn't the best.

[ShortTemperHatesStupidity]

Wait a second.. so you can go over your credit report, and get stuff removed off of it? Like if someone did a credit check on you?

I really need to look into this more, I know my credit rating isn't the best.

When you get your yearly report, go through and take a look at all the inquiries. Anything that didn't result in a loan/credit card/other form of credit can be deleted from your report. I did it after shopping around for a car. I had something like 30 inquiries (each dealership had 5 different banks pull my credit-which I had no idea was happening). It totally ravaged my credit rating. Once I had my report, there's an option (when doing this online-not sure about paper) to request them to go through and basically clean it up. Now, inquiries from potential employers will not go away. Only credit pulls that would have required you to allow the pull in some way (credit cards, car loan app., mortgage app.) can be taken off. Also, things for late payments will typically not come off. They fall off after a few years I believe.

[Seshat]

Wait a second.. so you can go over your credit report, and get stuff removed off of it? Like if someone did a credit check on you?

I really need to look into this more, I know my credit rating isn't the best.

You can also request getting 'bad stuff' removed from it - but only if you have evidence that it was falsely added.

This is useful if you discover that a clerk somewhere made a typo and recorded you as being a late payer instead of the person with the next account number. It's also useful if you are a victim of identity theft - though in that case, police reports and the like are a huge help in getting the agency to cooperate.

Keep bills and such for 7 years. It's not just for tax purposes, it's so you have evidence for cleaning your credit record if you need to. They WON'T clear out stuff just on your say-so, they will want to see the evidence.
(My method: filing cabinet for the current year, archive boxes labelled by year for the previous years, shred or burn the oldest archive box and refill it with the latest year once tax time is dealt with.)

[Andara Bledin]

Disclaimer: I am not involved in the credit industry in any way. The information given is to the best of my knowledge, but may contain inaccuracies.

In some cases, having bad (but not abysmal) credit is actually better than having no credit.

If you have no credit, then you're a mystery. Those looking have absolutely no idea how you will be have.

If you have bad credit, where you've paid things late, and maybe had some things go to collection, but you have otherwise taken care of, that will tell prospective creditors that while you might be a hassle to collect from, you will eventually pay.

Good ways to accrue positive credit ratings include all forms of regular bill payments. If you can, get a utility in your name, even just cell phone service. Another option might be to save up enough money to make a full purchase at a store that also does rent to own. Sign a contract for the rent to own, and pay the monthly payments for a bit and then pay off the remainder before you end up paying beyond the direct purchase price. Anything with a contract and a signature should be good.

Also, have a savings account that you essentially ignore. Just put the minimum in and then pretend it doesn't exist.

^-.-^