I think I left the teller at the bank genuinely disturbed when I told him that “If I can’t afford it, I just don’t buy it.” “What about a car? Do you drive a car?” he inquired, his voice toning on the edge of fear. I told him, “Yeah, I have a vehicle. I bought it used for under $3,000.” He looked physically pained. “What about if you want to buy some kind of new appliance? Or furniture?” he persisted. I stared at him blankly. “My couch was $5.00 at Goodwill. Like…I just buy shit cheap or I don’t buy it at all. The only thing in my life that I make payments on is my house, my bills, and my insurance, and that’s split five ways because I have housemates.” The young man looked horrified? Appalled? And somehow also awed? This guy couldn’t have been much older than me. But it seemed that he’d never even considered the option before of saving up for something to purchase it outright instead of using a credit card. Am I the only person in my general age group (just turned 26) who’s never owned a credit card, and who has forgone basic comforts in order to save up for items so you don’t owe money to anyone, like, ever?
If you’re living in the US without a credit card at 26, you’re playing with danger.
No credit is viewed as the same as bad credit. Which means you could be denied if you ever do need to rent an apartment or a car. Hospitals and clinics are also less likely to allow payment plan programs for people without good credit.
The best thing you could do at this point is apply for a credit card you’re eligible for and pay a few things (I do gas and groceries myself) with it each month. As long as you keep it to zero balance each month there is no interest and there will be proof of you not having debt (instead of just the absence of debt).
what.
This is legit how it works. The system requires records on you, or else. So you need a credit card and worse, you need to have a record of using it, even if you pay it off every single month. Unfortunately, the formulas used to determine credit score are secret, so we also have people suggesting that your credit rating is helped if every so often you do pay a bit of interest. The whole thing is a complete mess. If you don’t have a credit rating/history, then any loans you manage to get will be at extremely high interest and will require much more effort than they really should.
what
yeaah let me just go get a card that i can’t pay off because capitalism is shit, even if i literally only buy a pack of gum that’d go well
If you pay it off in full every month there is no interest. Do what OP is doing but put some of that on your credit card and pay it off every month, and soon you will have a very good credit rating.
you skipped right the fuck over the “can’t pay it off” part huh
like credit cards are just not a viable thing if you’re poor and have shit income
And I’m saying to literally not put anything on it if you can’t buy it in cash. And I’m aware that they fuck over poor people, but yeah, that’s the system that’s in place. This is advice for navigating it, which is how to obtain good credit which helps a lot.
Right like don’t make minimum payments, put your gas on your credit card then that same day pay the credit card company online then don’t worry about it for another month. It’s an absolutely shit system, but in the event of an emergency it’s good to have.
I have had to explain this to a lot of people in my life, but it’s true- no credit is the same as (or worse than!!!) bad credit. What having (and using) the card actually shows is that you are capable of (and actually follow through on) making regular payments: ie, it is proof of having a steady income (even if you do not actually have a steady income). It is showing you reliably can pay for things you purchase (you do the same thing with cash but there’s no record), and that if you borrow money you’re good for it when it comes time to repay, which is what your credit score is all about.
Think of it this way. You have a credit card, which is your credit tracking device. You use the card to tell someone “I will pay for this thing with borrowed money.” They agree to allow you to pay with borrowed money. You then turn around to your credit card company and say “Thank you for allowing me to borrow your money, I will now pay you back with my own money.” (which, if you repay them promptly enough, you can repay them the exact same amount you borrowed, rather than paying them more than you borrowed [which is what interest is])
The credit card company then recognizes that you successfully borrowed their money AND returned it safely, and they pass that information along to credit tracking companies. Each time you do this, you gain credibility. If you do this enough times, you are considered a credible borrower of money, so that if you ever are in a situation where you need to borrow a large sum of money (for example, a mortgage or a car or a hospital bill or whatever), companies with money will look at how well you have returned money in the past, and say Ah yes, this person repays their debts well, so we can lend them our money.
So like, do what the above folks are recommending. Get a credit card and use it to reasonably purchase things you already have to buy- put a batch of groceries on the card. Go home (or wherever you can use the internet), pay it off as if you had paid cash in the store for it. There is no extra fee or interest for doing this, and you are leveling up your credibility in case of emergency later on in life.
More shit in adult life they never tell you about in school
As someone who’s credit history was wiped to zero after an ex stole her identity.
Having no credit is significantly worse than having bad credit. I’ve been fortunate as of late and nothing bad has happened to me, and I’m set to inherit a house and the like. But, if say the furnace dies, or the hot water heater, or I get sick again (since my insurance company jacked my premiums to $1300/mo), I’m proper fucked.
One of the big suggestions my financial guy (I have some stocks and bonds, planning for retirement) suggested was, getting a secured credit card. Basically, it works like a normal credit card, but you put your own money down as a collateral/financing base (generally between $200-500), the financing bank/institution then puts their backing behind you. Secured cards have a near 100% approval rate for those of us with zero credit, whereas normal bank backed cards you are less likely to be approved.
Before my husband and I married he had exactly no credit. We tried applying for an apartment, but had to do it in my name or would otherwise have been declined. It took a couple years to convince him to even have a bank account (he was 100% cash) and it was when someone stole his wallet that he realized how fucked he is. Cash gets stolen? You’re fucked. Credit card gets stolen? You call the credit card company (or the bank if you get your card through them) and report the theft. Then they deactivate the card and mail you a new one. Congratulation, you’re not fucked.
After a few years he was able to get one our bills in his name without having a massive safety deposit on it. It helped raise his credit. We have a shared bank account, and using his debit card has helped raise his credit. Because we’re married our credit score is averaged between the two of us, meaning if he has shit credit it destroys mine. We were able to get car insurance with low interest. We were able to get a rental home with immediate approval due to our credit score being fantastic.
We’re currently paying off our credit card. We maxed it out due to losing our home to a house fire. Yeah, we have renters insurance (GET RENTERS INSURANCE!!! It’s about $15/month and if shit happen they cover the cleanup, packing, replacement, and give you money for what you lost) but it took two months and they didn’t cover the cost of the safety deposit and first month’s rent on our new home. We had to replace all our food and various other things. We finally got our reimbursement money, slapped that right onto the card, and our credit score went from shit (due to maxing out the card) to AMAZING (because we made a huge fucking payment). We pay about $10-$20 over what our monthly payment is to keep interest down AND to make our credit score nice and pretty.
Get a credit card, pay your fuel or groceries or whatever with it, and when you get home pay it all off right away.
OP, I applaud you, and agree that it’s SHOCKING that somebody would look at you like you’ve got an owl on your head just for talking perfect sense. 😦
While I agree it’s not wise to have no credit, it’s not true that having no credit is the same as having bad credit.
A credit score of [–] is FAR better than having a credit score of 1.
For one thing, having BAD credit PROVES to a lender that you’re irresponsible with money. Having NO credit can mean many things to a lender, like you’re young, you’ve only just joined the workforce, you’ve just moved to the country, or even possibly that you ARE responsible, at least responsible enough to not get into debt.
For another, more important, thing: Lenders can (and do) always look at other factors, such as if you’ve consistently paid your rent and other bills on time, the regularity of your paychecks, how long you tend to stay in one home and job, your income versus the amount you’ll owe / the credit limit, the value of any collateral (house, car, whatever) versus the amount of the loan, and other factors, as well. Your eligibility for a loan is absolutely NOT based solely upon your official credit score, but upon the sum of all your available financial history. If it were only credit, then you wouldn’t be asked for a ream of paperwork when applying for a mortgage, for example, and many recent immigrants would never be able to get credit! Even if the places you pay bills to don’t report to credit agencies (eg a private landlord), lenders have ways of checking your financial past and may even simply phone up for references. But most major cell phone providers report to credit agencies, for example, so if you have a phone in your name, you most likely have at least SOME credit (so make sure you always pay your phone bill on time!) already.
I was able to buy a HOUSE with NO credit, because I was (and still am, actually) very much like the OP and didn’t buy things I couldn’t afford but prefer to save up for big purchases. But I was able to get the house, which I could never just save up for, all on my own with no co-signer and in my own name, for a few reasons. I got a very good deal on the house and had a big down payment saved up, therefore the amount of the loan was significantly lower than the value of the house, and already the bank had a viable backup if I ever defaulted. In addition, I had very steady income with paystubs from the same employer going back 10 years. I also had paid all my bills on time for like 20 years, and the lender was easily able to check references on that stuff, or at least enough of it to satisfy them. They straight up TOLD ME that I had basically NO credit, like the least quantity they’d ever seen, and that it was FUNNY to them and they literally laughed about how little was there (not in a mean way!), but that what they were able to see was very secure, so they were happy to lend me over 100k$.
My credit history now consists of ~5 years of paying a mortgage on time and a SINGLE credit card, and that’s it – as far as official credit goes, that is – and my score is nearly 800. It’s so good, in fact, that I have finally achieved a credit related goal of mine – I have been offered a fucking AMERICAN EXPRESS CARD! And the real one, too, not that kid’s stuff Blue card! Oh yeah, baby, I’ve made it! 😀 Starting with NO credit!
GET GOOD CREDIT ANYWAY – IT’S EASY
ALL THAT SAID, it is OF COURSE true that having good credit, even just a little, can make your financial life a hell of a lot easier. It’s definitely a good idea. Luckily, it’s not difficult to get, if you’re coming from NO credit. Cleaning up BAD credit is not something I have any experience in or knowledge of, so I wouldn’t dare offer advice in that department. @naturepunk as responsible as you are, you should have a perfect credit score in just a couple years or so, with NO hassle and NO money lost!
(because I’m a windy bag of farts and this is a complicated topic)
TL;DR HOW TO GET GOOD CREDIT, FROM NONE
-> Apply for ONE credit card —- Go to your checking account bank, Sears, or possibly Cabela’s -> Load up a decent balance fairly soon —- Don’t get anywhere close to maxxing it out —- 10-20% of your total limit is pretty good —- I don’t recommend going over ~60% of your available limit -> Keep activity going, especially the first year or so —- You want to have purchases at least once a month -> Pay the minimum balance ON TIME every month —- NEVER EVER EVER allow yourself to pay late! NEVER!! —- There is nothing wrong with paying a big chunk if you need, but… -> KEEP A RUNNING BALANCE AT ALL TIMES —- Do NOT pay the balance down to 0, ever —- When you get close to 10%, or if you get near 0$ balance, BUY THINGS! -> Every few/several years, request a balance increase —- Be SURE you’re eligible before requesting; it’s a real credit check -> REMEMBER: This is for CREDIT BUILDING, but it’s also YOUR CARD! —- Don’t be afraid to use it in emergencies if you need it! —- You can always pay it down, and it’s good to have a balance anyway!
(obv this is for anybody, not just the OP!)
NOW FOR THE DETAILS, IN MY SUPER WORDY STYLE: I cannot recommend strongly enough going to apply for a single credit card, then buying a couple hundred bucks worth of stuff on it right away to build up a balance. Go into the bank where you have your checking account and speak to somebody – an agent, not a teller – in person; your own bank WANTS you to have their card, and they’ll very very likely give you one with zero credit. The longer you’ve had an account with them, the more likely they are to work with you. If they won’t do it, though, a really great bet would be SEARS!! I know for a fact that Sears will extend credit to people with no credit score, and they’re pretty well known for extending to those with fairly bad credit, too. ALSO, Cabela’s owns their own private bank and issues their own cards, so they might be able to work with you as well. It’s definitely worth a try, and talking to a human being, face to face, is always a good idea if you’re having problems, no matter where you go.
If you get approved, just accept whatever credit limit they offer you, no matter how small (you can always change that later), and NEVER forget that number. [That’s your available limit, the amount of money that is, effectively, earmarked for you, available to you, and yours, whether you do anything with it or not. I’ll talk a lot about that number, and it’s important.]
When you get the card and get a balance
[how much you owe/have charged, total]
charged to it, don’t pay it off!Pay the minimumamount every month, or a little more, if you’re comfortable, but keep a balance. Also, obviously, make your payments ON TIME and never late. Of course, never pay less than the minimum (which will be automatically set on your bill), and remember you are under no obligation to pay any more, either. Paying the minimum or paying more will have no impact on your credit in any way, but the more you pay, the more frequently you’ll need to charge to the card and add to the balance again.
NEVER pay your balance off to 0$, whether every month or even just occasionally; KEEP a running balanceat all times. I know that sounds counter intuitive, but hear me out. It doesn’t matter terribly how much balance you keep, but a significant percentage is good, so say if your credit line is 1000$ (like you’re maxxed out if you charge up that amount, total), then keeping 50-100$ is a pretty good place to start. Keeping a running balance of only like a few bucks is pointless and may well appear to creditors just the same as zero – so let’s say aim to keep a target minimum balance of at least 10% of your available limit at all times – DO NOT pay that off! When you go to pay the bill every month, check the balance, and if you notice that you’re approaching your target minimum balance, or God forbid you’re about to pay it off to 0$, go buy something right away! Just keep a target minimum balance number in mind
(say around 10% of your available limit)
and treat that number as “paying it off” in your mind.
DON’T charge it up to max, either – in fact, I wouldn’t charge it up more than 60% of the total available limit – if you can help it. So if your max is 1000$, I wouldn’t recommend building up a balance more than 600$.
I don’t think I’ve ever charged up 40% of my total available limit, and even when it’s active it’s usually only about 20%, but it still builds the hell out of my credit every month! The card company would prefer if you maintain a balance of probably 50% of your total credit line or more, but fuck them, I’m not comfortable owing that much money at any one time. Plus it’s credit reporting agencies we’re worried about, not issuers! What the agencies care about is that there is activity, there is a high available limit, a nice big chunk of that limit still unused, a chunk of that limit still actively owed and being paid regularly, and the ratio of your income to the total you currently owe (all credit balances).
To build up and keep up that balance, you don’t have to use the card to buy things you wouldn’t otherwise buy, or to get things you can’t afford, just to build your credit with it. You can just use it to always pay for a specific and regular purchase, like your gas or your groceries or a bill. Then when the payment is due, pay the minimum, rather than everything you’ve charged, or pay whatever amount will get you down to that target minimum balance you want to keep. That said, it might actually be easier to use it to buy, for example, the nicer, more reliable item(s) that you’d usually just have bought the cheaper version of, or to donate to charities when otherwise you wouldn’t be able to afford that, or to splurge on the occasional expensive treat. I do use mine to buy the occasional designer item or really expensive outdoorsy thing, because that way it puts one pretty big chunk onto the balance, and I can take my time paying it without needing to use it every month just to maintain a balance. However, my husband uses his every time he buys gas, and he has a hard time keeping the balance above 0 and has to buy other things on it here and there.
So as you continue to use and pay, use and pay, use and pay, and MAINTAIN A BALANCE without reaching your limit OR paying your balance off completely, your credit will just stack up. Every few/several years, as long as you’ve made all your payments on time in the interim and maintained a good balance and kept up consistent usage, you can call up your card company and ask them to increase your credit limit. Some cards may actually do this for you automatically and just send you a letter informing you that they’ve increased your limit, but if they never do, you can request it yourself or at least ask them if it’s something they do on their own or if you have to request it. Increasing your available credit limit will boost your credit score; but remember it will probably be a good idea to maintain a slightly higher balance when you’re extended a higher limit, too. ALSO remember to make sure you don’t call to ask about an increase within a couple months of doing anything that will officially check your credit , such as buying a car, getting a new phone contract, applying for a mortgage or a new card, OR requesting your credit rating from certain agencies that appear on your history (among other things) – and the higher value the thing, the longer I’d wait, though I don’t know how necessary that actually is. It’s just what I do; I never do more than one credit-related thing within months of each other.
One important thing to be very careful about when considering requesting a limit increase is that it does appear on your credit. It’s a credit check, and it leaves a flag on your history. Therefore, if you are DENIED the increase for any reason, it LOOKS on your credit as though you were denied a credit card or loan or whatever, and that alone can really damage your score. You want to REALLY be SURE that you’ve been consistently using your card well if you’re going to do this. It’s NOT something that’s 100% necessary to build up solid credit, so it’s not worth it if you don’t know for a FACT that you’re an excellent candidate for an increase. But if you ended up with a Baby’s First Sears Card with a total limit of only 400$, and you’ve had a pay raise, paid all your bills on time, and been a good card user, then it IS going to be VERY important that you get that increase, because an available limit that low will hold you back from getting your score above a certain number. You really want to have extended (AVAILABLE, not USED) to you as much possible potential money as you can get! That’s the best possible way of boosting and maintaining a high score, and you don’t have to use it all!
More than anything though, remember that it’s your card to use (or not use) how you want! If you need to use your card for an emergency, USE IT! But if you’re not comfortable with that and can find another way, DON’T! If you need to max it out because you got into a car wreck and have to find a way to pay for a rental or whatever, that’s what it’s there for. IMO, that’s better than missing out on rent and getting evicted!
You can always pay it down, even if it takes a long time, and it’s not going to hurt your credit carrying a maxed out card for a few months. And even if your interest rate is high, try not to think of it like you’re paying XX% more for an item you bought; think of it as a monthly bill to which you pay XX$ per month. Paying that money now will save you THOUSANDS if not HUNDREDS OF THOUSANDS of dollars in the future, when the time comes to calculate your interest rate for a car or mortgage or business loan or home equity loan… Even if you were to max out a card with a 30% interest rate, you’re paying for your credit score, and that is a solid investment in your financial future.
Oh! One last thing! DO NOT CLOSE YOUR ACCOUNT, if you can help it! Really, that should only happen in extreme circumstances, BUT some companies (Cabela’s is one, Sears is not) will close your account for you if you don’t use it often enough! Don’t let that happen! If they send you a letter warning you that you haven’t used it in a couple years so they’ll be closing it within 90 days (or whatever) – and they WILL give you plenty of notice – contact them, buy something with the card, something! It looks really bad on your credit to close an account, especially if you still have a balance to pay off, but even if it’s paid off it looks bad. It would suck to build up all that headway for a preventable setback like that, so just get in the habit of using the card, and don’t close it or let it get closed!
(Ohhhhhkay! That’s a LOT of words. I really hope that’s helpful to somebody! I apologize if it’s disjointed or if there are things missing or typoed, I haven’t slept well in days and I’m exhausted, and here I am up late as heck again! I hope it makes sense! Oh and I really apologize if any of this is really obvious stuff you already know. I wanted this to be info anybody could use.)
Something nobody has mentioned that my friends all did: go to your local Kay jeweler and finance a watch… that’s how almost all my friends established their credit. Just be sure you have enough saved back to afford it up front before you finance it.
OH MY GOSH, YES! ^^^^^^^^^^^
YES YES YES YES YES!!!
YES that is an absolutely BRILLIANT way to get a good little bit of credit history!! A place like Kay jewelers or Jared or something like that WILL report to credit agencies, and they WILL be able to work with you!
AND it’s a great way to get a line of credit going, while NOT buying anything you don’t have the money for and technically going into debt! If you save up the money for an item, and keep that money in your account (or even stash away the physical cash and go into the shop to make the payments!), you can still just get the credit for it and use that saved up money to pay it down!
And if you have bad credit or no credit and have a problem with getting a line extended to you, you may well be able to work with the people there and prove to them that you have the cash to pay it, and that may help them decide to extend you that line of credit!
REMEMBER, you’ll need to save up a little bit OVER the base cost of the item, since you’ll be paying additional in INTEREST. And DON’T PAY IT OFF EARLY! Make the payments exactly as scheduled, or you won’t see the full benefit of the credit you’re building!! It’s REALLY only good to pay off loans early and/or in full if you’ve already got good established credit. MAKE THE SCHEDULED PAYMENTS EXACTLY AS PLANNED, and KEEP A RUNNING BALANCE AS LONG AS YOU CAN! What the credit agencies want to see is regular payments, made on time. They don’t care much if you pay it off early, and the LENDER doesn’t want to lose out on all the interest you’d be paying if you stick to the schedule.
It does NOT help you to pay things off early if you’re trying to build credit. I can’t stress that enough.
Now, I personally don’t recommend going to a privately owned mom n pop shop, or a pawn shop, or anything else like that, if you’re doing this. They are not guaranteed to report to credit agencies the way the major national chains do, so all you’d be doing there is wasting your time and the additional money for interest.
I wish I could make the text of your post appear in bright red blinking flashing… hang on a minute!
It’s not perfect but hey! There we go! 😀
I’ve never seen somebody excited for anything I’ve ever said… thanks, it’s a little bit of sunshine on an otherwise cloudy day for me! I just hope it helps someone else along their way. One extra benefit is that you get a decent watch.
Well! 😀 It’s sooooo important, and exactly what you said REALLY IS the VERY BEST way to get your credit jump started from nothing, and I didn’t even think of it! I actually know several people who did exactly that, too, and I just did not think of it!!
And yeah, I really really hope this can help some people, that’s another reason your post is so brilliant – it’s such an easy thing to do that people NEED TO KNOW.
Credit is HARD, but it’s sooooo unbelievably important in this world, and probably more now than ever with the internet and online commerce! If you start building your credit young, even just a LITTLE, your whole future becomes easy. Not easier – EASY. And doing the jewellery shop thing is the perfect way to get started. And I know from experience that if you don’t work on your credit young, if you don’t think about those things, your financial future is HARD. It can take decades to fix bad credit, and years to start good credit from none, so if you start early and easy, it’s just a life changer.
andtheytoldustotellyouhello 