Question about Credit

[Cain]

So, I have always had questions about what Credit really is, and how to make the best of it, and I have a few questions that I'd like to ask:

1. If you where to use a credit card to let's say, pay your payments/buy everyday items, and you always pay it off that day or at most a week later, would that improve your credit more then just buying and selling with money or debit?

2. How can you improve your credit score other then a credit card and paying payments on time?

3. What good is having a high credit score?

4. What is your credit score when you become 18? I mean, is their a standard everyone starts with?

 

[SFC Ollie]

So, I have always had questions about what Credit really is, and how to make the best of it, and I have a few questions that I'd like to ask:

1. If you where to use a credit card to let's say, pay your payments/buy everyday items, and you always pay it off that day or at most a week later, would that improve your credit more then just buying and selling with money or debit?

2. How can you improve your credit score other then a credit card and paying payments on time?

3. What good is having a high credit score?

4. What is your credit score when you become 18? I mean, is their a standard everyone starts with?

First off having a good credit score lowers much of the interest that you may be charged on things like a car loan. So it can mean a difference over a few years of thousands of dollars in your pocket.

Get one credit card. use it to buy your gas every month, and pay it in full every month.

Do not pay your cell phone or any type of monthly payment you have late.

Things like auto insurance can be withdrawn directly from your checking account.

Do not permit multiple credit checks for no good reason. In other words, do not apply for credit that you do not need.

 

[Cain]

So, I have always had questions about what Credit really is, and how to make the best of it, and I have a few questions that I'd like to ask:

1. If you where to use a credit card to let's say, pay your payments/buy everyday items, and you always pay it off that day or at most a week later, would that improve your credit more then just buying and selling with money or debit?

2. How can you improve your credit score other then a credit card and paying payments on time?

3. What good is having a high credit score?

4. What is your credit score when you become 18? I mean, is their a standard everyone starts with?

First off having a good credit score lowers much of the interest that you may be charged on things like a car loan. So it can mean a difference over a few years of thousands of dollars in your pocket.

Get one credit card. use it to buy your gas every month, and pay it in full every month.

Do not pay your cell phone or any type of monthly payment you have late.

Things like auto insurance can be withdrawn directly from your checking account.

Do not permit multiple credit checks for no good reason. In other words, do not apply for credit that you do not need.

Thanks! You're a great help Ollie .

 

[code1211]

So, I have always had questions about what Credit really is, and how to make the best of it, and I have a few questions that I'd like to ask:

1. If you where to use a credit card to let's say, pay your payments/buy everyday items, and you always pay it off that day or at most a week later, would that improve your credit more then just buying and selling with money or debit?

2. How can you improve your credit score other then a credit card and paying payments on time?

3. What good is having a high credit score?

4. What is your credit score when you become 18? I mean, is their a standard everyone starts with?

Will Rogers was humorist from the Depression era. He noted that a bank will only lend you money if you can prove that you don't need it.

That's what a good credit score indicates. You don't need the money. You can pay it back and you will pay it back. If you desperately need the cash, you will probably have a great difficulty paying it back. Lending has loosened considerably since Roger's day.

That's why the economy collapsed.

Credit was too tight during the depression.

That's why the economy collapsed.

Getting confused yet? Put aside 10% of everything you earn and you'll be able to burrow from yourself instead of someone else.

Confusion eases considerably when you have no debt. I haven't made a car payment since 1978 and haven't made a house payment since 2009. Now if that worthless wife of mine would just find the right job, I could retire.

Ahhh... Independence!

 

[Cain]

So, I have always had questions about what Credit really is, and how to make the best of it, and I have a few questions that I'd like to ask:

1. If you where to use a credit card to let's say, pay your payments/buy everyday items, and you always pay it off that day or at most a week later, would that improve your credit more then just buying and selling with money or debit?

2. How can you improve your credit score other then a credit card and paying payments on time?

3. What good is having a high credit score?

4. What is your credit score when you become 18? I mean, is their a standard everyone starts with?

Will Rogers was humorist from the Depression era. He noted that a bank will only lend you money if you can prove that you don't need it.

That's what a good credit score indicates. You don't need the money. You can pay it back and you will pay it back. If you desperately need the cash, you will probably have a great difficulty paying it back. Lending has loosened considerably since Roger's day.

That's why the economy collapsed.

Credit was too tight during the depression.

That's why the economy collapsed.

Getting confused yet? Put aside 10% of everything you earn and you'll be able to burrow from yourself instead of someone else.

Confusion eases considerably when you have no debt. I haven't made a car payment since 1978 and haven't made a house payment since 2009. Now if that worthless wife of mine would just find the right job, I could retire.

Ahhh... Independence!

I wouldn't call a wife worthless.

Hmm, well, I just want a good credit score, if for no other reason then it's good to have. I might have to do car payments, but I am not going to be paying much, and shouldn't have issues paying it.

Cell Phone wise I am getting rid of my cell phone once I ship out, whether I get one after I get through Basic is debatable.

 

[R.C. Christian]

Credit is one of the biggest scams ever waged on the human race. I don't have any, zilch. Cash only.

 

[RadiomanATL]

Here's my advice, take it or leave it.

1. Carry a balance of about 10% of your total available credit on your credit card. Paying it off every month is good if you have long term established credit, but carrying a *small* balance from month to month is better if you are trying to establish credit. The key is small. This only applies if you are young and are trying to establish credit. If you own a house and make monthly payments, then pay the whole thing off.

2. Pay all your bills on time. A cell phone bill will not help your credit if you pay it off every month, but it most certainly will hurt your credit if you fall behind. This is because monthly bills don't report to the credit agencies UNTIL you go into collections.

3. There is no "standard" credit score everyone starts with. The credit agencies don't look at your age. It's not even in their reporting. All they look at is your debt to income ratio. This is why when you are first starting out, and have no history, carrying forward a *small* monthly balance isn't a bad thing. Once you have a history though, pay the thing off in full every month.

4. Having a good credit score will help you when it comes to purchasing a house. Tremendously.

 

[xsited1]

I learned the importance of good credit from my Mom. She always spent more than she had, paid her bills late and had creditors calling her weekly. Because of this, I decided to do the opposite.

The Importance of Good Credit - Why Good Credit Matters

BTW, my credit score has always been in the top 1%. Because of this, I've never been turned down for a loan and always got the lowest interest rate available. Now if we can only get the government to do this we'll be in good shape.

 

[Cain]

I will do my best to follow everyone's advice, I am glad so many have knowledge on this. I will probably need really GREAT credit then since I plan to buy a farm later on in life in North Dakota.

I really hope I can get my credit score as best as possible. So, basically, do the right thing and don't get into debt seems the #1. I don't see how I could get into debt unless I was stupid about it. The only payment I should have is car and car insurance. Everything else is covered.

 

[GWV5903]

So, I have always had questions about what Credit really is, and how to make the best of it, and I have a few questions that I'd like to ask:

1. If you where to use a credit card to let's say, pay your payments/buy everyday items, and you always pay it off that day or at most a week later, would that improve your credit more then just buying and selling with money or debit?

2. How can you improve your credit score other then a credit card and paying payments on time?

3. What good is having a high credit score?

4. What is your credit score when you become 18? I mean, is their a standard everyone starts with?

The 10% balance advise Radioman gave you is the best way to get points in a short amount of time....

You want 2 to 3 cards with low limits, when you exceed 50% of limit it will usually have a negative effect on your score....

Keep in mind that car loans and home loans use two different scoring methods, for homes visit Free FICO Credit Score + Check Your Credit Report Online | myFICO for more info....

 

[Cain]

So, I have always had questions about what Credit really is, and how to make the best of it, and I have a few questions that I'd like to ask:

1. If you where to use a credit card to let's say, pay your payments/buy everyday items, and you always pay it off that day or at most a week later, would that improve your credit more then just buying and selling with money or debit?

2. How can you improve your credit score other then a credit card and paying payments on time?

3. What good is having a high credit score?

4. What is your credit score when you become 18? I mean, is their a standard everyone starts with?

The 10% balance advise Radioman gave you is the best way to get points in a short amount of time....

You want 2 to 3 cards with low limits, when you exceed 50% of limit it will usually have a negative effect on your score....

Keep in mind that car loans and home loans use two different scoring methods, for homes visit Free FICO Credit Score + Check Your Credit Report Online | myFICO for more info....

2 to 3 cards? What? That is the opposite of advice I have been given, nearly everyone says just 1 card.

 

[Mad Scientist]

Stay away from credit cards, they will ruin your life.

If you absolutely must have a CC then try to get an American Express card that must be paid off completely every month.

Credit scores are a scam. I had crappy credit when I bought both of my houses and they tried to stick me with a high rate. I lied and said other places were offering me a lower rate. I just played them against each other and both great rates both times. If you have a good job and not many bills, they'll give you a loan no matter what, just remember it's a game so play it to win.

Did I mention stay away from credit cards?

 

[Cain]

Stay away from credit cards, they will ruin your life.

If you absolutely must have a CC then try to get an American Express card that must be paid off completely every month.

Credit scores are a scam. I had crappy credit when I bought both of my houses and they tried to stick me with a high rate. I lied and said other places were offering me a lower rate. I just played them against each other and both great rates both times. If you have a good job and not many bills, they'll give you a loan no matter what, just remember it's a game so play it to win.

Did I mention stay away from credit cards?

Yea, I would NEVER let a card payment last over a week. I don't see really, why does it take credit cards to get credit if a debit card does the same thing, except without the risk of debt?

Yes, you did, and I will take your advice as best as I can. I might get 1, but I am NOT going to use it in emergencies, their is no emergency that requires me to use money I don't have.

 

[Douger]

Credit is one of the biggest scams ever waged on the human race. I don't have any, zilch. Cash only.

Exactly. " Credit" is another way to trap/enslave/cage murkinz. They're very easy to catch!
The weaker ones are under a bridge near you, but they don't have much fat, and might make excellent guard dog food when that time finally comes.
"Never waste a crisis"

 

[WorldWatcher]

>


Heaven knows I don't claim any expertise in finance and credit. The smartest thing I ever did was marry my wife. In her younger days she was in a relationship that torpedoed her credit and it took her a long time to dig herself out (no bankrupcy, she paid it off in full - but this was years before we met). Of course the dumbest thing she ever did was marry me, so I know I'm smarter then her.

But I digress...

2 to 3 cards? What? That is the opposite of advice I have been given, nearly everyone says just 1 card.

My understanding is that having **too much** credit can have a negative impact on credit score. Not only how much you currently owe, but how many and how large the lines of credit you have open.

The amount and variety of credit needed varies with the individual. A young person probably doesn't have the credit depth as an older person, but they also don't normally have the same credit needs. (Remember "needs" and "wants" are two different things.) My wife and I have two children in college. Each are members of Navy Federal Credit Union and each has a single, fairly low ($1000) limit on a Visa card. The card provides for convenient payment of basically gas/food. The only major expenses that either has used their card for is purchasing textbooks on-line and the occasional on-line purchase. In each case the cards are paid off by the end of the month as they are backed up by cash (well checking) accounts.

At 19 & 20 respectively they only "need" one card for occasional purchases, both are smart enough not to use credit to pay reoccurring bills.

Now Mom and I are in our early 50's and we are in a different situation.

We carry 2 Visa's. A "Platinum" card and a regular (rewards points) card. The regular card has a fairly low limit (again about $1000) is used exclusively for on-line purchases and for daily purchases, gas purchases, if we go out to diner, etc... (when we don't pay cash). The balance at the end of the month is always cleared. The "Platinum" card is there for quick access to credit and it rarely used at all. It's primary purpose is for "emergencies".


*****************************

In general I tell people to stay away from using "Store" cards (J.C. Penny, Home Depot, etc...) because they charge outrageous interest - in the area of 20-22%. However because we don't need them we have the opportunity to use them to our advantage. When we need items, we often get additional discounts purchasing something on the store card, then go home and pay it off immediately. That 20% sale item becomes a 25% sale on the card. However the store is banking on most people not paying the purchase off so they get extra revenue from the store credit card. Doesn't work with us.


>>>>

 

[Madeline]

Cain, you have a credit score now if you have a social security number and have ever done anything that would prompt anyone to make a report on you (applying for car insurance, opening a checking account, etc.). Everyone has given you great advice, so I will only add a few comments.

Your credit score is very valuable. Protect it by at least checking with all three credit bureaus at least once a year to see if there is activity on it you do not recognise, to undo the impact of identity theft. You can be more vigilant by subscribing to a service, and only you can decide if that's worth it. It might be while you are overseas, as you'd have a much more difficult time undoing any identity theft damage from there.

Many things affect your credit score, and certainly, paying bills late is one of them. So are incidential expenses at college, like an unpaid library fee. Check with your burser's office at school once a year that nothing has been overlooked.

The biggest factor in your credit score is your debt to credit ratio. You cannot have one unless you have unused credit, and you cannot have unused credit unless you have credit cards or a line of credit. That is why you should get more than one credit card. Ideally, you would want to have a borrowing capacity equal to about 1/3 or 1/2 of your annual salary...and Radio is right. Carry a small balance, of about 10%, so that potential lenders can see you are able to repay in a timely fashion.

Examine the terms of any debts you consider taking on, from school loans to auto loans. If you have a credit score above 700, you should always be offered a rate that is about 5 points above the Treasury rate, mebbe a bit more when you are under 25. Don't accept higher rates -- you can do better if you shop around.

Do not put your name on leases or utility bills that you will share with someone else unless you can pay the entire bill by yourself if they default. Do not ever ever ever ever ever cosign a loan for anyone, not even your own grandma. If tempted, just buy the thing for them yourself and let them repay you privately.

You are gonna have such a bright future, Cain. You ask questions most 36 year olds are just now starting to ask.

 

[WorldWatcher]

Yea, I would NEVER let a card payment last over a week. I don't see really, why does it take credit cards to get credit if a debit card does the same thing, except without the risk of debt?

A credit score indicates to a potential lender your degree of responsibility.

I know this may not make sense but the premise is that if you do all transactions with a debit card you are not borrowing money (i.e. using credit) so you are not establishing a history of paying off credit, as you haven't used any credit.


>>>>

 

[Cain]

Well, here is my situation, as of now:

The only thing credit wise I am going to do is a truck. I am buying a Dodge Ram 1500, not sure what year or how much, but I know I can make a 5000$ down-payment on it. I get 10% off of any MOPAR (Chrysler, Dodge, Jeep) due to a parent working under them, and in Tennessee sales tax is taken off for Service Members. So, let's say my truck costs me 20,000$ (that is way above what it should, but anyways) in the end I'll actually pay around 13,000$, after down payment and discount. So, I'll need a loan of 13,000$. I plan to have it paid off, max of 3 years, which will be, at 7% Interest, 910 dollars in interest, not too killer.

Basically, I'll need to take a 13,000$ loan out on the truck in the end. I have a car currently, but I do not want to take this with me, and I plan to sell it, but I am letting my parents keep what I put into it, because I owe them at least that for raising me. Would getting a 13,000 dollar loan be affected by credit score?

Other then that, credit will NOT affect me until I retire out of the USAF to buy a farm in North Dakota. Then it will probably play a HUGE role, but until then, their is nothing I really want, ever.

 

[Cain]

Cain, you have a credit score now if you have a social security number and have ever done anything that would prompt anyone to make a report on you (applying for car insurance, opening a checking account, etc.). Everyone has given you great advice, so I will only add a few comments.

Your credit score is very valuable. Protect it by at least checking with all three credit bureaus at least once a year to see if there is activity on it you do not recognise, to undo the impact of identity theft. You can be more vigilant by subscribing to a service, and only you can decide if that's worth it. It might be while you are overseas, as you'd have a much more difficult time undoing any identity theft damage from there.

Many things affect your credit score, and certainly, paying bills late is one of them. So are incidential expenses at college, like an unpaid library fee. Check with your burser's office at school once a year that nothing has been overlooked.

The biggest factor in your credit score is your debt to credit ratio. You cannot have one unless you have unused credit, and you cannot have unused credit unless you have credit cards or a line of credit. That is why you should get more than one credit card. Ideally, you would want to have a borrowing capacity equal to about 1/3 or 1/2 of your annual salary...and Radio is right. Carry a small balance, of about 10%, so that potential lenders can see you are able to repay in a timely fashion.

Examine the terms of any debts you consider taking on, from school loans to auto loans. If you have a credit score above 700, you should always be offered a rate that is about 5 points above the Treasury rate, mebbe a bit more when you are under 25. Don't accept higher rates -- you can do better if you shop around.

Do not put your name on leases or utility bills that you will share with someone else unless you can pay the entire bill by yourself if they default. Do not ever ever ever ever ever cosign a loan for anyone, not even your own grandma. If tempted, just buy the thing for them yourself and let them repay you privately.

You are gonna have such a bright future, Cain. You ask questions most 36 year olds are just now starting to ask.

Thanks for the advice, I owe you guys a lot. Well, I worry a lot lol, I just want to be able to do my life the way I want. Right now, I want that dodge truck to take me base to base, and later on I am going to really want my farm that I retire too, so I am trying to get as much of the stuff done now as I can, and be prepared. Preparation is key to success.

Yea, I would NEVER let a card payment last over a week. I don't see really, why does it take credit cards to get credit if a debit card does the same thing, except without the risk of debt?

A credit score indicates to a potential lender your degree of responsibility.

I know this may not make sense but the premise is that if you do all transactions with a debit card you are not borrowing money (i.e. using credit) so you are not establishing a history of paying off credit, as you haven't used any credit.


>>>>

Hmm, I think I am starting to understand, it shows the trust that you will pay off your debts?

 

[Madeline]

Cain, I like the Suze Orman Show a whole lot. She's a financial advisor who can make most things fairly easy to understand. She's on Saturday nights on CNBC and she has a website, suzeorman.com.

She's written a book you may want to read called "Young, Broke and Fabulous" that is geared to your stage of life and has a lot of great advice.

You owe us nothing. It's such a pleasure to help, and you give back to everyone else.