Evening Gents,

Looking to get some solid advice on bringing myself into the "modern ages."

I am in college, and have a little less than a year and a half until I graduate. I have a prepaid credit card that I have been using since I was a freshman, a flip phone (obviously with no data plan), and a 11 year old car with 150K miles on it, and is probably in the "average" category in terms of how well it runs. I also have no established credit yet.

I have looked into two different ways to establish credit recently; one would be to invest in an actual credit card, (as opposed to the prepaid debit card, in which you continuously reload money onto it); the other is to look at getting a car and cosigning with my parents credit, the idea being their credit score would qualify me for the car, and by paying each month (under their name) I would start to build my own credit. I eventually told my parents that I didn't necessarily need a car right now, (just like I didn't need a new phone either) because I felt that by avoiding paying my own bills now, it would save me in the long run when I graduate and student loans start kicking in.

Was this the right decision, or should I start looking to get something newer now, and just pay the student loans when they start coming? The more I have given thought to this recently, the more I am afraid it will hit me all at once like a bomb.

I know there a lot of different options to this; I mean, I could get a no contract phone, for instance, or get a student credit card as opposed to a regular credit card. I still feel like holding out on the car for right now is a good decision. If I were to keep driving it for another year and a half, I'd be putting somewhere around 12-15K miles on it. I'm just curious to see what ideas are out there. If any of you have any advice, it would be greatly appreciated. Thank you.

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Mmmm... My advice would be to get the car. I've always been leery of credit cards (hence why I do not have one), and I bought my first car with saved cash. However, I did take out a loan to replace the transmission in ol' Dirty Gerty when it crapped out, and paying that off (along with always paying my utilities and student loan payments early) gave me a good enough credit score to get a decent rate on my own merits when I went to get my current vehicle. I've seen too many people get in way over their heads with credit cards, and something about using money you don't actually have rubs me the wrong way. I was pretty loathe to not buy my Jeep with cash, but making the payments is my way of bettering my credit score for an eventual mortgage. Just my two cents.

For the record, my car (a '96 Chevy S10 Blazer) had just turned 200k miles, and still ran fine. It was just getting to be too big a drain on gas, with my commute and all. I loved it, but it earned it's rest. I actually saw it yesterday; lil' ol' granny driving around in the car I lost my virginity in with tattoo parlor bumper stickers on it. Guess she didn't want to pry them off. Ah, fond memories.

You mentioned taking out a loan to pay for the transmission, but you don't currently have a credit card. Has anything happened to your credit score since? Am I correct in understanding that you continuously take out loans (in place of having a credit card)? And this will still impact your credit score the same way?

Contrary to what I said in my OP, I do agree with you on the "spending money you don't have" ideology. I guess I just looking at it from the wrong perspective. I'm not going to lie, the new car idea made me a little more at ease as opposed to the credit card idea (in terms of building up credit).

Your credit score is an amalgamation of different factors. I'm sure there are more financially literate men who could help you more than I, but this is what I know: Your score (at least your Equifax score) will increase when you make timely payments on outstanding loans and debts, such as monthly utilities. A credit card is only one way to influence your credit score, and one that (as I mentioned) can get out of hand quickly, especially for a student on a student budget. I don't want to take out loans; almost every time I have, I could have paid for the item in cash(I'm a stingy little prick, and I've been saving very thin dime I can since I was 10). However, a little advice from my mother (a corporate accountant) steered me towards taking a loan for large (read $2000+) purchases in order to better my credit score. Begrudging though I was at the time, taking on this responsibility (and paying them off as quickly as possible) has led to my having greater resources and options later down the road. Play the long game, my man.

As far as "Use it or Lose it", I am not aware of that applying to financial ratings. I've certainly never had a problem with it.

Due to some unexpected circumstances regarding financial aid, I've learned the hard way to be a little bit more frugal and not go out for beers with the guys as much as I would like to. I do honestly prefer to use cash as opposed to card, I just find that every now and then, there are flies where the green should be, and the card is there smiling at me.

In terms of the prepaid credit card, do you suggest keeping it then? It's good for use as a college student learning how to budget I guess, but it does get annoying when I've run out of money, and I have to call up my parents to bail me out by putting more money on it, and then having to wait for it to electronically transfer (or better yet, the new, no-fee card, that takes 5 days to upload when I transfer it online myself! -- please note sarcasm). I feel, at 21, having done it for 4 years now, it's getting to be a bit childish, but hey, that could just be me learning to manage my money.

Good information nonetheless, I appreciate the help. Thanks a lot! 

Glad to help, as a fellow young man.

I would keep the prepaid card, as I definitely understand the convenience factor. I never had one, but I've had a debit card since I was 14. I worked two full time jobs to put myself through school (Well, four, if you count my internship and the choir rehearsals and performances I had to do to maintain a scholarship). Call me a thick-skulled Greek; you wouldn't be the first, and it would be true at any rate. I wouldn't recommend that though; I compared the pictures from my high school graduation to my college graduation, and I looked like something Death scraped off his shoe.

 Here's a tip that I always employ at bars and casinos- lock the cards up at home. Bring only the amount of cash you can spare. That way, when it gets towards the end of the night, your discretion and mental checkbook are getting a little fuzzy, and that last beer is looking mighty friendly, you won't wake up to any unwelcome financial shortcomings.

In terms of feeling childish, well, you have to survive. That's the long and short of it. If it means hanging on to the parental tit a little longer, that's what it means. If you finish your program, you will have plenty of time to make up for it. If you don't, out of pride (and I have seen many, many people do this), you will have thrown away good money and time for naught. Just hang in a little longer.

Have you tried to run your credit report?  Student loans should be there.

Why do you want a credit history?  Are you thinking of buying a house in the next 7 years?  A car on credit?  Are you worried about what potential landlords will think of your credit report?  Potential employers?  If the answer to each of those 4 questions is "No," don't bother worrying about building a credit history.  Even if the answer to one or both of the second 2 is "Yes," I wouldn't worry much.  I understand the credit history in those contexts is more about red flags of lots of late payments than meeting a requirement.

Will you need a car when you graduate?  I understand hastening a planned upcoming expense, especially if there's an offer of help from your parents, but I find it's hard to plan 18 months ahead as you graduate from school.

You sound like the kind of person who can use credit cards responsibly.  I'd go that route because it's free, as opposed to the costs associated with a car.

I wouldn't necessarily rule out buying a place to live in the next 7 years. I'm 21. Maybe not a house, but certainly an apartment.

If I was to hold out my car until after I graduate, then yes, I would certainly start looking at investing in a new(er) car. It doesn't have to be brand spankin' new to appease me; something used in good condition will suit me just fine. In fact, that's probably the only way I'll look.

And will you need to buy that car on credit?

I'm no expert, but student loans + credit card should be enough for your purposes.  There's only so much you can do, since so much of a credit score is based on length of credit history.  6 years out of school, with a 12-year credit history, I still have that "ding."

Limited credit history will keep you from getting a decent mortgage or car loan.

I most definitely agree with that statement.

If anything, I feel like I would adopt your second method of using a credit card. I still agree with what Nate said earlier; I'd rather have cash than credit. I'm a college kid with a part time job; I don't make a lot of big purchases. If I did, I feel that would be a time to use credit. Thanks for the tips (to you as well Rebekah)

I just pay my balance off every month.  I don't keep a $0 balance by paying mid-cycle.  Where I find credit cards most helpful is recurring bills - gym membership, cell phone, Netflix, LinkedIn.  PayPal and other direct deductions from a checking account will work for some, but not all, of those.  If they're on a credit card, I write 1 check each month, rather than a check for each, and I only have to worry about the 1 bill being late, and I always have 3 weeks to pay it.

Plus you sleep with a banker :)

Not quite on either the sleeping with or the banker part, but that's immaterial.

I've had at least one credit card since I was 18 - more than 10 years.  I have 5 right now.  I've always paid the balance in full each month, and I've only been late once, out of hundreds of monthly credit card bills.  I guess I'm unusual, though my parents are similar with their credit cards.  I suspect there are millions of people like us, but because the whole point is we don't generate dramatic (sob) stories, you don't read about us. 

My feeling is anyone raising these issues at 21 is more likely to be like my family than the stories giving rise to anti-credit-card warnings.  It's like with nutrition advice; unlike most Americans, I'm usually looking for higher-calorie foods.  I ignore the conventional wisdom wrt nutrition and credit cards.


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