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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Actually it is not immaterial, certain professions and job titles have much lower errors in the reporting of the credit history.  Senator and Representative being some of the titles that have a much lower change of having faulty information.  

Seems like a chicken-and-egg issue.  Certain professions are going to be more inclined to monitor their credit reports, and more inclined to know how to do so.  I can tell you my husband's time as an investment banker seems to have made him unconcerned with individual credit histories and credit reports.

...unconcerned with individual credit histories and credit reports.

+1

I am unconcerned with these as well.

The credit companies like to see the following:

Good Income

A bit of cash on hand

Timely bill payment

but most of all, more than anything else, they like to see your "Revolving Credit" active. This means they like to see you getting things financed and paying off the debt. So, the thing you want to do is generate revolving credit without actually having debt or paying interest in so doing. To that end, if you can get a checking account attached to a line of credit account with no interest paid if you pay the balance in less than thirty days, you can generate a lot of activity without incurring interest, penalties or fees. Basically, every so often transfer money from your line of credit to your checking account, then pay it back in full quick like a bunny. Then, sprinkle in a few store credit cards that don't cost anything to get and have a low maximum line of credit - Hardware stores like Lowes or Home Depot are good, but watch Home Depot, they KILL you with late payment fees . Pay them in full each billing cycle, too - in short, you want to gin up alot of credit activity.

Soon enough, everyone will be kissing your butt and offering you department store cards, etc. Use them for the discounts, frequent flier miles, or in the case of Costco American Express cash rewards.

But NEVER, EVER pay interest. That should be only for true blood-squirting emergencies.

Better to take the money you would "invest" in establishing credit via annual fees, one time fees, etc, and put it into brokerage funds like Mutuals or ETFs - Earning 10% beats the SNOT out of paying 19%.

Focus on building your net worth, not your credit rating. 

Interesting solution. I must admit however, I am quite new to dealing with all the ways of money, and the terminology of it all, so I will do some research into what you are saying.

Juggling all those credit cards without going into debt is not as easy as it sounds.  Once you get used to buying things with borrowed money, you can end up nickel-and-diming yourself into a giant credit card debt before you know it.  There's a reason they give away airline miles, etc. ... because it lures people into debt.  Don't fall for the marketing scheme.


You're young, and in the prime age-range to start off on the right foot.  I'd recommend avoiding the debt cycle entirely.  No credit cards at all.  Live below your means.  Pay with cash ... even for cars.  Save up an emergency fund of 3-6 months expenses.  Then, start investing, Roth IRA's to start with.  With a bit of planning, and some common sense ... you'll be a millionaire before you're 50.  No credit score needed.


Read Dave Ramsey's The Total Money Makeover ... common sense financial advice.

 

JB

Credit cards are an issue where Dave Ramsey and I politely part company. His doctrine is that they are inherently evil, and to be avoided at all costs.

My doctrine is to use them like tools, suck every tiny free benefit out of the cards you can, and never let them make money off you. I have like a two-inch thick wallet dedicated to store cards. I never ever pay to get the card, never ever pay interest or annual fees, but often/always use them to pay less for something I was going to buy anyway. Why not get an extra 30% off at Macy's? Why not earn Skymiles - again, Dave and I part company here, I use my FF miles all the time. Why not get an extra 10% off at the hardware store? Why not get cash back at the end of the year on Amex purchases at costco?

I think for the undisciplined, avoiding cards at all costs is perhaps wise - but if you're that undisciplined it may be better to let your wife/mom handle your money PERIOD. 

It's rather like telling an alcoholic to avoid drunks by moving to a dry county. Better to have discipline. 

If you can't budget, avoid impulse buys, and pay your bills on time you're screwed wether you have cards or not. You'll just waste cash instead of credit.

With programs like Quicken, Money, and even Excel - there's no reason paying 100 bills on time is any harder than paying 2.

The goal is to spend as little as possible - to ask yourself before you spend a dime - do I need it or want it? if you need it, get the lowest price and buy the best quality. If you want it, think hard again and budget for it.

Make it last, wear it out, make do, do without - but when you gotta crack out the wallet, use every tool in your toolbox to spend the least amount possible.

I'd say get a regular credit card, without any kind of credit you're considered an unknown risk to creditors. Paying off your credit card in full every month, keeping up with your student loan payments, and paying your bills all demonstrate your ability to pay your debts and will keep your credit score up.

Look into getting a card with a modest credit limit and find out what your credit score is. I wouldn't look into taking out a loan for a car until you've started making your student loan payments and have figured out what kind of auto loan you can fit into your budget. 

Keep driving the car and save money for another used one. You will rarely ever spend as much money on repairs and maintenance on a used vehicle as you do payments on a new one. You can start saving for a couple of years now and then decide what to do when your engine/tranny go out.

I would also not take any credit card offer. Too many temptations to use them unwisely. The whole credit game is killing this generation. You don't have to have a credit history to be successful, you just have to have a credit history to buy stuff you can't afford. (and before anyone starts talking houses...there are manual underwriters out there still that will look beyond a non-existent credit history.)

With cars starting at 12-15K you almost can just save up for a new one and have the warranty also.   

Some more thoughts for everyone:  The electric company ran my credit report when I got the bill in my name.  Had it been below some threshold, they would have charged a deposit, I don't know how much.

Potential landlords running a credit report is pretty standard in this area.  I think my score was in the 600s (not good) when I signed my lease over 5 years ago, but at least I had a credit history and it showed on-time payments. 

It is now difficult to get a credit card before age 21, and I wonder what this means for young adults' first apartments.

Also, though they won't always admit it, employers look at your credit rating and your facebook page to see what kind of guy you are

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