Seconding student checking. No minimum balance.

1. Get a credit card.
2. Buy only small things on it, silly things even, like chocolate bars (not sure if the USA has limitations on certain purchases but at least things you can afford easily)
3. Pay off each bill in full rather than let any interest accumulate. Not even a penny.
4. Watch your credit rating and credit limit skyrocket. (you'll start getting offers every friggin week of new credit cards, higher limit balance's, and even interest rate reductions)
5. Great success.

Yeah.. no.


OP, good luck trying to get a car, house, or anything requiring a credit check with absolutely no credit using that method.

Get a card and pay it off in full for a year, thats your best bet.

Excellent logic there. You have thoroughly convinced me.

Putting 'Yeah.. no.' after an excellent argument without adding anything of value whatsoever is just lame.

Oh wow I did miss that one bit.

If you never borrow (credit card or loan), your record is not 0.

Your record is inexistent. Void. They have no record, no information on you, and thus have no idea whatsoever of your ability to do monthly payments. You are almost guaranteed to have any significant requests denied.

When you're a student is the easiest time, at least here in Canada, to build yourself a good credit score. You can get a student visa without much hassle. BUT you must be disciplined to get that good score. On the other hand, once you finish school and are starting your career, you no longer have access to a student VISA and the bank will require you to spend a certain amount of time in one job before willingly lending you money, UNLESS you have a GOOD credit record. Remember, your record is not at 0, it is inexistent if you never borrow money.

Without this record, it will be terribly difficult to get any car that isn't a clunker unless you can save up 10k+, and forget trying to get mortgage on a house.

Trust him. He knows.

I love these completely fallacious arguments that you can't get a home loan without a credit card. Quit spreading lies you read on the internet.

You can get a house without a credit card.

You can also get a good credit score without a credit card.

But you do need an existant credit record and a good score to get mortage for a house.

A credit card and discipline are an easy way to build a good credit record.

Why does anybody even listen/respond to Freelancer anymore?

Steven, have you ever stopped to ask yourself why it is so difficult to lead a so-called normal life without taking out a credit card and/or letting a bank watch over (and exploit) your money?

It is completely illogical that credit card companies would team up with banks to ostracize rational people who don't go into debt, or at the very least, force them to take a burden upon themselves with a high risk of slipping up. It makes no sense unless there's conspiracy involved.

But I can easily see how you'd be so busy worrying about some imaginary number or just trying to keep up with the rate race that you didn't even have time to think about how absurd it all is. Yes, a world where someone who has a lot of money in the bank and can't get a home loan while someone who's literally in debt can get one just because he has a decent credit score IS absurd.

The fact that you cannot build your own dwelling without being forced to subject yourself to several sources of financial usury is also absolutely absurd.

:downs:

Did you have an argument, or am I to assume the smilie is you?

Honestly, I have no arguments for you. If you choose to view life in such a way, that's your prerogative. For my part, I do not agree with everything in life, nor with everything the goverment, or financial institutions do, but I try to live happily and work within the confines of the system.

I face the choice of giving the finger to society, wallow in my own bearded misery, or try to find happiness and a working order within its often unfortunate boundaries. I don't enjoy paying ludicrously high tax prices and I do denounce them, but I am, of my own device, unable to alter these things. And I will not lower myself to the anarchistic bigotry you preach, and I refuse to sit here angry at the world.

I have no further interest in arguing with you. You just sit there and spew poison, regardless of what is said to you. No thanks.

I'll take Steven's advice on this one.

It wasn't worth typing a huge paragraph as to why. The statement was stupid and flawed, no more explanation needed.


Jep is right, there are other ways to build your credit BUT if you get a credit card thats the easiest route by far.

And free, all the BS your talking about with banks being hand in hand with credit companies, etc etc.. none of it really needs to be worried about if your making your payments in full every month now does it?


I think not.

Incorrect. It simply means that a lender must do things the old fashioned way rather than rely on a computer analysis that depends on a FICO score.

A lender, using a process referred to as manual underwriting, can look at bank statements, tax returns, record of payments for utilities, rent payments, and other similar things that aren't reported to credit reference companies to determine ones ability to repay a loan. At such point having a verifiable employment history and income along with a demonstrated ability to pay ones bills on time become as much of an asset as a recorded history of owing people money.

Getting a loan for a vehicle is never a wise choice and, yes, I have done so. You can usually pay thousands less if you buy the same vehicle with cash than if you finance. That is because one of the gimmicks car dealers use is to inflate the price of the car. When they get you financing, they sell the loan to the bank for less than what you just agreed to pay. The dealer gets what they really wanted and the bank charges you interest on the amount you agreed to pay. Even if you pay the loan off in full before the first payment is due they still profit whatever that amount was over what they paid for the loan.

Why would you place yourself in a precarious situation without being forced? The point is you were forced. The point is this is not a good deal. It's a horrible deal. They place people in a risky situation, knowing that a good portion of them will slip up and become unwilling fiscal servants. And the only reason people choose to place this burden on themselves is because credit cards are tied to more and more aspects of society, until participation is almost mandatory.

I agree with some of the points Freelancer is making. The system in place is designed to keep people in debt. It's not a "conspiracy" though, it's just the way the system works; it's how the economy keeps itself going. You should watch Money as Debt (despite the fact that it tends to go conspiracy-theorish, it's a great all around explanation of how the banking and monetary systems work). Unfortunately the system has built in flaws which include the economy being completely dependent on the banks getting richer. There are some proposed/theoretical alternate monetary systems which are worth reading up on, such as the The Ripple Project which proposes to use the Internet as a peer-to-peer loaning system.

The problem with the tin foil hat approach though, Freelancer, is that if you reject whatever you deem as flawed, you're not doing anything to change it. Going against the system and taking a beating in order to prove a point is not going to convince anyone but yourself. The correct approach is to get more democratically involved and push for gradual change by educating your peers, building/joining a movement and creating public pressure that can influence policy makers. Take a look at what MoveOn.org are doing.

IMO Credit Cards are useless. Debit cards work the same way these days, except you don't get to spend money you don't have.

Emergencies they 'could' come in handy, but if you're responsible enough to keep 500-1000 in the bank, you should have enough for most emergency expenses.

Except that debit cards don't build any credit score for you. Thus defeating the purpose. The main point of owning a credit card is to build a credit score, the benefit is to be able to use it when you don't have cash on hand.

It is not "stupid and flawed" it is the type of thing many people realize as fundamentally true after they have some experience under their belt. Stupid and flawed would be an unrelenting belief that the road to financial prosperity is best traveled by getting into debt. There are many things that nobody here takes into account when we have these discussions pertaining to debt. How about the lifestyle of constantly buying things and paying them off in order to "establish your name"? How about a general philosophy of making wise consumer decisions and buying used items that meet your needs rather than more expensive things that meet your wants? How about going into a big name store and purchasing a refrigerator on credit or going in with cash and making a deal for the same fridge for hundreds less? Yes, you can still do that!

If the average young adult paid more attention to my advice in this thread than some other people in this thread the chances are that they will reach true financial independence sooner. Of course, they won't be making payments on the nicer car some others might be driving for awhile. But of course, they won't be making as many payments at all. But I'm not going to defend this sound advice to young people such as yourself (I'm not even sure your balls have dropped yet). Your more than entitled to have your own experiences and come back in twenty years to let us know how it all went.

Amen.

I still believe that you're more likely to have your request denied, unless you are very wealthy. Of course, if they see 20-30k sitting in your bank account waving up at them, they'll likely fork the cash over.

Through such investigation, they are more likely to find one minuscule slip up that seals your fate. However, if what you state is indeed a possibility, that is an excellent option if you can maintain a flawless financial record.



Definately.

Of course, buying it with a loan enables you to get your hands on it near immediately. Whereas saving for it can mean several years. Again, by saving such amount of money, you'll likely be stuck with a mediocre car at best (unless you are lucky and get your hands on some deal or recieve it as a present) in the meantime, thus costing you a hefty amount of repairs and whatnot. Still, in an ideal world buying a car with cash is by far the better option.

We don't need any policy change. We need discussion, which is exactly what he is doing here. There is nothing tin foil hat about it. Far more people use credit cards to their detrement than don't. That means any one person getting a credit card is probably going to do the same regardless of their intentions. Of all the things we debate here I fail to understand why the rational advice of some of us to others not to get into debt (because a good credit score only shows that you like debt and repay credit thus making you an attractive borrower determined, of course, by an automated system) is considered tin foil hat. I know some of you can't wait to move out of mom's basement, just wait until you have the cash to do it. You'll be better off in the long run.

When he mentions the tinfoil hat approach, I'm rather sure Fardreamer is speaking of Freelancer's conspiracy nonsense.

Just for the record: I am not against your advice to live debt free. It is sound and if indeed bankers can (and DO) investigate the borrower's assets when a credit score is unavailable, then I am all for it.

For my part, I am merely encouraging discipline. It is possible to have a credit card, and some loans and not feel miserable or caught up to the neck in financial bs. It is simply important to keep your head and NOT listen to what bankers suggest or tell you you can afford. Banks like any other institution are there to make money.

If you watch money as debt and still don't think there's conspiracy in our economy then I don't know what else to say. If everyone followed wookie's advice, then there would literally (I mean absolutely literally) be no money.

Professor Steven comes to rescue the thread:

Debt: not a good thing or a bad thing an of itself. Undisciplined debt, unwise debt, unfounded debt is bad. Certain debt spending can be good, even when one has sufficient cash on hand, but I'll spare you the economics lesson (I paid thousands of dollars for mine, you can too!).

The trick is avoiding so called "bad" debt. This includes things like cars, Christmas loans, personal, and often, credit cards.

So called "good debt" is debt that will return you a profit. Debt such as a home mortgage, or a student loan will eventually turn up as being positive. Face it, most people don't have tens or hundreds of thousands of dollars to get educated or purchase a home, so debt is necessary.

Now, in order to get "good debt" (a home mortgage, for example) requires going to someone who does have the money - usually a bank. The bank wants to protect their loan and earn a profit, just like everyone else, so they charge interest and require proof that you are worth lending to. They do this a number of ways, but the two biggest ways are through a credit rating and by appraising the value of your home. A credit score is not an "imaginary number", but a carefully calculated "value" that determines how likely one is to pay back debts. A credit score is simply a number value representing financial trustworthiness.

The way to get a good credit rating is, unfortunately, by getting other debt and paying it back. As has been mentioned, the easiest way is with a credit car. By wisely and prudently spending on a credit card and paying it back in a timely manner, one can build good credit. By not making stupid purchases that one cannot afford, and by paying off their debt, one can get effectively use a credit card wisely. Of course, most people are not wise, and charge on things they cannot afford to pay off quickly, thus incurring higher interest rates and penalty fees. This is the trap of credit cards.

Personally, I have had a credit card for nearly 10 years. My credit rating is just above 800, when I checked in June to apply for my mortgage. I have "no" debt. My credit card balance is $130. I have been using my credit for nearly all purchases since I was in high school, and paying it off, completely, each month with cash I earned at work. This is how to properly use a credit card.

Manual underwriting is a thing of the past, and most (if not all) lenders don't practice that anymore. Those that do usually charge higher interest rates, or are not willing to loan as much. A lender will not, will not lend one large amounts of money simply based on an account balance. Account balances do not indicate how likely one is to pay back a loan.

Anyway, Tibby, I recommend that you do not apply for a card unless you are capable of being disciplined about it - no frivolous spending. Only buy things that you can pay with cash within two weeks. Being wise with a credit card is a good first step toward financial stability. If you don't have a steady source of income, avoid a credit card until you are ready.

Right on.

I have been using credit to my "advantage" for years. I understand the traps we fall for and if I had many things to do over I would. I'm not in a bad state, just that had I had these views earlier in life I would still be here today but with sizable investments.

I purchased my first house with a VA loan. I put nothing down and the payment is a reasonable $700+ per month for 30 years (financial experts will usually tell you 15 year loans are the most you should get but I did the "normal" thing). I had an excellent credit score so it was easy to get into. Of course, I had all the normal things that I "had" to do so I've racked up some credit card debt doing them. When I moved (I kept the house) I wanted to buy another home. I knew that I would have a hard time getting a loan the "normal" way because I had a relatively high debt/income ratio. I was able to get the loan for my second house with manual underwriting because of my demonstrated ability to repay extended credit.

So everything said arguing against my points, except for them being stupid, is mostly true but you're not winning when you follow the normal tried and true path. I did not make wise consumer choices and the vast majority of people do not when they use credit. And I have used it much less than I could have. We all see people who max out their cards. A very scary thing in my case was that I had a total amount of credit extended to me that could have covered the purchase of two $50,000+ Lincoln Navigators and that's just major credit cards. There is no way I ever could have repayed that debt nor, probably, even had made the combined minimum payments of such debt.

The problem with the arguments against me in this thread is that you are all arguing that you need to borrow money in order to be able to borrow more money. Go into debt so that you can go into more debt. We should be less worried about establishing a "good name" or high credit score and more worried about living within our means. By definition borrowing can not be investing in your own future.

Yeah, because, you know we really didn't have money for most of history leading up until relatively recently when consumer credit card took off enmasse. Certainly never to the extent that it was ever backed by anything tangible such as gold, or anything like that.

Well, what I suggested from the get go was to have a credit card, pay your gas and groceries with it and pay it back within the end of the month. No frivolous spending. The way I look at it, I don't consider that 'getting in debt'. I would definatly advise against actually getting in debt to raise your score. That would be ludicrous at best.

I am in debt only because I could not stomach buying another clunker of a car, otherwise I would be debt free, and will be so within a year or two max. I do look forward to that glorious day, heheh.

This.

It's not tied to consumer credit, it's tied to debt. And trust me, that's always existed. For example, when a bank extends you a mortgage, it's actually increasing the money supply.

To clarify: tinfoil hat = conspiracy theories = inability to understand and accept that a large system of small, self-concerned entities can form a complex hierarchical system without some mastermind plan behind it all. Intelligent design, anyone?

Wookie, I pretty much agree with every word you're saying, except for the fact that we don't need change. The extreme reliance our economy has on bank loans has been recently proven to be fundamentally flawed - or have we already forgotten about the little recession we just had. Saving up for buying a car is one thing; investing in a business is another., You need to invest capital in order to start a business, you can't just "savie up" $200K to create a product prototype. And the fact that this investment always depends ultimately on the bank means that when banks collapse, the economy collapses. Decentralizing and democratizing the monetary system so that wealth (along with healthcare and education) can be spread more evenly among the population should be in everyone's interest to ensure a stable economy and society.

To clarify: when I say conspiracy, I don't necessarily mean there's a mastermind or an all-powerful oligarchy. I do mean that the wool's been pulled over the general populaces' eyes. Almost no one I talk to has the slightest idea of how fractional reserve banking works.

Well, in that sense I do agree that there are some people out there pocketing titanic amounts of money at our expense.

I guess I never considered that. I've got so many paid off loans and other things on my credit, I don't have an issue with that.

I'm not sure I would agree with that last bit. It may be semantics but I'm not sure that an increase in the circulation of money equals an increase in supply.

I think you have inferred something incorrectly about my views. In this thread I am talking specifically about consumer credit. I believe people should borrow money for a home. I also believe people should invest in a variety of mutual funds. Investing is essentially another form of borrowing except that the consumer is now the creditor and other entities are the borrower. In general, though, I believe that actual cash circulating for purchases, while maybe reducing the perceived supply, would actually lead to a healthier supply than one artificially inflated by transactions of IOUs.

Yes, I was going to address the use of the word. Of course there is a conspiracy. Typically, most high profit potential sales and credit situations involve a conspiracy to reap maximum profit from the consumer. Look at all the sales tactics used in high profit sales areas like cars and furnitures. All of the bogus tricks. "Let me go ask the manager," and then he steps back to the break room to shoot the **** for a few minutes. Do you really think credit card companies want the average consumer to know all the gimmicks and tactics that they use to reap maximum profit? You might be able to outsmart them but, just like the house, they always win.

However, in general, we all seem to agree on the important issues here so for all intents and purposes I'll bow out of any future debate in this thread.

Case in point:





It is clear you don't know how deep the rabbit hole goes.