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Establishing credit as a youngin'?
 

Heist's picture
(Baboon, 131
 
Points)
 on 6/26/12 at 11:00pm
Credit Card.jpg

I am currently entering my junior year of college and have yet to establish credit for myself. I was hanging out with some of my older friends who stressed how important credit is and I started to freak out that I wasn't already on top it. I have been raised by two parents were both once upon a time terrible with credit cards and have a scared attitude when addressing credit.

My questions are: how does one start establishing credit, what kind of score will I want leaving college and how vital is it to have credit on hand?

A few thoughts to boost my credit would be to take the bills in my name on the house me and 4 other roommates are renting, open a small credit card at Dillard's or The Rack to start a small line of credit and move phone service providers and fly solo.

Any advice would be helpful. I'm all about learning the tips and tricks to life and this is definitely one of those where expertise on the subject will save me a lot of time and money.

PS: Don't bitch about me not knowing this on a Finance forum, I'm an IT guy who enjoys the personalities on this forum a helluva lot more than others.

Tags:
Value_added's picture

You don't need to have a

O
 
Points)
 on 6/26/12 at 1:43pm

You don't need to have a fantastic credit score right after college unless you're planning on borrowing money for a car or house. You do, though, want to have a good credit score as a lot of places you rent will check this. Moving over bills is a good start as well as opening up credit card with a small limit.

As you get more comfortable with credit cards, and make sure you can handle paying them off each month, you will build a better credit history which will let you get larger limits, and better cards.

You might want to checkout creditkarma.com. It's a good resource that will let you track your score and it breaks down the factors that affect your credit score.

Neighbor's picture

Yeah you have the right idea,

IB
(King Kong, 1,236
 
Points)
 on 6/26/12 at 1:45pm

Yeah you have the right idea, open a small Visa or AMEX (or any credit card I guess) and use it for whatever you're sure you can pay off. Simple enough.

I didn't say it was your fault, I said I was blaming you.

valuationGURU's picture

My first step was to open a

CF
 
Points)
 on 6/26/12 at 2:11pm

My first step was to open a credit card in college. Great way to start. Make sure to always pay off the balance. Plus you get rewards or cash back. It makes more sense than using a debit card.

See my other WSO blog posts

DonVon's picture

Discover will extend you a

IB
(King Kong, 1,914
 
Points)
 on 6/26/12 at 2:25pm

Discover will extend you a line of credit as a college student and they have very good rewards relative to other companies.

"An intellectual is a man who takes more words than necessary to tell more than he knows."
- Dwight D. Eisenhower

Check out my blog!

lionwater's picture

The "importance of

IB
(Baboon, 102
 
Points)
 on 6/26/12 at 2:29pm

The "importance of establishing credit" is a notion generated by credit card companies to get people to use their cards and collect fees and interest.

I hope you are not planning on buying a house/apartment in your early (or even mid/late) 20's. You shouldn't WANT to take out loans for anything really.. maybe a student loan, but you do not need excellent credit for that.

Good to Excellent credit gets you better rates on loans in general.. and maybe finding a place to rent (landlords may check that your credit score is decent).. other than that, it is not important.

Just open one credit card with a low limit and use it for your cell phone or something like that, and pay it off every month.

MPBYO's picture

Waiting till junior year for

IB
(Baboon, 126
 
Points)
 on 6/26/12 at 2:34pm

Waiting till junior year for a card was def a bad financial move. I had got my 1st at 16. In your case though, apply for a college focused card. I had Citi's MTVu card before they discontinued it, and it allowed me to get 4x points for textbook purchases and the likes. Plus if you mailed in your transcripts after each semester you got between 500-2000 points based on GPA range.

Do not go crazy opening accounts as that has a negative effect on your credit score, plus department store cc have some high apr. Just stick with Visa/Mastercard, don't go over 30% of the credit limit each month, and try not to rush building credit.

lionwater's picture

Things that boost your credit

IB
(Baboon, 102
 
Points)
 on 6/26/12 at 2:38pm

Things that boost your credit score, from what I remember when I worked in that space:

- On-time payments
- Long history of payments
- Ratio between your average monthly debt and total monthly debt limit

Things that hurt your score:

- The opposite of the above (obviously)
- Recently opening a credit card / loan
- Any prior defaults on credit cards / loans

Though things might have changed since I last checked..

Also.. you do not need to pay to see your credit score. You are legally entitled to check it for free once a year (or maybe twice?).. just find the official website for it.

wallstasks's picture

Get some sort of credit card

 
Points)
 on 6/26/12 at 2:38pm

Get some sort of credit card so you establish a history. If you don't qualify for any, get a prepaid credit card. You don't have to use it, but just get one so you're building a history.

J_monkey's picture

Same here. I always hated the

O
(Baboon, 165
 
Points)
 on 6/26/12 at 2:42pm

Same here. I always hated the idea of credit cards but I guess it is about time.

Relinquis's picture

Heist: I am currently

RE
(Neanderthal, 2,186
 
Points)
 on 6/26/12 at 2:42pm
Heist:

I am currently entering my junior year of college and have yet to establish credit for myself...

Keep it that way.

Heist:

My questions I guess are how does one start establishing credit, what kind of score will I want leaving college and how vital is it to have credit on hand?

Don't get into debt. If you live your whole life without a credit card you will be freer, happier and more financially secure.

Don't ever get a credit card. EVER

relinquis... Killing the GMAT this December; Over/Under set at: 725 GMATs.

DonVon's picture

Relinquis: Don't ever get a

IB
(King Kong, 1,914
 
Points)
 on 6/26/12 at 2:46pm
Relinquis:

Don't ever get a credit card. EVER

I don't know about that. I've personally pocketed a few grand off of rewards and have always paid my outstanding amount in full at the end of the month. Maybe I'm in the minority (well, I'm DEFINITELY in the minority), but credit cards are good to have.

"An intellectual is a man who takes more words than necessary to tell more than he knows."
- Dwight D. Eisenhower

Check out my blog!

Relinquis's picture

Vontropnats: Relinquis: Don

RE
(Neanderthal, 2,186
 
Points)
 on 6/26/12 at 2:51pm
Vontropnats:
Relinquis:

Don't ever get a credit card. EVER

I don't know about that. I've personally pocketed a few grand off of rewards and have always paid my outstanding amount in full at the end of the month. Maybe I'm in the minority (well, I'm DEFINITELY in the minority), but credit cards are good to have.

"on a long enough timeline everyone's survival rate turns to zero..."

eventually you'll hit a rough patch and they'll destroy you... their entire business model is based on this.

relinquis... Killing the GMAT this December; Over/Under set at: 725 GMATs.

qweretyq's picture

Relinquis: Vontropnats: R

ST
 
Points)
 on 6/26/12 at 3:00pm
Relinquis:
Vontropnats:
Relinquis:

Don't ever get a credit card. EVER

I don't know about that. I've personally pocketed a few grand off of rewards and have always paid my outstanding amount in full at the end of the month. Maybe I'm in the minority (well, I'm DEFINITELY in the minority), but credit cards are good to have.

"on a long enough timeline everyone's survival rate turns to zero..."

eventually you'll hit a rough patch and they'll destroy you... their entire business model is based on this.

Just because their model is based on the overwhelming majority of consumers doing that, doesn't mean you have to be in that majority.

My largest expense after rent is groceries, something I HAVE to buy, and AMEX gives me 6% back on that which means I get 6% off everything in the supermarket...
and I pay it back in cash never carrying the balance...

Please explain to me how they are ever going to "eventually get me"

bfin's picture

I don't mean to be the barer

CF
(Neanderthal, 2,773
 
Points)
 on 6/26/12 at 3:29pm

I don't mean to be the barer of bad news but we have talked about this on this forum many many times...

The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee

WSO is not your personal search function.

Boothorbust's picture

Relinquis: Don't ever get a

O
(King Kong, 1,130
 
Points)
 on 6/26/12 at 3:39pm
Relinquis:

Don't ever get a credit card. EVER

This is really bad advice. If you are responsible with money a credit card is great way to save money and earn rewards. Maybe better advice is "Don't ever run a balance. Ever"

And by the way, the credit card business model is NOT based on driving people to financial ruin. That's like saying the credit market is based on driving corporates into bankruptcy.

In fact, businesses like AmEx make the vast majority of their money on fees charged to merchants as most of their customers pay their balance off monthly. Using a credit card responsibly is a good way to distribute some gains from merchants you patronize to yourself by capturing some of those fees in the form of rewards.

I use an AmEx for essentially all eligible purchases. I live within my means and pay my balance monthly. I did not increase my spending when I got a credit card, just transferred purchases from a debit card to a credit card. I have earned probably 6-8 free flights in the past two years or so on this card.

If you are smart and responsible using a debit card instead of a credit or charge card is basically leaving money on the table.

EDIT: I will also add that chuck palahniuk is the most overrated writer of his generation and every time I see someone quote him I want to strangle a small bunny rabbit.

Value_added's picture

Relinquis: Don't get into

O
 
Points)
 on 6/26/12 at 4:41pm
Relinquis's picture

You will fall on hard times

RE
(Neanderthal, 2,186
 
Points)
 on 6/26/12 at 4:56pm

relinquis... Killing the GMAT this December; Over/Under set at: 725 GMATs.

Boothorbust's picture

Relinquis: You will fall on

O
(King Kong, 1,130
 
Points)
 on 6/26/12 at 5:11pm
Tolland15's picture

It'll be easier to swallow

O
(Baboon, 150
 
Points)
 on 6/26/12 at 5:13pm

I was taught that the human brain was the crowning glory of evolution so far, but I think it's a very poor scheme for survival.

Relinquis's picture

Boothorbust: Relinquis: You

RE
(Neanderthal, 2,186
 
Points)
 on 6/26/12 at 5:25pm

relinquis... Killing the GMAT this December; Over/Under set at: 725 GMATs.

Boothorbust's picture

OK dude, I'm not going to

O
(King Kong, 1,130
 
Points)
 on 6/26/12 at 5:34pm
Relinquis's picture

Boothorbust: OK dude, I'm not

RE
(Neanderthal, 2,186
 
Points)
 on 6/26/12 at 6:10pm

relinquis... Killing the GMAT this December; Over/Under set at: 725 GMATs.

Heist's picture

If it is only necessary for

(Baboon, 131
 
Points)
 on 6/26/12 at 6:16pm
BTbanker's picture

Boothorbust: OK dude, I'm not

IB
 
Points)
 on 6/26/12 at 11:01pm

"A man generally has two reasons for doing anything. One that sounds good, and the real one." - J.P. Morgan

Rana Clamitans's picture

I don't understand how hard

CO
(Orangutan, 277
 
Points)
 on 6/27/12 at 12:22am
TDSWIM's picture

Vontropnats: Discover will

(Orangutan, 316
 
Points)
 on 6/27/12 at 12:53am
HumPiranha88's picture

I've seen rational students

ER
(Baboon, 129
 
Points)
 on 6/27/12 at 1:50am
ALF.'s picture

I got my first credit card at

O
(Gorilla, 612
 
Points)
 on 6/27/12 at 2:24am
dwight schrute's picture

Get a capital one

(Gorilla, 673
 
Points)
 on 6/27/12 at 2:29am

Making money is art and working is art and good business is the best art - Andy Warhol

CanadianPositiveCarry's picture

You for real dawg? You should

IB
 
Points)
 on 6/27/12 at 2:59am
Boothorbust's picture

I will add that a major

O
(King Kong, 1,130
 
Points)
 on 6/27/12 at 11:02am
bfin's picture

Boothorbust: I will add that

CF
(Neanderthal, 2,773
 
Points)
 on 6/27/12 at 5:53pm

The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee

WSO is not your personal search function.

qweretyq's picture

Relinquis: Boothorbust: OK

ST
 
Points)
 on 6/27/12 at 11:11pm
IlliniProgrammer's picture

^^^ No, I'm with Relinquis on

ST
(Almost Human, 9,244
 
Points)
 on 6/27/12 at 11:44pm

Work hard, play hard.

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