How long does it take to build your credit after getting your first credit card?

[revhead347]

I totally disagree, there is plenty of good debt and bad debt. Having $10,000 in debt with 4 maxed out credit cards is totally different from owing $10,000 in school debt. There are a lot of responsibility issues when it comes to your credit score. Creditors look at different types of debt differently. The thing to do when you are young is to try and accumulate some debt. If you don't buy a house by the time you are 35, there is no point in buying one. If you pay cash for everything until you are 35, and accumulate no credit history, you will never be able to qualify for a mortgage. 99% of the people in this country don't have $200K to drop on a house when they are 35 years old. If you don't buy a house and continue to rent for the rest of your life, that means you are paying someone else's mortgage, plus a profit margin. Usually that profit margin is greater than the 5% you'd be paying on a mortgage, which you are already paying for through the rental of the house, because the interest on the owner's mortgage is accounted for in the rental price. And we haven't even started on how much you are saving on your taxes every year by being able to deduct that mortgage interest. Do you see how quickly that 5% mortgage interest becomes inconsequential?

Kurt

 

[Tom95gt]

Here are a couple ideas
FORD RANGER, 1994
2002 VW Jetta GLI 24v VR6

My mom said she could lend me a couple bucks, I want something a little sporty, these two vehicles caught my eye

 

[BlackVert]

don't other entities like utility companies and sell phone providers and the like also affect one's credit score?

if a credit card is the only way to build establish one's credit score, then at least please make sure you pay the entire thing off every month and don't use it as an emergency fund. the worst thing you want to do is lose your job and use the credit card as an emergency fund because you won't be able to pay the bill and then you're in deep doo-doo

revhead, follow me down this path please ...

suppose you have a 30 year mortgage for $200,000 at 5% interest.

your payment is $1073.64 per month for 30 years.

over the 30 years, you pay $386,511.57.

the interest you pay on the loan over the entire life of the loan is $186,511. that is money you will never see.

i don't think that $186,000 is inconsequential. but maybe that's just me.

as to the tax "savings", if you are in the 28% tax bracket, the "savings" would be $52,223

so you are still out $134,288


of course the problem is, for the "pay cash for your house" plan to work, you have to live somewhere while you are trying to save to buy the house. and that usually means paying rent or living with parents. so it is sort of a chicken and egg thing.

a mortgage is pretty much the only way to go for 999 out of 1000 people. and a mortgage is really the only debt that everyone agrees is unavoidable (and therefore acceptable). but if possible, at least try to make it a 15 year mortgage.

 

[revhead347]

don't other entities like utility companies and sell phone providers and the like also affect one's credit score?

They do effect your credit score. But I don't think you are going to build enough credit to buy a house without actually borrowing money. Credit cards aren't the best way to do it. I have credit cards, but I always pay them off at the end of the month.

Now, here is the key element you are missing with the mortgage interest. Whether or not you take out the mortgage yourself, if you pay to live somewhere, you are paying that mortgage interest. Either you are paying your own mortgage, or the person or business that owns your residency is paying the mortgage interest, and including it in the amount they charge you in rent. The vast majority of rental properties are mortgaged, and that mortgage interest is charged to the resident one way or another. If you rent, you can't deduct the interest, so $52,000 in tax savings over 30 years is pretty substantial.

Kurt

 

[BlackVert]

i hear you ... that is what i was talking about here ... the 999 out of 1000 thing ...

of course the problem is, for the "pay cash for your house" plan to work, you have to live somewhere while you are trying to save to buy the house. and that usually means paying rent or living with parents. so it is sort of a chicken and egg thing.

a mortgage is pretty much the only way to go for 999 out of 1000 people. and a mortgage is really the only debt that everyone agrees is unavoidable (and therefore acceptable). but if possible, at least try to make it a 15 year mortgage.

unless you happen to have parents who have an extra house somewhere where you can live while stockpiling your money.

we have a house at bethany ... i should probably offer it to my kids as a place to stay while they are saving their money for their own houses.

 

[reddy351]

"revhead"-dont take this personally. It's not meant as an attack on you.

What you're saying though, is complete garbage. It is "conventional wisdom" that is based on a market that operates in a known and usual manner. This market has been screwed up for several years, so it doesn't count. Credit lenders are becoming more and more adversarial in their approach to lending. Their bottom line is about making as much money as they can, as quickly as possible. The people that they loan money to are thought of very much like the "batteries" in the movie The Matrix. "Use it and throw it away, when it's given all it has."

It used to be (back in the 80's, maybe) that the market could count on the money being there, if it was needed. More and more people started using credit because it was so readily available. Most got into the mindset that they could pay it back, anytime. However, as more and more people started to rely on credit instead of cash, more and more people were unable to repay their loan back at all. Bankruptcy filings are at an all time high. Care to ponder "why?"

Here's a scenario that I can see happening to a lot of people, in the next 10 years. Say you have $5000 in unsecured "credit". (Car loans, credit cards, signature loans, etc.) You're making your $150 a month "minimum payment" with no problem. Now, say something happens with the market and banks become required to pay notes that THEY were loaned to get the money to loan you. Care to ponder where they'll get that money? They'll raise your "minimum payment" to 2 or even 3 times what it is, now. When you can't pay it, they'll require that that note be paid in full. When you can't, they'll sue you and get a judgement against you (You DO owe the money, after all.) Once they have that judgement, they'll garnish your wages until the balance (plus "collection" fees) is paid in full. They are able to garnish your ENTIRE check, clean out any money that you have in any accounts and place leins on any property or items that you may own that have any value. Those items (that car you couldn't live without) will be sold at auction, for a fraction of their value and MUCH less than the balance on your account. As has been said "I hope you REALLY like that car."

While that day may never come, you should read the fine print on the stub of that application that just got filled out and sent in. It says something to the effect of "the balance of this account may be called due at ANY time and with no prior notice or reason", so the groundwork is already in place for my scenario. What have you done? Nothing wrong. You just paid your bill, as you agreed to. Is it your fault that the market bubble either popped or got really soft? No. Did you owe the money? Yep. Did you sign the app that said that the balance can be called, at any time? Yep. Is your proverbial pooch thoroughly screwed? Yep.

If you want to control your own future, don't participate in the "credit game". Pay cash for everything. Save money for what you want and go get it. (Most people who save money to buy something regularly realize once they have the money saved that they didn't REALLY want or need that "item of their dreams", after all. Lol!) "Conventional wisdom" is why people invested in mortgages with balloon payments and what not. Don't do it.

Plus, it is proven fact that when you pay for an item with a credit card, you will pay as much as 20% MORE for the exact same item than if you had paid cash for it. (NOT including the finance charges!) THAT is just plain stupid.

As far as getting a mortgage on a house, you don't need credit history for that, AT ALL! If you have no credit history, 2-3 years of good payment history on an apartment and 20% down, you can walk into ANY reputable lender and walk out with financing for a home. So, the "I need to get credit cards to build my credit so I can buy a house" is total CRAP.

So, it's your life, do what you want. But, if you were going to have to walk through a mine field, wouldn't you like to have the advice of a couple of people who had been through that mine field successfully? Everyone here has "been through it". I have talked on here about this before. Blackvert and other agreed with me then, as they are now. Compared to your whole life, we are certainly a minority. We are trying to help you but you have to think for yourself and SEE what really happens. I give you a 10% chance of getting to 40 years old and saying "Damn. I'm glad I listened to those guys!"

Again, I wish someone had taken this time to explain finances to me in this way. (My kids prolly HATE it when I get on a rant about this subject. Too bad, I do it anyway. I care about their futures and believe it or not, yours too.)

 

[Adam95GT]

Here are a couple ideas
FORD RANGER, 1994
2002 VW Jetta GLI 24v VR6

My mom said she could lend me a couple bucks, I want something a little sporty, these two vehicles caught my eye

stay away from the vw... Im also in the situation... im up to my eyeballs in debt (student loans)... and my focus is starting to act up.. dies at idle ETC.... im looking for a new car as well... dont even bother trying for a civic in NJ all are beat to hell riced out... trust me ive been looking... i could go for another zx3 or zx5... even a 4door integra.

just for example:
http://southjersey.craigslist.org/cto/1534301075.html
http://southjersey.craigslist.org/cto/1533968534.html
http://southjersey.craigslist.org/cto/1536257994.html
http://southjersey.craigslist.org/cto/1535839154.html


I mean all i want is a mid 90's prelude, civic, integra... and cant find one in half decent shape...

My g/fs cousin wants to sell me a beat up focus with a blown HG for $200... i might go pick it up and extend the life of my curent leakbox...

Here is the only decent one i found... im going to put a few hundred in the focus and hope to fix it... maybe this is worth looking at for you...
http://southjersey.craigslist.org/cto/1534702275.html

there is also something like this:
http://southjersey.craigslist.org/ctd/1534007085.html

 

[revhead347]

Here's a scenario that I can see happening to a lot of people, in the next 10 years. Say you have $5000 in unsecured "credit". (Car loans, credit cards, signature loans, etc.) You're making your $150 a month "minimum payment" with no problem. Now, say something happens with the market and banks become required to pay notes that THEY were loaned to get the money to loan you. Care to ponder where they'll get that money? They'll raise your "minimum payment" to 2 or even 3 times what it is, now. When you can't pay it, they'll require that that note be paid in full. When you can't, they'll sue you and get a judgement against you (You DO owe the money, after all.) Once they have that judgement, they'll garnish your wages until the balance (plus "collection" fees) is paid in full. They are able to garnish your ENTIRE check, clean out any money that you have in any accounts and place leins on any property or items that you may own that have any value. Those items (that car you couldn't live without) will be sold at auction, for a fraction of their value and MUCH less than the balance on your account. As has been said "I hope you REALLY like that car."
)

Dude are you for real? Have you ever borrowed money on anything in your whole life? No where on any loan contract does it say that the balance can be requested at any time. Unless you have been borrowing money from guys named Paulie. A contract is a contract, you pay back at the contract terms. And furthermore, if you owe $5000 on a car loan, it's going to cost the bank 3 times in legal fees to sue you. Not that I should even address that fact, because it's predictated on theory that is absurd to begin with. Have you ever noticed that there are two times of mortgages and car loans out there; fixed and adjustable? Do you understand what the difference is. When you get a fixed mortgage, that interest rate is FIXED by CONTRACT.

I'm 30 years old, own my own home, own 3 cars, have an 800 beacon score, and only have school debt and my mortgage to worry about. And I'm done it on a very modest income, so obviously I've figured out the system, and how to build credit.

If you don't think this is the best way to do it, go talk to a financial advisor and tell him how you would rather pay rent the rest of your life to be more financially responsible instead of buying a house. He will laugh at you, I promise.

Kurt

 

[blksn955.o]

The balance can be called due if the loan falls into default (31-90 days past due). This is written in the contract of your car loan, mortgage, CC, ect. If it is too much to seek legal damages they can charge off the items. They might not come take your stuff from charging off a CC but your score will be fubar either way. Exactly what reddy said, if you can not pay it...the note becomes due in full.

Rates are going to spike all across the board not just like how they did with CC.

 

[Black95GTS]

Dude are you for real? Have you ever borrowed money on anything in your whole life? No where on any loan contract does it say that the balance can be requested at any time. Unless you have been borrowing money from guys named Paulie. A contract is a contract, you pay back at the contract terms. And furthermore, if you owe $5000 on a car loan, it's going to cost the bank 3 times in legal fees to sue you. Not that I should even address that fact, because it's predictated on theory that is absurd to begin with. Have you ever noticed that there are two times of mortgages and car loans out there; fixed and adjustable? Do you understand what the difference is. When you get a fixed mortgage, that interest rate is FIXED by CONTRACT.

I'm 30 years old, own my own home, own 3 cars, have an 800 beacon score, and only have school debt and my mortgage to worry about. And I'm done it on a very modest income, so obviously I've figured out the system, and how to build credit.

If you don't think this is the best way to do it, go talk to a financial advisor and tell him how you would rather pay rent the rest of your life to be more financially responsible instead of buying a house. He will laugh at you, I promise.

Kurt

I'm with you 100%. I've always heard its better to NEVER pay off your house. I think anyone that honestly pays rent for 10-15 years with the hopes of paying off their house in cash, instead of building equity, is crazy. By the time you are 30-35, you'll be making enough money to get absolutely raped in taxes because you'll have no write-offs.

I've always had debt, be it school, car, whatever. At 25 my credit scores were 771, 748, and 738. My fiance, who's 24 ,in the same boat, was slightly better. Difference being her parents payed for her school so she doesn't have debt there.

Get an HSBC Mastercard with 1% cash back. I pay EVERYTHING with that card. We throw about $2500 at the mortgage every month. Couple that with school loans, utilities, etc, I'm getting back at minimum $30 a month. Just pay the balance in full, every time, and you can't lose.

Adam

 

[BlackVert]

i agree (again!) ... paying rent, which is probably about what a mortgage would be (or more), would make it pretty much impossible to invest the amount you would need to invest to be able to pay for a house in cash, or do any of the investing that will break the cycle of giving your hard earned money to someone else.

my earlier example of "if you could invest the same amount as the mortgage for 10 years, you could buy the house with cash and have no mortgage" was mainly to illustrate the power of compound interest.

i have also said more than once that it is not feasible for 999 of 1000 people.

i also never said that paying rent instead of a mortgage is a good idea or more financially responsible.

but ... being OK with carrying debt around, and thinking that it is normal or good is just plain stupid. if you want to give your hard earned money to the car company and the bank every month for the rest of your life, then go right ahead. it's your money, throw it away if you want. i hope you like dog food, because when you are 75 and still have mortgage payments to make, that is about all you will be able to afford.

and the whole "i am better off having a mortgage for the rest of my life because of the tax write off" is a fallacy, and the big, multi-billion dollar banks are very happy to keep it going. where do you think they get their money? if you don't understand the fallacy, then i'll be happy to provide a detailed explanation with examples if you want.

people who are smart with their money don't finance or lease cars, they carry no credit card debt, they live below their means, they have a few thousand saved for emergencies, and they pay off their school loans and mortgages as soon as possible. then they put their money into long term investments and before long, they are millionaires.

 

[revhead347]

I'm with you 100%. I've always heard its better to NEVER pay off your house. I think anyone that honestly pays rent for 10-15 years with the hopes of paying off their house in cash, instead of building equity, is crazy. By the time you are 30-35, you'll be making enough money to get absolutely raped in taxes because you'll have no write-offs.

I've always had debt, be it school, car, whatever. At 25 my credit scores were 771, 748, and 738. My fiance, who's 24 ,in the same boat, was slightly better. Difference being her parents payed for her school so she doesn't have debt there.

Get an HSBC Mastercard with 1% cash back. I pay EVERYTHING with that card. We throw about $2500 at the mortgage every month. Couple that with school loans, utilities, etc, I'm getting back at minimum $30 a month. Just pay the balance in full, every time, and you can't lose.

Adam

I pay for a lot of stuff with my Discover card, which pays cash back, but I'm not sure exactly how much, and then I pay off the credit card at the end of the month. It's free money. Here is another trick that a few of our captains with really good credit play. They get credit cards with an introductory 0% APR for 6 months on Cash Advances. As soon as they get the card, they write themselves a check off the card maxing out the card, and deposit it in a COD. Then they pay the minimum on the credit card for 6 months. When the six months is up, they cash out the COD, pay off the credit card, and keep the interest. It's not a lot of money, but it doesn't take much effort, and it's really sticking it to the man. The best is when you get the card from the same bank you deposit it into the COD with.

People need to understand. Our country is built on credit. Just about every person, every business, even the government borrows money to get ahead. Think about this If you borrow money to go to college, you will probably end up paying around $7000 or so in interest. If you go to college, the odds show you will make $1 million more over your lifetime vs not going. I would say that $7000 was a worthwhile investment. Why you would wait to go to college? You're throwing away money. It's all about investing.

Kurt

 

[BlackVert]

They get credit cards with an introductory 0% APR for 6 months on Cash Advances. As soon as they get the card, they write themselves a check off the card maxing out the card, and deposit it in a COD. Then they pay the minimum on the credit card for 6 months. When the six months is up, they cash out the COD, pay off the credit card, and keep the interest. It's not a lot of money, but it doesn't take much effort, and it's really sticking it to the man. The best is when you get the card from the same bank you deposit it into the COD with.

i used to do this back when life was good. the cards would typically have a $99 maximum transaction fee and a 6 month 0% period, and CDs returned a decent rate. so i would do $10,000 cash out and get a 6 month cd and end up a couple hundred ahead.

but then they changed the rules. instead of a transaction fee maximum of $99, they made it 3% of the amount with no maximum. and CD return rates fell, so it wasn't worth it anymore.

i guess i wasn't the only one sticking it to the man

 

[reddy351]

Dude are you for real? Have you ever borrowed money on anything in your whole life? No where on any loan contract does it say that the balance can be requested at any time. Unless you have been borrowing money from guys named Paulie. A contract is a contract, you pay back at the contract terms. And furthermore, if you owe $5000 on a car loan, it's going to cost the bank 3 times in legal fees to sue you. Not that I should even address that fact, because it's predictated on theory that is absurd to begin with. Have you ever noticed that there are two times of mortgages and car loans out there; fixed and adjustable? Do you understand what the difference is. When you get a fixed mortgage, that interest rate is FIXED by CONTRACT.

I'm 30 years old, own my own home, own 3 cars, have an 800 beacon score, and only have school debt and my mortgage to worry about. And I'm done it on a very modest income, so obviously I've figured out the system, and how to build credit.

If you don't think this is the best way to do it, go talk to a financial advisor and tell him how you would rather pay rent the rest of your life to be more financially responsible instead of buying a house. He will laugh at you, I promise.

Kurt

Blackvert said-

"being OK with carrying debt around, and thinking that it is normal or good is just plain stupid. if you want to give your hard earned money to the car company and the bank every month for the rest of your life, then go right ahead. it's your money, throw it away if you want. i hope you like dog food, because when you are 75 and still have mortgage payments to make, that is about all you will be able to afford.

and the whole "i am better off having a mortgage for the rest of my life because of the tax write off" is a fallacy, and the big, multi-billion dollar banks are very happy to keep it going. where do you think they get their money? if you don't understand the fallacy, then i'll be happy to provide a detailed explanation with examples if you want.

people who are smart with their money don't finance or lease cars, they carry no credit card debt, they live below their means, they have a few thousand saved for emergencies, and they pay off their school loans and mortgages as soon as possible. then they put their money into long term investments and before long, they are millionaires"

Guys. Read this again! 'vert, you're absolutely correct!

People who are rich (Not the ones that Drive an expensive car and live in an expensive house.) do NOT use credit cards to "finance" their lives!


For your information "revhead", I own two houses and people pay ME rent. (I've NEVER had a finacial advisor laugh at me. You have?) I have three cars, all paid for. (Only 1 is a "late model"...1999 Jeep Cherokee. The other two are 85 and 86 Merkur XR4ti's...my "weakness". I DD one of the Merks, in the Summer. The Jeep is for Winter.) No credit cards. I make about $30k a year. I'm 40 and have seen credit being the absolute RUIN of people. (Almost myself included.)

I guarantee, "good" credit WILL bite you sooner or later. That super awesome credit score will VANISH, as soon as you miss a payment or two. Good for you, if you think you've got it. I choose to not have a "lender" (who will become adversarial, with one missed payment) in my financial affairs. Do it how you want to. I'm just saying I've learned not to trust CC companies.


And, by the way, contrary to your response, I never said that you should pay rent for the rest of your life. (Those were words YOU added.) Just maybe 2-3 years until you can save up 20% down for a house that fits your needs. I dare you to find a FA that would laugh at that.

 

[chaos254]

there is nothing wrong with credit just stupid people. ****.. if it wasn't for credit there are plenty of times in college I wouldn't have been able to afford food or gas.

 

[revhead347]

Well Reddy, if you are mortgaging your homes then you are a hypocrit.

Kurt

 

[blksn955.o]

He is not saying dont have a mortgage...just pay it off ASAP and make sure you in the best possible situation entering the mortgage (IE. with 20% down or more). Even the best laid plans can go to carp, what he is saying the less you depend on credit the less you have to worry if something bad goes down. Its a lot easier to live below your means than cut back after the fact even more so if your talking about a high (DTI/HTI ratio level) mortgage payment, multi car notes, and several credit cards. You can have a 800 have a bad spell and get knocked down to 550 then 5-10yrs later be 750+ it fluctuates its only important the exact moment you NEED it. If you depend/need/rely on it less it means your life is less dependent and more independent.

One thing on the CD using a cashed out CC...in a lot of situations that will hurt you as your using more than 33% of the avail credit. Then most cash advance cards have a higher rate charged...even if its 8%(cash advance rate) and your getting a CD @ 10apy thats a year so at 6mo your looking at a 1/2 apy of 5% all the while your paying 3% more on the cash advance. Sure at the end of the CD you have some cash but you more than paid for it with the min. payment due. Even if you do end up making 2% somehow and that is say $500 over 6mo that is about $19 a week. You could probably work 1-2hrs a week of OT and put it in the bank and not even worry and keep compounding that interest for decades. There are people at the credit card companies that are far smarter than anyone in this debate (I know some of them) who do nothing but think of ways to not only make more money by changing things but also think of ways the system can be exploited to put things in place to make it not worth while.

You want to make money on credit cards. Get in contact with a credit card company and become a private backer. You back and support lines of credit yourself and get the interest. Just like how its done with the mortgage industry with the secondary markets who carry the risk but have a big upside as well. Now dont put more than you can afford to loose...but I know people who do not work as they have their own credit portfolio and after 5-10yrs they dont even care if they loose it all as they have so much put away from the profits.

 

[reddy351]

Well Reddy, if you are mortgaging your homes then you are a hypocrit.

Kurt

Exactly what blksn955.o said. I was talking about UNSECURED debt. If things go bad for you, you can probably sell the house and cover most of the debt. A car depreciates so fast that if you need out of it, you'll need to finance the difference between the sale price and the amount you owe to get the title. Credit cards have NOTHING attached and good luck selling that $1800 plasma tv that is only a year old and is now worth $400. (That was "for example", not saying you put a TV on your CC.)

You like to try to put words in peoples conversations that they never used. I see how you "win". Nice. (On whom in your life does that actually work?)

I stand by everything I said and anyone that asks will get the exact same answer. I know what I'm talking about and I'm passionate about it. If YOU are passionate about unsecured debt, I'll see you when they auction your house because they shut down the plant where you work and you can't pay your bills. I do need another rental property.

Like I said before, you do what you want. I'm still going to fight to keep other people (who'll listen) from making the same mistakes I did.

Good day.

 

[Black95GTS]

I just bought a Ruger Mark III competition grade pistol solely out of the seperate account that I keep the credit card kick backs in. It was free.

July 3rd and 4th every year I get 2 hotel nights next to the beach, on Cape Cod, for FREE with the Hilton Honors American Express card I put my business/travel expenses on. Interest paid to date? $0.00.

Adam

 

[revhead347]

Exactly what blk
You like to try to put words in peoples conversations that they never used. I see how you "win". Nice. (On whom in your life does that actually work?)

I stand by everything I said and anyone that asks will get the exact same answer. I know what I'm talking about and I'm passionate about it. If YOU are passionate about unsecured debt, I'll see you when they auction your house because they shut down the plant where you work and you can't pay your bills. I do need another rental property.

Like I said before, you do what you want. I'm still going to fight to keep other people (who'll listen) from making the same mistakes I did.

Good day.

No, you keep changing your opinion. The whole discussion is over good debt and bad debt. You're going from all debt is bad, to unsecured debt is bad, but mortgaging is ok. All based on mistakes you've made in the past. I've never made a mistake with my credit, and I have enough money in the bank to live for about 9 months with no income. So which do you think is better? Using that money in the bank to pay down the house or saving it in case you lose your job? At 5% APR, for the love of god, keep your money. If I use the good credit that I already have, I could stretch it out to a year without having a job. The point is to make a determination on what kind of debt you take out to get yourself ahead, and what kind of debt you want to avoid.

Kurt