Best Way to Build Credit?

Off Topic
42

[quote]Chickenmcnug wrote:
rainjack wrote:
Chickenmcnug wrote:
wow…

I rarely carry cash on me unless I have a date or go to a bar. Or maybe there is some other circumstance which requires a physical manifestation of currency, like a trip or something.

I purchase everything on my credit card and pay it off in full every month. My gas, groceries, gym dues, etc. All of it goes on my card and at the end of the month i am able to tell how much I “cost”. If there was a way to put my rent on credit i would do that too…I should look into that.

I view it as the same thing as having my paychecks go in my checking account w/ direct deposit. I don’t have to see the money to know it exists. And I never have the urge to buy 50k worth of shit I don’t need. I guess i am just happy with what i have.

I always have cash and my debit card. We have not had a credit card in almost 2 years.

You can tell how much you cost by budgeting, and reviewing. You would be surprised how much money you can save by just paying attention to what you are spending.

What happens if you forget to pay your credit card bill? What happens if there is a medical emergency where you can’t pay your bill, or you have no job and no money with which to pay?

Cash is king.

I never forget to pay the bill. Thats like saying, “what happens when you forget to pay your rent”. Who forgets that sort of thing?

In the case of a medical emergency I would wage whatever the best course of action would be as far as what bills to pay off. But that wouldn’t be a big deal. Because i use credit the same way as you use cash. If I didn’t buy my gas/food in credit, i would have bought it in cash regardless. And the money has already been set aside.

I guess the big thing is knowing how you deal with temptation. Its not an issue with me. I understand its a problem for a big portion of america though.[/quote]

You are not a very old guy, nor do you have any kids judging from how bullet proof you think you are.

That’s fine.

But take it from someone who has been around the block several times - shit happens. No matter how temptation proof you think you are, shit happens. And it doesn’t take much shit to bury a person.

43

[quote]Professor X wrote:

Someone broke into my car two weeks ago to steal my tv. [/quote]

Did you watch a lot of tv in your car ??

44

I use my credit card all the time with the simple rule that I pay it off in full at the end of every month. I get a cash back bonus on my credit card so I have actually made 400 dollars over the last few years with it, never paid a dime in interest.

I’m 23 1/2 and have a credit score in the 700’s (2 paid off cars, 6 years perfect credit) with basically no help from the parents at all. I’m not rich by any stretch of the imagination either.

I have friends that just have no clue how to do this stuff… They are in debt thousands and pay over 20% interest on car loans, its crazy. Just pay your bills on time, its that easy.

45

Actually, it’s best to pay something off over three months to build credit. If you pay it off each month, it’s not really credit. Keep it cheap so you dont pay a bunch of interest. For example, charge $30 or something. Then pay it off the third month.

Etc etc

If it’s a department store card, then apply for a major card. Look at the interest rate and such so you dont pick a bad card. Major cards have a bigger impact on your credit than a JcPenny card or gas card.

But, the amin thing about all of this is not to start charging everything. This country has a huge retail debt crisis. A guy mentined on this string to pay cash for things. Do not charge if you don;thave to.

46

[quote]Lonnie123 wrote:
I use my credit card all the time with the simple rule that I pay it off in full at the end of every month. I get a cash back bonus on my credit card so I have actually made 400 dollars over the last few years with it, never paid a dime in interest.

I’m 23 1/2 and have a credit score in the 700’s (2 paid off cars, 6 years perfect credit) with basically no help from the parents at all. I’m not rich by any stretch of the imagination either.

I have friends that just have no clue how to do this stuff… They are in debt thousands and pay over 20% interest on car loans, its crazy. Just pay your bills on time, its that easy.[/quote]

Maybe not so hard to do when you are single.

Get married. Have a couple of kids. Then get back to me about how easy it is.

47

[quote]74 wrote:
tedro wrote:
I’m with Aleksandr on this one. I love credit cards. I use one for nearly all of my purchases, and pay it off in full every month. It’s biggest benefit is the convenience. I also just got another with 0% financing for a year. It allows me to remodel my kitchen and bathrooms now instead of waiting until I have the money saved to start. Of course, I know that I have the self discipline to set aside X dollars a month so that I can pay it off before the intro rate ends. I also have a significant savings account should an emergency come up.

I know everybody has their own opinions and risk tolerance, but I don’t have any problem having debt. Controlled debt can be an excellent tool to help any financial situation, if you have the self-discipline to keep it controlled.

To answer the OP’s question, you need to use the card regularly. Whether you pay it off in full every month doesn’t affect your score, as long as you make the minimum payment on time. Of course it is generally wise to pay it in full. You also want to make sure you don’t have the debt built up close to your credit limit, as this will hurt your score.

Just using it and making payments will get you a good score, but ultimately what is going to hurt you the most is a lack of credit history. The only way to fix this is to take out a loan or two and repay them. Don’t take out a loan just to help your history, just wait until you take out a mortgage or legitimately need a loan.

Having a good income and funding does not help your credit score, but it will make lenders more likely to give you money.

I agree with this. I use credit cards for everything, right down to a $1 pack of gum. Pay off the cards in full every month. What I really like to do is get 0% cards for 12 months, charge all of my expenses, keep the money to pay it off in a high yield savings account (on-line) and make money off of my debt. Using other people’s money for less than you can make off of it is called leverage, the secret to true wealth. Have a little discipline, only purchase what you know you can afford, but put it on the card and use someone eles’s money to earn a little extra interest every month, pay the balance off every month unless it is 0% for any length of time.

[/quote]

Exactly. In fact, you can even MAKE money off credit cards if you are diligent enough. For one way to do that, check this out: How To Make Money From 0% APR Balance Transfers (Index) — My Money Blog

48

[quote]Lonnie123 wrote:
I use my credit card all the time with the simple rule that I pay it off in full at the end of every month. I get a cash back bonus on my credit card so I have actually made 400 dollars over the last few years with it, never paid a dime in interest.

I’m 23 1/2 and have a credit score in the 700’s (2 paid off cars, 6 years perfect credit) with basically no help from the parents at all. I’m not rich by any stretch of the imagination either.

I have friends that just have no clue how to do this stuff… They are in debt thousands and pay over 20% interest on car loans, its crazy. Just pay your bills on time, its that easy.[/quote]

So even if you pay it off in full every month, your credit score goes up? Does this work if you keep charging the same amount, or do you have to start making larger purchases to keep it going?

Thanks, btw.

49

Actually, thanks to everybody who responded. Appreciate the help.

50

[quote]The Bambino wrote:
74 wrote:
tedro wrote:
I’m with Aleksandr on this one. I love credit cards. I use one for nearly all of my purchases, and pay it off in full every month. It’s biggest benefit is the convenience. I also just got another with 0% financing for a year. It allows me to remodel my kitchen and bathrooms now instead of waiting until I have the money saved to start. Of course, I know that I have the self discipline to set aside X dollars a month so that I can pay it off before the intro rate ends. I also have a significant savings account should an emergency come up.

I know everybody has their own opinions and risk tolerance, but I don’t have any problem having debt. Controlled debt can be an excellent tool to help any financial situation, if you have the self-discipline to keep it controlled.

To answer the OP’s question, you need to use the card regularly. Whether you pay it off in full every month doesn’t affect your score, as long as you make the minimum payment on time. Of course it is generally wise to pay it in full. You also want to make sure you don’t have the debt built up close to your credit limit, as this will hurt your score.

Just using it and making payments will get you a good score, but ultimately what is going to hurt you the most is a lack of credit history. The only way to fix this is to take out a loan or two and repay them. Don’t take out a loan just to help your history, just wait until you take out a mortgage or legitimately need a loan.

Having a good income and funding does not help your credit score, but it will make lenders more likely to give you money.

I agree with this. I use credit cards for everything, right down to a $1 pack of gum. Pay off the cards in full every month. What I really like to do is get 0% cards for 12 months, charge all of my expenses, keep the money to pay it off in a high yield savings account (on-line) and make money off of my debt. Using other people’s money for less than you can make off of it is called leverage, the secret to true wealth. Have a little discipline, only purchase what you know you can afford, but put it on the card and use someone eles’s money to earn a little extra interest every month, pay the balance off every month unless it is 0% for any length of time.

Exactly. In fact, you can even MAKE money off credit cards if you are diligent enough. For one way to do that, check this out: How To Make Money From 0% APR Balance Transfers (Index) — My Money Blog

[/quote]

I did this last year. Had $80,000 in interest free, fee free convenience checks from 4 credit cards. Put the money in an Emigrant Direct account and wound up making over $4000 of free money. I am still making money off this initial investment as I am juggling the money to new 0% cards.

51

[quote]74 wrote:
I did this last year. Had $80,000 in interest free, fee free convenience checks from 4 credit cards. Put the money in an Emigrant Direct account and wound up making over $4000 of free money. I am still making money off this initial investment as I am juggling the money to new 0% cards.

[/quote]

Yeah, getting 5% interest on savings was nice wasn’t it?
Those were the days…sigh. Might be a while before was see that again though.

52

[quote]rainjack wrote:
Lonnie123 wrote:
I use my credit card all the time with the simple rule that I pay it off in full at the end of every month. I get a cash back bonus on my credit card so I have actually made 400 dollars over the last few years with it, never paid a dime in interest.

I’m 23 1/2 and have a credit score in the 700’s (2 paid off cars, 6 years perfect credit) with basically no help from the parents at all. I’m not rich by any stretch of the imagination either.

I have friends that just have no clue how to do this stuff… They are in debt thousands and pay over 20% interest on car loans, its crazy. Just pay your bills on time, its that easy.

Maybe not so hard to do when you are single.

Get married. Have a couple of kids. Then get back to me about how easy it is.

[/quote]

I hope to be making enough money at that point in my life to have this same scenario keep rolling right along. I dont plan on getting in over my head any time soon, kids or no kids.

53

[quote]sen say wrote:
Professor X wrote:

Someone broke into my car two weeks ago to steal my tv.

Did you watch a lot of tv in your car ?? [/quote]

What does that have to do with anything? No, I didn’t. Next question.

54

[quote]Lonnie123 wrote:
rainjack wrote:
Lonnie123 wrote:
I use my credit card all the time with the simple rule that I pay it off in full at the end of every month. I get a cash back bonus on my credit card so I have actually made 400 dollars over the last few years with it, never paid a dime in interest.

I’m 23 1/2 and have a credit score in the 700’s (2 paid off cars, 6 years perfect credit) with basically no help from the parents at all. I’m not rich by any stretch of the imagination either.

I have friends that just have no clue how to do this stuff… They are in debt thousands and pay over 20% interest on car loans, its crazy. Just pay your bills on time, its that easy.

Maybe not so hard to do when you are single.

Get married. Have a couple of kids. Then get back to me about how easy it is.

I hope to be making enough money at that point in my life to have this same scenario keep rolling right along. I dont plan on getting in over my head any time soon, kids or no kids.[/quote]

What he’s saying is that things can get very unpredictable very quickly, especially when you start caring for little people and have a wife. Shit happens. It does help to try to be prepared…but it helps even more to realize early on that you can’t control every aspect of your life. You could lose that job, or your kid could get arrested. You could get married and end up getting a divorce (which will pretty much screw you financially for life unless you had a prenupt). You may have everything planned in advance and that is when life will show you how unprepared you really are.

55

[quote]The Bambino wrote:
74 wrote:
I did this last year. Had $80,000 in interest free, fee free convenience checks from 4 credit cards. Put the money in an Emigrant Direct account and wound up making over $4000 of free money. I am still making money off this initial investment as I am juggling the money to new 0% cards.

Yeah, getting 5% interest on savings was nice wasn’t it?
Those were the days…sigh. Might be a while before was see that again though. [/quote]

Agreed. It’s now down to about 2.75%, probably will be dropping even further with all the fed talk of “recession” and “stalled economy”. Also, it is now extremely difficult, near impossible, to find any cards that offer 0% FEE FREE.

The positive side is that the market has dropped significantly allowing me to pick up shares of mutual funds on the cheap. I guess this “positive” is based on your age, as I am only 33. Wouldn’t be so happy if I was old enough to choose 2008 to be my retirement year to start tapping investments.

56

Have assets.

Instant credit builder.

It would require you to actually save and buy them though and that hurts of course.

Not that I would invest in the US right now.

You could by Canadian stocks though. Preferably companies producing commodities.

Yup, save and own stuff. Boring, I know.

57

In addition to making free money off of my plan you have the ability to help build your credit 2 ways.

Number 1: You make regular monthly payments on your outstanding balances, which you aren’t paying interest on. In my case I am making 4-5 credit card payments a month in addition to bills and mortgage. So, you build a payment history.

Number 2: When you pay off the credit cards you then have a large unused balance, which is part of your credit score (credit used vs credit available). You can even consolidate your cards into one, if they are all from the same provider (Citi, Chase, etc) for ease in record keeping.

58

[quote]orion wrote:
Have assets.

Instant credit builder.

It would require you to actually save and buy them though and that hurts of course.

Not that I would invest in the US right now.

You could by Canadian stocks though. Preferably companies producing commodities.

Yup, save and own stuff. Boring, I know.

[/quote]

Why would one not invest in the US? If there has ever been a great buy opportunity, it would be now.

Buy low - sell high.

But I agree with your approach.

I remember several months back, there was a discussion similar to this about how people were using credit to invest in real estate. I wonder how smart they feel today.

59

[quote]rainjack wrote:
orion wrote:
Have assets.

Instant credit builder.

It would require you to actually save and buy them though and that hurts of course.

Not that I would invest in the US right now.

You could by Canadian stocks though. Preferably companies producing commodities.

Yup, save and own stuff. Boring, I know.

Why would one not invest in the US? If there has ever been a great buy opportunity, it would be now.

Buy low - sell high.

But I agree with your approach.

I remember several months back, there was a discussion similar to this about how people were using credit to invest in real estate. I wonder how smart they feel today.

[/quote]

Agreed with the buy low sell high. Now is a fantastic time to be buying funds both domestically and internationally. Everything is on sale. Buy now, forget about them for 20 years, retire rich!!!

60

[quote]rainjack wrote:
orion wrote:
Have assets.

Instant credit builder.

It would require you to actually save and buy them though and that hurts of course.

Not that I would invest in the US right now.

You could by Canadian stocks though. Preferably companies producing commodities.

Yup, save and own stuff. Boring, I know.

Why would one not invest in the US? If there has ever been a great buy opportunity, it would be now.

Buy low - sell high.

But I agree with your approach.

I remember several months back, there was a discussion similar to this about how people were using credit to invest in real estate. I wonder how smart they feel today.

[/quote]

I expect the dollar to fall. It would make sense to be in another currency then.

61

[quote]orion wrote:
rainjack wrote:
orion wrote:
Have assets.

Instant credit builder.

It would require you to actually save and buy them though and that hurts of course.

Not that I would invest in the US right now.

You could by Canadian stocks though. Preferably companies producing commodities.

Yup, save and own stuff. Boring, I know.

Why would one not invest in the US? If there has ever been a great buy opportunity, it would be now.

Buy low - sell high.

But I agree with your approach.

I remember several months back, there was a discussion similar to this about how people were using credit to invest in real estate. I wonder how smart they feel today.

I expect the dollar to fall. It would make sense to be in another currency then. [/quote]

The dollar is falling. That’s why the US would be a good investment. It will come back. This is just a cyclical thing. Happens every 20 years or so.