axio
08-22-2007, 10:14 PM
This is assuming that you are young and have no credit at all. If there is interest I'll throw some common sense together over how to repair your credit.
Most of this is common sense, but it seems like most people don't know these things and how harshly they can hurt your credit... or even what "credit" is!
Basics:
A credit score is actually pretty simple. It is a number that is assigned to you by credit bureaus that shows how credit worthy you are. It tells creditors how likely you are to pay back credit. The end.
Interest is based on how risky it is to lend money to you. If you are less likely to pay something back then you are a high risk.
But how a credit score is achieved is a trade secret. Each bureau has a different way to arrive to it. But practically all the current credit scoring systems are based off the Fair Isaac system.
Most things you hear about credit, how to build it, etc is bullshit. There is no magical way to build it over night and creditors are wise to all the ways you'd imagine to "work" the system.Anchors, these are things that will always make up your credit score. They will carry your score through your entire credit history and if you build a strong base with these you won't really have to worry about your score all the time.
Don't carry a balance. You do not have to carry a balance to earn credit. Creditors want to know you'll pay, not that you'll carry a balance. They don't give a shit about your balance until you start falling behind on it.
Start slow. Don't jump into opening 20 cards at 18 and getting 2 loans in the same day. You'll raise red flags all over the place. Do some research, then start applying.
Equity. Creditors want to know you have cash to pay back the debt you'd take on. Open a checking/savings account early, keep money in it, and never close it out. If a creditor sees that you've had a savings account open since 1983 they are more likely to give you a decent rate in comparison to someone who doesn't have a bank account and goes to check cashing facilities.
Pay on time. In fact, pay early (some creditors give incentives to pay early). Late payments will destroy your credit score. Being late on one might put a small blip, but always being late will ravage your score. Creditors want to know they'll get their money and being a faggot that doesn't pay on time makes them less likely to give you any money. Some creditors will bump your rates, immediately, if you are late (most don't though, unless you demonstrate that you'll keep being late).
Never miss a payment, ever. Even missing one payment will tank your credit score and getting out of that pit will take years. There is no way around this. Creditors want to know you'll pay on time. Be late once, but never miss a payment. Your interest will sky rocket and you'll have shitty credit for the next 7 years.
Understand how much credit you've been given and refuse to use it all. Never have more than a balance of 20-30% of the credit you've been given. It makes you look irresponsible with your credit if you max out immediately.Basic tips:
Use someone else's good credit to your advantage. Does your dad have good credit? Have him co-sign. Follow #2-4 from above even harder. If you screw up a co-sign you are also screwing up the credit of the co-signer. A lot of people think this doesn't help your credit and that isn't true.
Get a company card. Express/Gap/whatever asking you to open an account? Do you shop there a lot? No? Then you don't want one. Yes? Then you want one. It isn't Visa/Mastercard/etc but it is credit and if you pay back quickly and on time you are golden. Keep these accounts open as long as possible, and since you shop there a lot you will be doing just that.
Never open more than 2-3 accounts that are similar. Meaning, don't have 10 credit cards/15 company cards and expect your score to be great. It makes you look irresponsible. You want to favor your oldest accounts and want to keep away from opening new accounts as much as possible. Once you have a credit card, expect to stick with it for years.
Call your creditor. Ask for a higher limit and ask them to drop your rates. Repeat this every 6 months. As long as you keep Instead keep asking creditor to move the amount you can charge up on the same cards. Most creditors will do this on their own, but if you are proactive about it you can bump your ability to spend a lot more and will keep you away from having a balance over 20-30%.
Have a credit card? Use it. Simply opening a credit card and then sitting on it is a bad idea. Open it, use it occasionally, and pay it off at the end of the month. You can use a credit card to leverage your credit but it can also ruin your credit.
Monitor your credit score. You are given a free report from all 3 bureaus every year. Get it and look for anything that doesn't look right or is negative.Advanced. These will expose you to more risk but if you are always paying on time, never borrow more than you can pay back, and never miss a payment then leveraging your credit always works towards your advantage:
Ask the companies that you have accounts with which agencies they report to. No one? Close those accounts immediately, they are worthless to you. Just one? These aren't that important to you either. All 3? These are your priority accounts, you want to be an angel on these.
Speaking of which, when you are looking to rent a place always ask where they report. No where? Look elsewhere.
Get a bank loan to pay off a credit card. You want a $2,000 TV. You charge it on your card. You go to a bank and get a $2,000 loan. You use the money from the loan to pay the credit card every month. You use money you'd normally pay to the credit card to pay off the loan. You never miss a payment and you are never late. You are building good credit in two different ways for the same purchase. The only con to this is that you will probably end up paying more in interest.
Leveraging your credit card. You can use your credit card to build credit by paying it on time every month and never being late (preferably you are paying it off every month on time). But you can also use it to build credit on top of the credit you are getting for paying on time/never being late by using it to pay other bills that are reporting how you use credit.
Use a credit card to pay your utilities and phone bill. You are paying $50 a month on time and never missing a payment/never being late on your phone bill. Use your credit card to pay it. Your phone company will report that you've paid your bills on time and you will be using your credit card and paying on it at the same time.
Use a credit card to pay your rent. Most credit cards will send you credit card checks to use. The main purpose of these is to use your card to take the balance from another card. But some cards will allow you to write a check to pretty much anything (call your credit card company and ask). If your card is one of these then pay your rent with these checks. If you are living somewhere that reports your credit and you pay off that amount on your credit card each month you are building twice as much credit for something you do every month anyway.Don't be a retard with credit. Use it wisely and use it to leverage yourself into a good position. Do not abuse it and do not let it control you. Only spend as much as you can afford to pay back every month. :)
Most of this is common sense, but it seems like most people don't know these things and how harshly they can hurt your credit... or even what "credit" is!
Basics:
A credit score is actually pretty simple. It is a number that is assigned to you by credit bureaus that shows how credit worthy you are. It tells creditors how likely you are to pay back credit. The end.
Interest is based on how risky it is to lend money to you. If you are less likely to pay something back then you are a high risk.
But how a credit score is achieved is a trade secret. Each bureau has a different way to arrive to it. But practically all the current credit scoring systems are based off the Fair Isaac system.
Most things you hear about credit, how to build it, etc is bullshit. There is no magical way to build it over night and creditors are wise to all the ways you'd imagine to "work" the system.Anchors, these are things that will always make up your credit score. They will carry your score through your entire credit history and if you build a strong base with these you won't really have to worry about your score all the time.
Don't carry a balance. You do not have to carry a balance to earn credit. Creditors want to know you'll pay, not that you'll carry a balance. They don't give a shit about your balance until you start falling behind on it.
Start slow. Don't jump into opening 20 cards at 18 and getting 2 loans in the same day. You'll raise red flags all over the place. Do some research, then start applying.
Equity. Creditors want to know you have cash to pay back the debt you'd take on. Open a checking/savings account early, keep money in it, and never close it out. If a creditor sees that you've had a savings account open since 1983 they are more likely to give you a decent rate in comparison to someone who doesn't have a bank account and goes to check cashing facilities.
Pay on time. In fact, pay early (some creditors give incentives to pay early). Late payments will destroy your credit score. Being late on one might put a small blip, but always being late will ravage your score. Creditors want to know they'll get their money and being a faggot that doesn't pay on time makes them less likely to give you any money. Some creditors will bump your rates, immediately, if you are late (most don't though, unless you demonstrate that you'll keep being late).
Never miss a payment, ever. Even missing one payment will tank your credit score and getting out of that pit will take years. There is no way around this. Creditors want to know you'll pay on time. Be late once, but never miss a payment. Your interest will sky rocket and you'll have shitty credit for the next 7 years.
Understand how much credit you've been given and refuse to use it all. Never have more than a balance of 20-30% of the credit you've been given. It makes you look irresponsible with your credit if you max out immediately.Basic tips:
Use someone else's good credit to your advantage. Does your dad have good credit? Have him co-sign. Follow #2-4 from above even harder. If you screw up a co-sign you are also screwing up the credit of the co-signer. A lot of people think this doesn't help your credit and that isn't true.
Get a company card. Express/Gap/whatever asking you to open an account? Do you shop there a lot? No? Then you don't want one. Yes? Then you want one. It isn't Visa/Mastercard/etc but it is credit and if you pay back quickly and on time you are golden. Keep these accounts open as long as possible, and since you shop there a lot you will be doing just that.
Never open more than 2-3 accounts that are similar. Meaning, don't have 10 credit cards/15 company cards and expect your score to be great. It makes you look irresponsible. You want to favor your oldest accounts and want to keep away from opening new accounts as much as possible. Once you have a credit card, expect to stick with it for years.
Call your creditor. Ask for a higher limit and ask them to drop your rates. Repeat this every 6 months. As long as you keep Instead keep asking creditor to move the amount you can charge up on the same cards. Most creditors will do this on their own, but if you are proactive about it you can bump your ability to spend a lot more and will keep you away from having a balance over 20-30%.
Have a credit card? Use it. Simply opening a credit card and then sitting on it is a bad idea. Open it, use it occasionally, and pay it off at the end of the month. You can use a credit card to leverage your credit but it can also ruin your credit.
Monitor your credit score. You are given a free report from all 3 bureaus every year. Get it and look for anything that doesn't look right or is negative.Advanced. These will expose you to more risk but if you are always paying on time, never borrow more than you can pay back, and never miss a payment then leveraging your credit always works towards your advantage:
Ask the companies that you have accounts with which agencies they report to. No one? Close those accounts immediately, they are worthless to you. Just one? These aren't that important to you either. All 3? These are your priority accounts, you want to be an angel on these.
Speaking of which, when you are looking to rent a place always ask where they report. No where? Look elsewhere.
Get a bank loan to pay off a credit card. You want a $2,000 TV. You charge it on your card. You go to a bank and get a $2,000 loan. You use the money from the loan to pay the credit card every month. You use money you'd normally pay to the credit card to pay off the loan. You never miss a payment and you are never late. You are building good credit in two different ways for the same purchase. The only con to this is that you will probably end up paying more in interest.
Leveraging your credit card. You can use your credit card to build credit by paying it on time every month and never being late (preferably you are paying it off every month on time). But you can also use it to build credit on top of the credit you are getting for paying on time/never being late by using it to pay other bills that are reporting how you use credit.
Use a credit card to pay your utilities and phone bill. You are paying $50 a month on time and never missing a payment/never being late on your phone bill. Use your credit card to pay it. Your phone company will report that you've paid your bills on time and you will be using your credit card and paying on it at the same time.
Use a credit card to pay your rent. Most credit cards will send you credit card checks to use. The main purpose of these is to use your card to take the balance from another card. But some cards will allow you to write a check to pretty much anything (call your credit card company and ask). If your card is one of these then pay your rent with these checks. If you are living somewhere that reports your credit and you pay off that amount on your credit card each month you are building twice as much credit for something you do every month anyway.Don't be a retard with credit. Use it wisely and use it to leverage yourself into a good position. Do not abuse it and do not let it control you. Only spend as much as you can afford to pay back every month. :)