Quote:
Originally posted by nash
Hi NoSoup,
I've read through the entire thread and it looks like the info that you and others have posted will be of great help in the future.
But as for now, I am a student with no credit looking to establish credit so that I may be able to own a home and what not in the future. I am fortunate enough that my parents have a college fund for me (I go to a state school and commute from home so tuition isn't that expensive at all anyways) and have not had to take out student loans for school. From previous posts, I've learned that secured credit cards are a good place to start. What else can I do after that? And how long after getting the secured credit card should I wait before doing whatever you suggest next (if anything)? If I get a secured credit card, I will most likely not ever be using it anyways since currently I have a debit card and I like making sure I have enough money in the bank before making any purchases.
On a related side note, one professor I had was saying that: taking out a small loan, leaving it in your bank account (and not touching it) and paying it back on schedule, and then getting a bigger loan and doing the same, etc. will be worth paying the interest in the long run because the bank will "trust" you with larger sums of money after they've seen that you've had a good history. He said something like "start when you don't need the money, so that when you do need the money you'll be trusted with more." Any thoughts on that?
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Nash- I the next step after obtaining secured credit via a secured credit card, would probably be to get an unsecured one. Talk with the financial institution that gave you the secured one and see if they will release it, but if they prefer to keep it secured, it's no big deal. Make sure you choose a "conventional" credit card, instead of falling into the retail card trap.
As far as your professor's advice, it is pretty sound, except you don't necessarily need to increase the loan amount. Credit history is exactly that, just a history of you making your payments on time. It may be difficult to keep making smaller payments when you know you are paying additional interest, but keep in mind that spending that extra bit now could potentially save you tens of thousands of dollars in the future. I really like the fact that he said to get the money now, when you don't need it, for when you do. Again, frustrating because you are paying interest, but definately true. Chances are, you will not be able to live your whole life without credit coming into play somewhere. I see far too many people that think they don't need credit have an emergency come up, and when they apply for a loan, just simply don't have any credit. These people are generally declined due to lack of credit history. Unfortunate, but a good example as to why it is important to start early.
If you do end up getting a secured credit card, make sure you use it. Even if you keep track of the balance vs. your checking account balance and don't spend more than you have, make sure that card is put to use. You always can pay it off each month and avoid interest charges, but make sure you keep the balance under 60% of the credit limit, even though you may pay it off each month.
I hope this answered your question! If not, Post again!
Thanks!