# How to build credit.



## Deon

I have no credit at all. I am wondering the best and easiest way to get credit without making a huge investment. I remember in high school in a class called Math Models, in which we learned how to handle and budget money in the real world, our teacher told us we could apply for a credit card and buy a something for about $20 on it each month only to build good credit. Is that a good idea? Can you get credit from renting an apartment?


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## ryan28801

I have a similar situation....35 and never built credit, always waited till I had enough $ for what I needed. Suggestions? I don't want to go out and buy something I don't need just to build credit.


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## JeepHammer

Start your credit history by having a checking account and savings account with a local bank.

DO NOT OVER DRAW THAT ACCOUNT!
That overdraft will go on your credit report with the larger, conglomerate banks, but smaller, home town banks & savings & loan banks don't often report it.

Keep at least $100 in that account no matter what!
Most of the time, if your balance doesn't drop below $100, there is no monthly service fee, and that alone saves you $7 to $25 a month in service fees, 
Plus it will raise your in bank credit rating considerably...

Once you have an established account with the bank, ask for a loan...
And maybe build a rapport with the loan officer, let them in on what you are doing....

*BECAUSE...*
*The Best way to build a credit rating and credit history is with a real bank loan.*
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You can borrow from 'Other than banks' but those loans might not be reported to the credit reporting agencies, so they won't help you, but if you are late with payments, they WILL report that, so it WILL hurt you!

Those 'Buy Here, Pay Here' places are useless, as well as most store credit cards since they don't report to the credit bureaus unless you are LATE,
So they don't help you, but they can HURT you...
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Start with buying a $1,000 CD (Certificate of Deposit) and using it as collateral on a loan.

Most banks won't loan you less than $1,000 or $1,500...
And with no credit rating at all, you won't get a loan for more than $2,500.

So around $1,500 to $2,500 is about right.

The all time best way is to have a loan officer that is in on the gig, and will issue you a check, escort you to the CD desk to get the CD, and then take it for collatral on the note she just wrote you the check for.

If not, and you have friends/family that will lend you $1,500 or $2,500 for about 2 hours, then when they inform you that the loan has been approved, take the money from friends, buy the CD, and take it to the loan officer to be stored as collateral...
Then that loan officer will issue you a check for the value of the CD, and you use that to pay back parents, friends or whoever...

A $1,000 CD will get you a $1,500 or $2,000 loan.
But you are better off covering the entire amount of the note right off the bat...

Some banks will actually load you up to $2,500 on a pay back plan, and then you use that $2,500 to buy up a CD and use it as collateral... 
(It's called a 'Secure Loan')

If you have the entire loan secured, as in you use the $2,500 to buy a 2,500 CD, then if something happens,

(and believe me, SH!T DOES HAPPEN!)

Like you get disabled, laid off at work, ect, the loan is covered...
They can't loose, so they will loan you that $2,500 with no issues...

*ALWAYS STAY AT LEAST ONE PAYMENT AHEAD OF THE PAYMENT BOOK!
You NEVER, EVER want to be late!*
Late payments on your first loan would be BAD!

When the $2,500 load is paid off, you now have a $2,500 CD that collected interest, and you have a credit rating!
Sort of a 'Forced Savings Plan'!
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Another way to get a loan is with a stable CO-SIGNER...
This would be someone with a good credit rating.
What a Co-Signer does is assume the loan in case you default and don't pay it back...
(Then they are on the hook and you have lost a friend, someone that trusted you!)

Co-Signers are not as easy as they used to be, people are much more leary of getting into something with people they can't beat up on at every family get together!
AND,
Banks are leary of lending on Co-Signed notes unless you are very young with no credit rating, like a parent Co-Signing for a kid,
Or you are freshly married with no credit rating...
Then your spouse is usually enough to get you a loan...
---------------------------------

If you get a car loan, and if you buy a car that will be it's own collateral, that is often a good way to start a credit history.
If you get a car loan, GET IT THROUGH A BANK, like GMAC or your local bank...
AND,
You WILL NOT get a loan with out a down payment.
They aren't going to pick up 100% of the cost on your first note!
-----------------------------------

Getting a bank credit card, 
(NOT a debit card that's attached to your checking account!)
And keep some small balance on it, but make sure you pay the bill the DAY it comes in!
And you will build a payment credit rating like that.

Don't have too may credit cards.
Credit cards usually have a $2,500 to $10,000 balance limit, so if you have 5 cards at with a $2,500 limit, that is a potential for $12,500 in instant debt, so that doesn't look good...

Don't EVER have a maxed out credit card!
Maxed out cards are a red flag that you are already in trouble!

If you have a problem with 'Impulse Buying', leave your credit card in a safety deposit box or even freeze them in a bowl of water in the freezer, anything to keep you from abusing them!
The credit card companies don't report your balances unless you are late... So use the card a couple of times a year, buy magazine subscriptions or get your license plates once a year, then put the credit card back in storage!
Pay the bill IMMEDIATELY when you get it!

All the credit companies will report is 'No Late Payments in the previous 12 months'... EXACTLY what you want to go on your credit report!


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## JeepHammer

I almost forgot, 

I say CD's becuse they are 100% available for credit.
Meaning you can borrow 100% of their value.

If you put up stocks or something like that, you can only get somewhere between 1/3 and 2/3 the value on a loan....

CD's are also FDIC insured, so even if the bank fails, you will get ALL your money back...


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## bankerrkt

Jeep Hammer had some good ideas and great advice. I would echo one of his suggestions. That is .... form a relationship with a banker and let them know that you would like to establish credit. Let them be your guide and counselor. I'm guessing you guys are extremely disciplined since you have paid cash for everything. So I doubt you would go crazy with creidt like a lot of folks. You might find it more difficult right now to get credit only because the credit markets are in turmoil. But be patient and it will happen for you.


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## bankruptONselling

How do you get your money when you want to use some of your CD?


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## tech274

I was unemployed for 2 years , went bankrupt and eventually lived in my truck. My credit was gone. 

While in Target they offered me a credit card , they gave me $100 limit. Not much , but a place to start. I charged everything that I had the cash for and paid them off every month. 
Once I found a job , I started applying for other cards, it took a while but eventually got them. Spread the charges around and built up credit with 4 companies. 
After I saved a bunch of cash , I bought a small cheap home , got the loan , rented it out and built my credit further. 

5 years later my credit score is back in the 700's and I have plenty of credit . 
It just takes time , paying everyone off every month. 
Once i established the credit , I got myself down to 2 main cards that are paid off every month.


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## Canadian

If you have no credit the easiest thing is to get a credit card. I paid cash for everything my entire life until the day I wanted to buy a brand new car. I needed financing but was declined because I had no credit history. I got a Visa card. I bought all my normal shopping on that card for a few months. Then I went back to the dealership and bought the car. The next day I cancelled the card. 

You credit rating - in Canada - has little to do with how much you have spent and paid off on credit. It just has to do with having a good record of paying back on credit even if you only have a small credit limit on your card. In a matter of months I built up the highest score possible by buying groceries etc. Now my credit is awesome.


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## NaeKid

Canadian said:


> If you have no credit the easiest thing is to get a credit card. I paid cash for everything my entire life until the day I wanted to buy a brand new car. I needed financing but was declined because I had no credit history. I got a Visa card. I bought all my normal shopping on that card for a few months. Then I went back to the dealership and bought the car. The next day I cancelled the card.
> 
> You credit rating - in Canada - has little to do with how much you have spent and paid off on credit. It just has to do with having a good record of paying back on credit even if you only have a small credit limit on your card. In a matter of months I built up the highest score possible by buying groceries etc. Now my credit is awesome.


Your credit-score can also be based on bill-payments (utilities), mortgages, etc. If you just get your credit-card and cancel it, your amazing credit-score will drop over time due to non-use.

If you replace your credit-card with some other "regular payment" you can keep your score high (ie: new car payments).


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## northernontario

I made a rather interesting discovery last year when my wife and I were 'pre-approved' for a mortgage. The bank lady called up and said "you as a couple are approved for $xxx, but you might want to know, the credit reporting company says you(ME!!) have no credit history."

What???

This turned into phone calls with my bank, then the credit card company I've used since I was 18 (now 25)... we start confirming information on the account... and we discover the social insurance number thats on my CC account isn't mine, but my deceased mother's. Turns out that when I was 18, filling out my CC info with my dad, and asked him for my SIN, he grabbed the wrong one from his files... we put down my mother's number instead of mine. Turns out I had been maintaining a fantastic credit rating for 6 years... but it was being reported as my mother's information. 

You would have thought it would set off some alarm bells or something.


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## NaeKid

dtompsett said:


> This turned into phone calls with my bank, then the credit card company I've used since I was 18 (now 25)... we start confirming information on the account... and we discover the social insurance number thats on my CC account isn't mine, but my deceased mother's. Turns out that when I was 18, filling out my CC info with my dad, and asked him for my SIN, he grabbed the wrong one from his files... we put down my mother's number instead of mine. Turns out I had been maintaining a fantastic credit rating for 6 years... but it was being reported as my mother's information.
> 
> You would have thought it would set off some alarm bells or something.


Not always. When I moved to Alberta from BC my drivers licence birthdate got screwed up (I ended up one month older) - took alot of explaining to do in order to make that right. My credit-card mixed up my month / day birthday and recorded it as day / month ... I had an employer with dislexic fingers swap some of the numbers of my SIN around .. that was a nightmare to fix up ...

The database is only as good as the people entering the information .. :dunno:


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## Canadian

The birthday on my listing with Revenue Canada is wrong. I tried to correct it for several years and failed. Eventually I gave up and they just tell me the number does not match every year. I just ignore it now.


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## TechAdmin

So the Canadian version of the IRS is flawed as well? Imagine that.


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## Von Helman

Bump

Thanks jeep hammer for the great information.

I personally do not care what my credit score is or worry anything about not having a god score. I live in such a rural area and a simple lifestyle that if I don’t have the money or can’t barter with a friend than I don’t get need it. 

Maybe if I lived in the city had had to compete in the circus there it might be different because credit rating are important there even to rent an apartment these days (Sad) so all I can say is thank God I live in the sticks!


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