Q&A: How do I build credit when I don’t have much?
Question by Heather: How do I build credit when I don’t have much?
I am trying to build credit, but no one will give me a credit card. I have a car loan in both my husband and my name and we always pay early, but that doesn’t seem to be enough. When I apply for credit cards they always say “insufficient credit”. How do I go about building credit and getting a credit card?
Best answer:
Answer by Kath6
You might try joining a credit union, if you can, and open a checking or savings account. After you’ve been a good customer there for awhile, you may be able to take out a small personal loan for something. (When my son was 16, he got a loan for $ 400 to buy a drum set.)
Another way you can get credit is to get a secured credit card. First Premier Bank is one such card. You have to basically put an amount of money up front and then you use it for small amounts, say $ 20 or so and pay it off every month. You’re really using your own money, but it shows that you’re responsible and a good credit risk. The catch is, you must repay it on time every month. You don’t want it to grow and not be able to pay it off. Only charge a very small amount each month. After a few months of doing this, your credit will improve and they may offer you a better card. But, be careful. Credit cards are very dangerous to use. If you absolutely cannot pay off whatever you charge every month, do not use it! Remember that your credit score is very important. It is the key to getting good interest rates on car loans and mortgages. Safeguard it well. The sources below will help you more. Good luck.
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Categories: Credit Score Questions Tags: Best, build, Credit, credit card, Don't, month, much, think
If you pay the full balance on your credit card each month do you still…?
Question by dk: If you pay the full balance on your credit card each month do you still…?
If you pay the full balance on your credit card each month, does this help to build up good credit history or score?
Best answer:
Answer by message_board_ceo
You can’t pay off debt if you don’t have debt. According to FICO, the most effective way to raise your score is to pay debt. Chase, Discover, and MBNA (now BofFA) all confirmed this by advising me to charge a small amount and paying it ALMOST entirely (leaving a small $ 3-5 balance). This would show I was an extremely low credit risk, thereby boosting my FICO score.
So I tried this method using 3 sock drawer cards, each with a credit line in excess of $ 10k. I would buy a tank or two of gas, small grocery purchases, etc. under $ 100 on each per month, then pay off 95% of the balance. My score shot up from the low 700’s to 755 in a matter of 3-4 months. Mind you I had very little outstanding debt on any of my other cards. Don’t believe me? Try it, because it most definitely will improve your score.
One more thing, keeping a card with $ 0 balance, not using it for extensive periods of time used to be a good thing but is a big NO NO these days. Why? Because creditors are very freaked out by unconsumed lines of credit that are potential sitting ducks for turning into delinquent accounts. Furthermore, unused cards are having their credit lines slashed substantially, thereby reducing your available credit, which is a major factor in FICO’s score. Expect your score to take a nosedive when Chase or Amex decides to cut your unused 10k credit line in half because you didn’t even need $ 5k, so why should they give you $ 10k?
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