After reading this thread..https://www.ford-trucks.com/forums/s...d.php?t=343332

I came to the idea of making my own thread about my own situation, to get suggestions on where I should go with my finances. I'm more or less trying to improve my credit...which is pretty good I've been told.

First, where can I get a credit report for myself and be sure it's secure?

I've had a credit card since I turned 17. My parents co-signed on it, and i've had that for almost 4 years now (I'll be 21 in may). When I was 18, I got a cell phone and the guy said it was pretty unusual for someone to be able to get a cell phone at 18 due to insufficient credit, and he was surprised that I got it. I've never had an autoloan, payed for my vehicles outright. At first, I payed my truck insurance every month for about 6 months, then since then I've payed it off in full every time (they charge me $4 a month in order to pay every month). Last year I took an $8000 loan for a snowmobile purchase, which I didn't have enough credit for (not sure why), but i had my dad co-sign on it. I payed that off in 1 payment and only paid about $20 in interest on that loan.

The credit card I have had, has a $1000 limit and they are unwilling to raise it because of 2 missed payments in 4 years. In that 4 years, they have not made a penny off me in interest, I pay the bill in full every month. I opened a sears card 5-6 months ago, and got an $1800 limit (they offer you 10% off for opening one). This card has had about $100-$150 on it for the last 4-5 months, I pay the minimum. I opened 1 new credit card, about 4-5 months ago, because my other card did not offer me enough credit. I had a new engine to purchase for my truck, and applied for a chase credit card, which they gave me a $3800 limit.

The last 4-5 months is the only time I've ever carried a balance on a credit card. The first card has had 5-600 on it, the chase card has a few thousand on it (and has since i got it), and the sears card has $100 or so on it. I've payed the bills, but just don't have enough money right now to pay them off completely, but I'm working at it. I pay their bills whenever I get money, sometimes I make 2+ payments on the card a month, and pay well over the minimum. I'd like to pay these cards off over the next couple of months if not sooner, and get out of this debt. I make about $400 after taxes a week on average, so hopefully it won't take long, it's the first time I've ever been near debt or in debt. I didn't work much this summer, a lot of my bills were payed on savings, and my engine died so I'm trying to absorb that and move forward.


I have a savings account on the side that I never touch, with about $5000 in it for real emergencies.

Can anyone offer tips as to how I can improve my credit, as well as avoid negative credit (other than making sure the payments are made)...

 

First off, your credit score is not the entire picture when getting a loan. Your debt-to-income ratio plays a huge factor. You may not have much debt right now, but your income isn't that high, either, so it's easy for you to have a high D/I ratio. For example, virtually all mortgages from a bank are written under some version of the "29/40" rule--that is, your house payment cannot exceed 29% of your monthly income, and your total debt service payments (mortgage, credit cards, vehicle loans) cannot exceed 40% of your monthly income. These numbers vary from lender to lender. In your case, at ~$1600/mo, your approximate total debt payments would have to stay under ~$640 AFTER you get whatever loan for which you're applying.

You may want to consider getting a different type of loan on your snowmobile once the balance is less than your savings. You could use your savings to secure the loan balance, and remove your dad from the co-signature. Overall, though, your best bet would be to use your savings to get yourself out of the credit card debt, and close all the accounts except for maybe one. If you're paying the minimum on your Sears card, chances are that you've already eaten up the 10% savings you got when you opened it--in interest.

Other than that, don't miss payments--that's a big credit no-no. Pay off your credit cards, and don't let them automatically raise your limit on the ones you keep. (Too much open, revolving credit is also bad).

I'm saying this not because I've done all this, but because I'm 30, and I was about where you are when I was 21. I wish I was 21 again...you don't want to be where I am credit-wise when you're 30. I have a good credit score, but am pretty much maxed out. I pay ALOT in interest every month, and if I had it to do over again, I would definitely embrace SAVING and a much more Spartan lifestyle.

Get out of debt and stay out!!!

Jason

 

Get a book by Dave Ramsey titled "Financial Peace". Read it. It's got a lot of good recommendations about staying away from unsecured debt.

 

Well, the loan for my snowmobile is over with...as soon as the payment info came, I sent them $8020 to cover it, and that was it on the loan. I did not want to pay interest on this, had the money, and payed it. However, it appears that paying a loan in full right away doesn't help your credit very much because...

I had absolutely NO debt (no cc balance, not even an insurance payment, that had been paid off for the year, my only bills were my cell phone, and any credit card stuff I bought, never more than a few hundred bucks and still always paid up)...and was making $2000 a month takehome. I do live with my parents, so I don't pay rent for an apartment. My income is a little lower now than it has been, but for my age I do well, last year I made 31,000. My debt - income ratio should have been excellent....had over $17,000 in my checking/savings (let alone the $5000 in my other savings) ....I still didn't get the loan...

A lot of my bills are 100% paid at all times....when my insurance bill comes for the year, I send them the amount in full because I have the money and don't wish to pay interest/fees. My CC bill gets paid in full every month (except for the last couple of months). I hate paying interest because it's just lost money on credit that I don't really need (have the money!)...

The book was a good suggestion, I'll check into that.

 

You are doing fine, I wouldn't worry about it too much, unless you are planning to try and borrow 200,000 dollars.

If someone told you your credit is very important and it must be carefully guarded, they are probably thinking "old school" 50's, 60's and 1970's way of thinking. A person's credit status was more important in the old days, because it was harder to track a borrower and retrieve bad loans. These days credit companies can find you easier, and in fact, enjoy knowing every move you make when your credit or debit card is used so they can keep tabs on you. Of course you are going to be looked at harder because of your age, but these days just about anyone can borrow anything as long as they breathe, and can function.

Keep all your bills paid, and up-to-date. Do not worry about the occassional late payment because you forgot to send it in or didn't have the money, as long as the credit company doesn't have to get a collection agency involved you are OK. Safeguard your receipts, shred them or store them securely. Keep all personal ID numbers out of the trash, to minimize fraudalent attacks on your savings, credit, and even SSA accounts.

The best investment you can make is your career. find a job that pays well and you enjoy. Then you can dictate to the credit companies what you want.

 

Any ideas why I didn't get that loan for my snowmobile? I wish I knew why...but I seemingly don't have the ability to make a loan, even just for $8000....so I'd like to get a credit report and don't know how to do it securely.

 

i think when you turn 21 you'll find it easier to get loans. atleast that's what i've been told

 

www.myfico.com You can purchase a credit report for about $15. I buy one about every 3 months to check for errors.

 

Have you had much for errors?

 

The hard part is not figuring out what you should do, but to actually put a plan in place and do it. It is definitely easier to get started when you are young. Not just because of the long time you should have to do it, but because you have more disposable income to do it with.

It's common for us to think when we are young we don't make much money and when I get older it will be easier to save, invest etc. But when you reach middle age with children, mortgage and all the rest of the bills it gets harder.

You are to be congratulated for even thinking about this at a young age!

 

Never had an error. It also has a program that lets you see what you can do to improve your credit score.

 

Justin,

If you want to build a good credit history the best way imo is to piggy back on your parents credit cards. If your parents have excelent credit history just ask them to add you as an authorized user. You will never even have to touch the card. As long as they pay their bills on time you will be getting some good credit history without building any debt.

If you have 5k in savings I would use a portion of it to pay off all current debt and put the rest of the cash to work for you. At your young age compound interest will be good to you. Just don't leave your money wasting away in some bank that does not offer a good interest rate on your money.

 

You are doing everything right, its incredibly important for you to not miss any payments, even if you can only pay the minimum.

The only thing you can do is be older. The reason you didn't get the loan was because you basically had a maximum limit of $1000. I just got my first credit card, with a $2,000 limit.

 

Im not sure at all but I dont think being an authorized user of someone elses credit will help, based on that logic if your parents turned into deadbeats you would be ruined as well, it just doesnt work that way. Account holder and authorized user are not the same. (I dont think)

Also, where are you going to put 5gr that offers a good interest rate? Answer, nowhere, leave it in the bank. When rates are low, all rates are low, its great for buying houses and cars, lousy for savings returns. A 24 month CD will net you what 2% ? 200 bucks for no access to your cash for 2 years.

I'll second myfico.com, good service. I highly doubt you are anywhere near where too much credit becomes a problem, you are more likely in a position where more credit will help you, I have 80 maybe 100K of unused credit (some cards get a little silly with limits), my score is very high, and I have never been declined for anything. Having credit tells a lender that someone else has confidence in your ability to pay.

To build credit you have to use credit and use it responsibly, you seem to be doing pretty well, just dont make late payments..

Im not clear on what happened with the snowmobile, you did or didnt get a loan?? The posts are confusing.

 

Its all a margins game. It sounds like you have been doing great with your finances (paying off in time). I think thats your problem. They do not make any money off of you, with you doing that. They are obviously money making machines, so they try and cut down on their 'less profitible' customers. They wont be as willing to lend more to you. I certainly believe this to be true. As I have gotten older, my debt has increased. I do play their game, and vary between paying the minimum, and a % over some months. I have everything from frivilous purchases (stuff for my truck, vacations, etc), to my schooling. I have more credit than I need. I am probably in the area of $20k available credit. I utilize about half of that. Oh no! Rich, you have way too much debt!! Yes, and no. The debt that I do have, I am paying a much lower % than any bank could lend it to me at. I dont want to have to be the one to tell you that it costs money to gain additional credit, but thats certainly what it seems like to me (as well as what my father has told me). As for the snowmobile loan, was this a personal unsecured loan you had applied for, or something else? I do believe that although you have good payment histories, age probably does have a great deal to do with it. Besides, credit just gets you in trouble