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Establishing credit

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Establishing credit

Unread postby Rat_Tail » Wed Jun 16, 2010 10:14 pm

Anyone got some good advice to establishing credit?

I've been hesitant to get a credit card just because I really hate the whole idea of credit but I really shouldn't wait too much longer.

I already got a checking and savings account with Chase so should I just go through them?
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Re: Establishing credit

Unread postby swerb » Wed Jun 16, 2010 10:19 pm

Two biggest components to your credit profile are ..

1. Paying your bills on time
2. How much of your available credit you actually use

Never make any payments 30 days late. Get a credit card, never use more than 30% of the total credit line, and pay the balance off in full each month.

Those are the best first steps to establishing credit.
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Re: Establishing credit

Unread postby motherscratcher » Wed Jun 16, 2010 10:20 pm

You should use one of those payday loans places like Check Into Cash as much as possible. Are there any near you?
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Re: Establishing credit

Unread postby Stu » Wed Jun 16, 2010 11:13 pm

just be smart with money. dont go into debt. pay everything off in full when its due. never pay interest on something other than a house, tuition, or to start a business.

credit is a result of smart financial decisions, smart financing is NOT a result of having good credit.
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Re: Establishing credit

Unread postby waborat » Thu Jun 17, 2010 6:48 am

Swerb & Stu couldn't have said it any better...

I'll add this, if you have any outstanding interest loans (other than a house/tuition) and you have money in your savings account, pay off the loans quickly...It's ridiculous to pay the higher interest

This is assuming you have some kind of credit to you...

I know so many people that owe 10K plus on dumb loans while they have 6-7 K in the bank "for a rainy day"...Guess what? It's already sprinkling, so bring in the clothes
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Re: Establishing credit

Unread postby mistero » Thu Jun 17, 2010 8:36 am

Don't get married...seriously. Hide your check book in a box buried under the garage.
My wife used our money 1st for entertainment, eating out, shoes, clothes, concerts whatever, then if there's anything left she'll want to pay the bill that's two months late. You know the one that's pink with the shut off notice. If there's money in any account she'll find it and spend it. A few years ago I got a separate checking account and deposit my paycheck there. I pay all the bills. She has her check to light on fire. Works better for everyone.
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Re: Establishing credit

Unread postby Orenthal » Thu Jun 17, 2010 5:54 pm

Buy only what you can afford to pay cash for at the end of the month/credit period. This shit isn't rocket science. Stupid people with or without a credit card will still have horrible credit and a crappy life. Stupid people with good money management skills, are still stupid, but will have more money, and better credit.

Credit card paid in full is a good start. Getting co-signed on a vehicle and then buying your own vehicle. A proven ability to repay trumps all.

ETA:
Wab hits the nail on the head of good money management. If you have extra money, and a 7% interest rate on a car loan, you pay off that car loan faster then the payment schedule. This is always the way to go unless you can make greater then 7% through investment or there are penalties for early payoff. Again it is mostly common sense. What seperates is the abilty to resist temptation of short term pleasure/irrational purchase. Going to the bar constantly, clothes... Propinquity MF'ER!
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Re: Establishing credit

Unread postby FUDU » Thu Jun 17, 2010 8:45 pm

1. Discipline

2. Understanding a key banking principle: saving interest is better than earning interest.
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Re: Establishing credit

Unread postby waborat » Thu Jun 17, 2010 9:00 pm

FUDU wrote:
2. Understanding a key banking principle: saving interest is better than earning interest.


Now that's just beautiful...

Sounds Slovenian
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Re: Establishing credit

Unread postby Cease » Thu Jun 17, 2010 9:11 pm

Automatic bill pay your CC every month in full. Set up auto-pay where ever you can so you don't miss a payment.

FUDU wrote:

2. Understanding a key banking principle: saving interest is better than earning interest.


Wrapping my head around this advice... Is this to say that all things being equal, it is better to use excess cash to pay off a 5% interest loan than to invest that excess cash at an interest rate of 5%? Or, are you talking about saving at 2% vs. paying off at 12%, in which it is clearly better to use excess cash to pay off?

Or are neither or my examples pertinent to your point?
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Re: Establishing credit

Unread postby Orenthal » Thu Jun 17, 2010 9:20 pm

I tried to put a real world example of what Donny is talking about in my above post. Don't save oodles of cash in an account earning below 1% interest, when you owe 10,000 plus on a car note that is at 5-6-7%.

I bought my last car after the lease was up in 2008. I have perfect credit high high high 700's, and my rate was still near 7%, and that was after shopping around at local banks, and beating up the dealer. So naturally unless I can grab over 7% from my spare money (I get close with my Altria stock holdings. btw there are some killer stock dividends to be had right now, but another topic.) you save interest by paying it off early. As opposed to collecting the less than 1% by earning it...

Love that lil quip donny!
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Re: Establishing credit

Unread postby waborat » Thu Jun 17, 2010 9:24 pm

Cease wrote:Automatic bill pay your CC every month in full. Set up auto-pay where ever you can so you don't miss a payment.

FUDU wrote:

2. Understanding a key banking principle: saving interest is better than earning interest.


Wrapping my head around this advice... Is this to say that all things being equal, it is better to use excess cash to pay off a 5% interest loan than to invest that excess cash at an interest rate of 5%? Or, are you talking about saving at 2% vs. paying off at 12%, in which it is clearly better to use excess cash to pay off?

Or are neither or my examples pertinent to your point?


What OJ said...

Only borrow when it's free or nearly free money...

If you have to borrow, pay back asap...

My father told me a long time ago "If ya can't pay cash then ya can't afford it"
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Re: Establishing credit

Unread postby Cease » Thu Jun 17, 2010 9:30 pm

Yeah, that's what I was thinking- I just hadn't seen it so eloquently stated. I turned into a debt-focused freak about 4 years ago, and the result has been freedom. It's powerful to pay something off and roll that payment into the next debt sum.
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Re: Establishing credit

Unread postby aoxo1 » Thu Jun 17, 2010 9:40 pm

Cease wrote:Automatic bill pay your CC every month in full. Set up auto-pay where ever you can so you don't miss a payment.

FUDU wrote:

2. Understanding a key banking principle: saving interest is better than earning interest.


Wrapping my head around this advice... Is this to say that all things being equal, it is better to use excess cash to pay off a 5% interest loan than to invest that excess cash at an interest rate of 5%? Or, are you talking about saving at 2% vs. paying off at 12%, in which it is clearly better to use excess cash to pay off?

Or are neither or my examples pertinent to your point?

If you have a loan at a very low rate, it's not worth paying off early. ie: no reason to pay off that 0% car loan. As long as the rate is above inflation, you will come out ahead paying it off compared to stuffing it in your mattress.

If you have some option which is guaranteed to give you a higher interest rate (you HAVE to take into account tax liability) with complete liquidity instantly, then that is certainly better than paying off a lower interest rate loan. But that would be very rare.

(2) holds true 90%+ of the time, and even in the cases it doesn't you aren't really doing any damage.
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Re: Establishing credit

Unread postby Cease » Thu Jun 17, 2010 9:54 pm

Thanks for the extra color on that, Ao and others.
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Re: Establishing credit

Unread postby Orenthal » Thu Jun 17, 2010 10:44 pm

Yup Ao added another layer to the equation. It can get more and more complicated the deeper you go, but following your plan will work wonders.

Those who sometimes get too smart, I have done a bunch of things thinking I was going to rock a higher rate of return (school loans as nearly free money to play stocks), end up getting burned. Slow and steady may be boring, and might not lead to the super high end, but damn that freedom tastes good.
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Re: Establishing credit

Unread postby FUDU » Fri Jun 18, 2010 4:47 am

OJ covered it well, I didn't catch his post prior to mine yesterday.

Anyway, the other advantage of the concept that saving interest is better than earning interest being that you don't have to pay taxes on the interest you save as opposed to having to do so in most cases with interest earned.

Like mentioned by Cease I became very focused on debt years ago, the power of being debt free is under valued.
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Re: Establishing credit

Unread postby waborat » Fri Jun 18, 2010 6:50 am

aoxo1 wrote:If you have a loan at a very low rate, it's not worth paying off early. ie: no reason to pay off that 0% car loan. As long as the rate is above inflation, you will come out ahead paying it off compared to stuffing it in your mattress.




Kinda thought this was common sense, but I should probably know better, huh?

Pretty much free money whenever you can get 1.9% or less...

Foolish not to take advantage of 0% and stay ahead of the game...

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