Metafilter: How do I credit card?
October 12, 2012 8:58 AM Subscribe
This is embarrassing: I'm 25. I don't know the first thing about credit cards and building credit. I do not have a credit card, and therefore, no credit. Where do I even start?
It didn't even occur to me until I started looking at apartments to rent and realized many of them require a credit check in their application. I have a stable full-time job and make a good income, don't have any debt to pay off, have enough in savings for emergencies/staying afloat for a few months etc. I've lived with roommates in the past but never dealt with landlords - I always rented from people trying to fill a room. I don't really live beyond my means so I don't even buy a lot of "stuff" like furniture or flat screen TV's so I've never even considered a credit card.
My first question is - is there any way around this credit issue with regards to apartment applications? Or am I stuck in my current living situation until I have enough credit? How long does it take to build good credit?
The second is - I obviously need to get a credit card and start building credit. I feel like a sheltered little child - where do I even start? Do I just go to my bank and apply for a credit card? Would I even get one if I had no credit? How do I avoid getting ripped off?
I honestly have a limited understanding of how they even work beyond using it to buy stuff and not having to pay for it until later. Which I'd really rather not do - I'd rather just pay for things on the spot - but I will start using a credit card if I have to, if that's the only way to show landlords or loan applications etc that I am a credible person to count on for paying things off.
Please help me be a freaking grownup and go about this the smart way.
It didn't even occur to me until I started looking at apartments to rent and realized many of them require a credit check in their application. I have a stable full-time job and make a good income, don't have any debt to pay off, have enough in savings for emergencies/staying afloat for a few months etc. I've lived with roommates in the past but never dealt with landlords - I always rented from people trying to fill a room. I don't really live beyond my means so I don't even buy a lot of "stuff" like furniture or flat screen TV's so I've never even considered a credit card.
My first question is - is there any way around this credit issue with regards to apartment applications? Or am I stuck in my current living situation until I have enough credit? How long does it take to build good credit?
The second is - I obviously need to get a credit card and start building credit. I feel like a sheltered little child - where do I even start? Do I just go to my bank and apply for a credit card? Would I even get one if I had no credit? How do I avoid getting ripped off?
I honestly have a limited understanding of how they even work beyond using it to buy stuff and not having to pay for it until later. Which I'd really rather not do - I'd rather just pay for things on the spot - but I will start using a credit card if I have to, if that's the only way to show landlords or loan applications etc that I am a credible person to count on for paying things off.
Please help me be a freaking grownup and go about this the smart way.
Basically, the process is this:
You pay for purchases with your credit card and build up a balance. At the end of the month, you have to make a payment to the credit card company. There will be a "minimum payment" that will be a fraction of the total balance; this is the least you pay without racking up big extra fees.
If you only pay that minimum payment, however, you'll still be racking up another type of big extra fees: interest. Interest on credit cards is very high. What you want to do is pay off the entire balance every month. Treat your credit card like a debit card: the money you're going into debt with each purchase is not *really* your money anymore.
A nice benefit of many credit cards is rewards: they'll give you 1% (or more, or airline miles, etc) of all purchases back free. Watch out for "annual fees" -- for some credit cards, but not all, you'll have to pay a significant amount just to get the card in the first place.
Sometimes it can be tricky to even get that first credit card, particularly if you're not a student, because they don't want to give someone a credit card who has no credit history. Shop around, get the first card without an annual fee, and then pay off the balance each month.
posted by lewedswiver at 9:09 AM on October 12, 2012 [1 favorite]
You pay for purchases with your credit card and build up a balance. At the end of the month, you have to make a payment to the credit card company. There will be a "minimum payment" that will be a fraction of the total balance; this is the least you pay without racking up big extra fees.
If you only pay that minimum payment, however, you'll still be racking up another type of big extra fees: interest. Interest on credit cards is very high. What you want to do is pay off the entire balance every month. Treat your credit card like a debit card: the money you're going into debt with each purchase is not *really* your money anymore.
A nice benefit of many credit cards is rewards: they'll give you 1% (or more, or airline miles, etc) of all purchases back free. Watch out for "annual fees" -- for some credit cards, but not all, you'll have to pay a significant amount just to get the card in the first place.
Sometimes it can be tricky to even get that first credit card, particularly if you're not a student, because they don't want to give someone a credit card who has no credit history. Shop around, get the first card without an annual fee, and then pay off the balance each month.
posted by lewedswiver at 9:09 AM on October 12, 2012 [1 favorite]
I was 26 and had no credit last year. My bank (HSBC) rejected my application for a credit card but I was able to get a card from Capital One -- one of the really small limit ones. It started at $500 and is now up to $750 after a couple months of making payments on time. This does not help your immediate issues regarding renting (I live in a small town and credit checks are rare here) but you can definitely get a credit card now and slowly build up credit.
posted by peacheater at 9:10 AM on October 12, 2012 [1 favorite]
posted by peacheater at 9:10 AM on October 12, 2012 [1 favorite]
First, don't think that being 25 and having no debt is a bad thing. It's really great and good for you for making it this long without one of these things.
I think a good idea would be to make rules about the card. For example, use it only for groceries and gas and then pay it off at the end of each month. Don't start using it for eating out or buying shoes. It's way too easy to get sucked in and end up with a balance that you can't pay off at the end of the month.
posted by dawkins_7 at 9:16 AM on October 12, 2012
I think a good idea would be to make rules about the card. For example, use it only for groceries and gas and then pay it off at the end of each month. Don't start using it for eating out or buying shoes. It's way too easy to get sucked in and end up with a balance that you can't pay off at the end of the month.
posted by dawkins_7 at 9:16 AM on October 12, 2012
Many people in your situation ask their parents to co-sign the lease until they've built up enough of a credit history. Is that an option for you?
posted by acidic at 9:19 AM on October 12, 2012
posted by acidic at 9:19 AM on October 12, 2012
Find a local credit union and move your checking and savings accounts there if they're in a regular bank. If you can get your paycheck direct-deposited all the better. Ask for a credit card from the credit union.
posted by mareli at 9:19 AM on October 12, 2012 [1 favorite]
posted by mareli at 9:19 AM on October 12, 2012 [1 favorite]
1) I've never had a credit card. I've still rented apartments. When the landlord does a credit check, he may well just be looking to make sure you aren't thousands of dollars in debt and don't have a long sordid history of missed payments on anything important. It is still worth applying, or at least asking the landlord whether they'd consider renting to someone with no credit history.
2) Anyway, it is possible that you still have a credit history even without having credit cards in your name. For instance, if you've ever had a non-prepaid cell phone, or put a utility bill in your name, it is possible that they've been reporting to the credit agencies "Yup, Anonymous is a customer of ours, and he makes all his payments on time." (This is actually sort of rare — often, utility companies and the like will only file reports if you do something bad, and won't report on-time payments at all — but it's worth checking.)
3) But if you can't get a place with your current credit history and you want to move now, you'll need a cosigner on the lease. For most people in their 20s, that means getting one of your parents to cosign. (And asking someone other than a relative or an incredibly close friend to cosign is probably a bad idea.) The practical result will be that if you skip town owing a bunch of back rent, your cosigner will start getting nasty phone calls saying "Either pay this off yourself or tell us where Anonymous went so we can take him to court." But if you're responsible and pay your rent on time, your cosigner won't actually need to do anything or get involved in any way.
posted by nebulawindphone at 9:19 AM on October 12, 2012 [2 favorites]
2) Anyway, it is possible that you still have a credit history even without having credit cards in your name. For instance, if you've ever had a non-prepaid cell phone, or put a utility bill in your name, it is possible that they've been reporting to the credit agencies "Yup, Anonymous is a customer of ours, and he makes all his payments on time." (This is actually sort of rare — often, utility companies and the like will only file reports if you do something bad, and won't report on-time payments at all — but it's worth checking.)
3) But if you can't get a place with your current credit history and you want to move now, you'll need a cosigner on the lease. For most people in their 20s, that means getting one of your parents to cosign. (And asking someone other than a relative or an incredibly close friend to cosign is probably a bad idea.) The practical result will be that if you skip town owing a bunch of back rent, your cosigner will start getting nasty phone calls saying "Either pay this off yourself or tell us where Anonymous went so we can take him to court." But if you're responsible and pay your rent on time, your cosigner won't actually need to do anything or get involved in any way.
posted by nebulawindphone at 9:19 AM on October 12, 2012 [2 favorites]
If you are really nervous about credit cards (or have trouble getting one), you can start off with a secured card. This means that you put down $700 and get a credit card with a limit of $700. Not ideal for a lot of people but not bad for others.
posted by two lights above the sea at 9:22 AM on October 12, 2012
posted by two lights above the sea at 9:22 AM on October 12, 2012
I think you're getting good advice about how to build credit, but, so long as you have proof of income, I don't the lack of credit history is going to be as big a barrier with landlords as you think unless you live in a really strong landlord's market. When landlords, especially smaller ones, run a credit check, it's more typical for them to be looking for derogatory items like maxed-out cards, unpaid loans and judgments against you, not how high your FICO score is.
I remember applying for an apartment before I had any credit, and having my prospective landlord describe the results as "great".
(On preview: I agree with nebulawindphone)
posted by strangely stunted trees at 9:22 AM on October 12, 2012 [2 favorites]
I remember applying for an apartment before I had any credit, and having my prospective landlord describe the results as "great".
(On preview: I agree with nebulawindphone)
posted by strangely stunted trees at 9:22 AM on October 12, 2012 [2 favorites]
I'm like you, except I didn't get one until I was over 30. BAD IDEA NOT TO GET ONE, let me tell you. If you're in college they'll give them to anyone, but after that, nobody wants to. My bank wouldn't take me. My mom's credit union did, but they will only give me a secured card, and actually after a year they still won't take me off of being secured. So I really screwed myself for life by not getting one earlier.
And for the record, I had absolutely no credit history before getting the card, even though I pay phone bills and utilities. Those do not count whatsoever towards your record, even if you paid the PG&E late a few times.
Nerdwallet.com has plenty of listings for cards you can get if you have zero credit and nothing to recommend you (and don't have a credit union).
As for using it:
(a) Pay it in full.
(b) Do not spend more than 30% of your limit (I have read that spending more on it is not good).
(c) You're probably better off only using it to pay your phone bill or some automatic recurring thing that you don't have to think about. Also, leave the thing at home and don't bring it with you by default in your wallet.
(d) Official credit cards are good for renting hotel rooms and cars, so if you ever have to do that, use the card for it because they will put a lot of money in your debit account on ice for weeks on end to cover it.
posted by jenfullmoon at 9:25 AM on October 12, 2012
And for the record, I had absolutely no credit history before getting the card, even though I pay phone bills and utilities. Those do not count whatsoever towards your record, even if you paid the PG&E late a few times.
Nerdwallet.com has plenty of listings for cards you can get if you have zero credit and nothing to recommend you (and don't have a credit union).
As for using it:
(a) Pay it in full.
(b) Do not spend more than 30% of your limit (I have read that spending more on it is not good).
(c) You're probably better off only using it to pay your phone bill or some automatic recurring thing that you don't have to think about. Also, leave the thing at home and don't bring it with you by default in your wallet.
(d) Official credit cards are good for renting hotel rooms and cars, so if you ever have to do that, use the card for it because they will put a lot of money in your debit account on ice for weeks on end to cover it.
posted by jenfullmoon at 9:25 AM on October 12, 2012
Consider signing up for CreditKarma - they check your credit report (for free) and give you your credit score. It might not be as bad as you think - as nebulawindphone says, credit *cards* aren't the only things that go on your credit report. (And, FWIW, I was once nervous about submitting to a credit check for an apartment, and they said that I needed "excellent" credit, but actually they just wanted to make sure my score was over 600, which is more in the "average" range.)
CreditKarma will also advertise a list of cards to you that you would likely qualify for based on your score. If you have poor credit, you may only qualify for "secured" cards (where you give them the money that they then lend to you, basically) or cards with annual fees. Which is kind of a drag.
But! If you just have kind of blah/no credit you may qualify for a card with a low credit limit (i.e. how much you can have charged on it at any one time) and high interest (i.e. how much they charge you if you don't pay the whole balance off every month) - which should work out just fine so long as you are paying it off every month and using it for things you can afford. Don't use the card as an excuse to spend more money! (This is actually a lot harder than it seems...)
posted by mskyle at 9:25 AM on October 12, 2012
CreditKarma will also advertise a list of cards to you that you would likely qualify for based on your score. If you have poor credit, you may only qualify for "secured" cards (where you give them the money that they then lend to you, basically) or cards with annual fees. Which is kind of a drag.
But! If you just have kind of blah/no credit you may qualify for a card with a low credit limit (i.e. how much you can have charged on it at any one time) and high interest (i.e. how much they charge you if you don't pay the whole balance off every month) - which should work out just fine so long as you are paying it off every month and using it for things you can afford. Don't use the card as an excuse to spend more money! (This is actually a lot harder than it seems...)
posted by mskyle at 9:25 AM on October 12, 2012
First of all you should know that you are entitled to a free credit report from each of the three major credit reporting companies every 12 months. Some people space these out so they get a free credit check every 4 months. For more information on this see the FTC page or go to https://www.annualcreditreport.com which is the official authorized source for this in the US. Companies like FreeCreditReport.com (they of the annoying ads) will give you a report but are pretty scammy and generally push you to sign up for other services you don't need. CreditKarma, suggested above, seems to be the exception to this, because their revenue comes from ads, not selling you crappy services. I use them and have had a good experience.
Nebula is right that the biggest point of the credit check is usually just to make sure you're not drowning in debt. You can also reassure your potential landlord by having a parent co-sign the lease, by submitting a letter from your work giving proof of income and maybe that yours is a long-term position unlikely to be abruptly terminated, and by giving them bank statements showing your savings. All a little invasive of privacy, but hey you're aking them to let you live in their property, it's a two way street. This will vary by landlord of course. I've lived in a perfectly nice apartment without a lease even being signed because the landlord and I had a mutual reliable friend, though I don't recommend doing that.
If you had student loan debt that you paid off (not that was all in your parents name) that will be reflected in your credit history.
two lights suggestion of a secured credit card is also a good one, although unless you're really nervous about being irresponsible I wouldn't try it unless you get denied every other way. Assuming you have a steady income and no debt skeletons in your closet there is no reason you shouldn't be able to walk into your bank and get a credit card with a $500-$1000 limit.
Also look around on AskMe - this has been asked in various ways before and there is lots more advice.
posted by Wretch729 at 9:31 AM on October 12, 2012 [1 favorite]
Nebula is right that the biggest point of the credit check is usually just to make sure you're not drowning in debt. You can also reassure your potential landlord by having a parent co-sign the lease, by submitting a letter from your work giving proof of income and maybe that yours is a long-term position unlikely to be abruptly terminated, and by giving them bank statements showing your savings. All a little invasive of privacy, but hey you're aking them to let you live in their property, it's a two way street. This will vary by landlord of course. I've lived in a perfectly nice apartment without a lease even being signed because the landlord and I had a mutual reliable friend, though I don't recommend doing that.
If you had student loan debt that you paid off (not that was all in your parents name) that will be reflected in your credit history.
two lights suggestion of a secured credit card is also a good one, although unless you're really nervous about being irresponsible I wouldn't try it unless you get denied every other way. Assuming you have a steady income and no debt skeletons in your closet there is no reason you shouldn't be able to walk into your bank and get a credit card with a $500-$1000 limit.
Also look around on AskMe - this has been asked in various ways before and there is lots more advice.
posted by Wretch729 at 9:31 AM on October 12, 2012 [1 favorite]
Yeah, first, speaking as a landlord: mostly we are looking for the absence of bad things. If you have collections, judgments, evictions, etc. on your report we won't rent to you, but mostly if you do not have any of these things we will rent to you, so don't worry too much about that. Sometimes people with no credit history need to pay a higher deposit, but that's about it.
Second, on the credit card thing: get a Capital One card to start with, they're very easy to get and they'll give you a low limit. Put recurring bills on it (cell phone, gym membership, electric bill, things like that) and then set up auto-pay to pay the card off every month. You don't have to carry it with you or use it for everyday spending. Just a few things that you pay every month anyway, and boom, you're building a credit history.
Now, if in a few years you want to get fancy, then you find a card that has rewards (like, 5% for gas or groceries or travel or whatever it is you normally spend money on) and use that for your everyday spending and pay it off in full every month -- that way you're actually saving money vs. paying cash but ONLY IF YOU PAY IT OFF IN FULL EVERY MONTH. Which, it can be harder to track your spending that way, so don't do that if you think you will have a hard time keeping track. Just having a credit card that you pay your recurring bills with is enough, to start.
Also: do you have student loans or a car payment? Those things show on your credit report too, and if you have been paying those, then you actually DO have a credit history. It's not just credit cards on there (though no, utilities and cell phones generally aren't on there).
posted by rabbitrabbit at 9:34 AM on October 12, 2012
Second, on the credit card thing: get a Capital One card to start with, they're very easy to get and they'll give you a low limit. Put recurring bills on it (cell phone, gym membership, electric bill, things like that) and then set up auto-pay to pay the card off every month. You don't have to carry it with you or use it for everyday spending. Just a few things that you pay every month anyway, and boom, you're building a credit history.
Now, if in a few years you want to get fancy, then you find a card that has rewards (like, 5% for gas or groceries or travel or whatever it is you normally spend money on) and use that for your everyday spending and pay it off in full every month -- that way you're actually saving money vs. paying cash but ONLY IF YOU PAY IT OFF IN FULL EVERY MONTH. Which, it can be harder to track your spending that way, so don't do that if you think you will have a hard time keeping track. Just having a credit card that you pay your recurring bills with is enough, to start.
Also: do you have student loans or a car payment? Those things show on your credit report too, and if you have been paying those, then you actually DO have a credit history. It's not just credit cards on there (though no, utilities and cell phones generally aren't on there).
posted by rabbitrabbit at 9:34 AM on October 12, 2012
I'm 25, have never had a credit card and have just been approved for renting a flat. This is the UK, but my letting agent allowed me to submit 3 bank statements demonstrating regular income in place of a credit check. Again, the UK context, but my electricity supplier ran a credit check on me which came out positive, so I guess they check more than credit card repayments... On the other hand, I've been turned down for store-credit-cards, so mileage varies I suppose??
You have my sympathy re:not knowing how to do financial stuff. I think 'Doing Grown Up Things' should be compulsory for all undergrads.
posted by dumdidumdum at 9:38 AM on October 12, 2012 [1 favorite]
You have my sympathy re:not knowing how to do financial stuff. I think 'Doing Grown Up Things' should be compulsory for all undergrads.
posted by dumdidumdum at 9:38 AM on October 12, 2012 [1 favorite]
Did you have student loans in your name? I assumed I would have a really hard time getting a credit card after grad school, but it turned out my credit history was substantially more solid than I thought.
It is not complicated to pull your credit report and it's a good thing to have gone through the process once or twice, just in case you end up needing to pull it for a bigger issue (buying a house, fraud) in the future. I was able to get a 2k limit card from Bank of America just through their standard online application, even without having received a paycheck yet from my new job.
posted by jetlagaddict at 9:43 AM on October 12, 2012 [1 favorite]
It is not complicated to pull your credit report and it's a good thing to have gone through the process once or twice, just in case you end up needing to pull it for a bigger issue (buying a house, fraud) in the future. I was able to get a 2k limit card from Bank of America just through their standard online application, even without having received a paycheck yet from my new job.
posted by jetlagaddict at 9:43 AM on October 12, 2012 [1 favorite]
First of all, go to the free sites and check out your credit score.
You can buy the scores from Fico, or get them from any of the three Credit Reporting Bureaus: Equifax, TransUnion, Experian.
They each have their own cute sites, Quizzle, Creditkarma, etc.
If you have a score that's over 650, you shouldn't have a problem getting utilities, a cell phone, an apartment, etc.
So before running around like your hair is on fire trying to get a credit card, check your score. If you have a cell phone, you have a credit score.
Now, if you're a responsible person, check out the best deal for you and get a card,. Keep it for things like renting cars, hotels, buying stuff on line, paying when you suspect that the deal is sketchy (as you can call the card company after the fact and dispute the charges) etc. Pay it off, in full, every month.
That's all you need to do.
If you want to buy a house in the future, you can be qualified by letters from landlords, utilities, and a solid down payment.
Contrary to popular belief, you don't need a credit card to live a full and fulfilling life. They are tools that can make certain transactions easier.
posted by Ruthless Bunny at 10:11 AM on October 12, 2012
You can buy the scores from Fico, or get them from any of the three Credit Reporting Bureaus: Equifax, TransUnion, Experian.
They each have their own cute sites, Quizzle, Creditkarma, etc.
If you have a score that's over 650, you shouldn't have a problem getting utilities, a cell phone, an apartment, etc.
So before running around like your hair is on fire trying to get a credit card, check your score. If you have a cell phone, you have a credit score.
Now, if you're a responsible person, check out the best deal for you and get a card,. Keep it for things like renting cars, hotels, buying stuff on line, paying when you suspect that the deal is sketchy (as you can call the card company after the fact and dispute the charges) etc. Pay it off, in full, every month.
That's all you need to do.
If you want to buy a house in the future, you can be qualified by letters from landlords, utilities, and a solid down payment.
Contrary to popular belief, you don't need a credit card to live a full and fulfilling life. They are tools that can make certain transactions easier.
posted by Ruthless Bunny at 10:11 AM on October 12, 2012
I've never had a credit card. I have a decent credit rating from paying phone bills, utility bills, student loans, etc. I've never had trouble renting a place, and I got a home mortgage a few years ago with no trouble. Not having a credit card has never prevented me from doing anything.
Things might be different in your local area, but there's one more data point for you.
posted by echo target at 10:21 AM on October 12, 2012
Things might be different in your local area, but there's one more data point for you.
posted by echo target at 10:21 AM on October 12, 2012
Most apartments don't really care if you're in the "no credit history" category; they're just looking for any big red flags in terms of unpaid debts. My dad even managed to get an apartment with a recent bankruptcy because he had a good rental history. You shouldn't have a problem there.
It's probably still not a bad idea to get a credit card, though. Your bank is probably the best option because they have more information than shows up on your credit report, and it's sounds like that's a positive for you. Then you have two options.
The easiest thing to do would be to find one or two bills you pay monthly and put those on your credit card and then set your bank account up to automatically pay your credit card on a monthly basis. Instant credit history.
Another thing you can do as long as you have good willpower and pay attention to your spending is that you can put most everything through your credit card and still pay it off at least monthly. The main advantage to this is you can earn rewards, but those rewards are not worth it if you end up carrying a balance. The other advantage is that if you get ripped off using your credit card it's a lot easier to clear up than if it was your bank card.
posted by dagnyscott at 10:28 AM on October 12, 2012
It's probably still not a bad idea to get a credit card, though. Your bank is probably the best option because they have more information than shows up on your credit report, and it's sounds like that's a positive for you. Then you have two options.
The easiest thing to do would be to find one or two bills you pay monthly and put those on your credit card and then set your bank account up to automatically pay your credit card on a monthly basis. Instant credit history.
Another thing you can do as long as you have good willpower and pay attention to your spending is that you can put most everything through your credit card and still pay it off at least monthly. The main advantage to this is you can earn rewards, but those rewards are not worth it if you end up carrying a balance. The other advantage is that if you get ripped off using your credit card it's a lot easier to clear up than if it was your bank card.
posted by dagnyscott at 10:28 AM on October 12, 2012
I haven't read through all of the responses, so presumably this has been said...but the easiest way to get a first credit card is to go to the bank you've been banking at (presumably you've been with the same one for a while?) and sit down with one of the suit-wearing folks and tell them you'd like to apply for a credit card. They'll review your info and almost certainly give you one.
Like others are saying, use it to pay for just about everything and then pay it off in full every month. Several months down the line, call your bank and ask to raise your credit limit. You'll have to guess at this because they play stupid credit card company games, but ask for something about 50-75% higher than whatever your starting limit is. Continue to use the card as normal (and responsibly).
posted by phunniemee at 10:34 AM on October 12, 2012
Like others are saying, use it to pay for just about everything and then pay it off in full every month. Several months down the line, call your bank and ask to raise your credit limit. You'll have to guess at this because they play stupid credit card company games, but ask for something about 50-75% higher than whatever your starting limit is. Continue to use the card as normal (and responsibly).
posted by phunniemee at 10:34 AM on October 12, 2012
You're getting pretty good answers about credit basics from everyone above. I came here to urge you not to get a credit card.
No one, ever, in the history of our free-market capitalism universe, will tell you that a credit card is the reason they're so wealthy and/or happy.
If you have a credit card, there's a tendency to use it. That's called "building credit", which is also called "spending money you don't have". You can tell yourself, as I did, that you'll pay it off every month, but experience tells me you won't.
You probably won't get yourself into any serious trouble. You'll rack up a few thousand dollars over the next four or five years with some unplanned expenses that you'll justify in a variety of ways. Then one day you'll read the statement balance and freak out, then pay it off dutifully over a period of months or years.
Credit cards are like addictive drugs. Some people have fun with them, and can use them responsibly, but the chances of developing a life-altering problem are very, very high.
When people do background checks and run credit history reports, they're just looking for problems. If they see you have no credit history, they just move on to other ways of proving that you're a dependable, responsible citizen.
In fact, getting a credit card today will do nothing for your apartment search. A year from now, it will give them one more data point (a year's worth of payment history), but it won't make or break your application.
You don't need a credit card. It can only hurt you.
Wow, that got preachy, didn't it?
posted by sportbucket at 10:41 AM on October 12, 2012 [1 favorite]
Ruthless Bunny: Contrary to popular belief, you don't need a credit card to live a full and fulfilling life.I cannot second this enough. The only reason you need a credit card or a good credit score is if you're planning on going into debt. And I'd argue that you should avoid going into debt. You've made it this far, right?
No one, ever, in the history of our free-market capitalism universe, will tell you that a credit card is the reason they're so wealthy and/or happy.
If you have a credit card, there's a tendency to use it. That's called "building credit", which is also called "spending money you don't have". You can tell yourself, as I did, that you'll pay it off every month, but experience tells me you won't.
You probably won't get yourself into any serious trouble. You'll rack up a few thousand dollars over the next four or five years with some unplanned expenses that you'll justify in a variety of ways. Then one day you'll read the statement balance and freak out, then pay it off dutifully over a period of months or years.
Credit cards are like addictive drugs. Some people have fun with them, and can use them responsibly, but the chances of developing a life-altering problem are very, very high.
When people do background checks and run credit history reports, they're just looking for problems. If they see you have no credit history, they just move on to other ways of proving that you're a dependable, responsible citizen.
In fact, getting a credit card today will do nothing for your apartment search. A year from now, it will give them one more data point (a year's worth of payment history), but it won't make or break your application.
You don't need a credit card. It can only hurt you.
Wow, that got preachy, didn't it?
posted by sportbucket at 10:41 AM on October 12, 2012 [1 favorite]
sportbucket, I super hate credit and never wanted to have one and still don't, but if the OP ever wants to buy a house, or finance a car (i.e. the reason I caved and got it), and major stuff like that, it is going to be a problem to not have credit.
posted by jenfullmoon at 10:46 AM on October 12, 2012 [2 favorites]
posted by jenfullmoon at 10:46 AM on October 12, 2012 [2 favorites]
You should be fine for renting if you have proof of a steady income, and a good rental history with a blank or low-info credit score (just not a bad one showing lots of debt).
I'm in my late 20's with no credit card (never had one) and a small but stable income and have had to move around essentially yearly for the last ~7 years (all over the US). I have a decent credit rating from a combination of my mostly lack-of-debt (some small student loans) and the occasional utility company that actually reported my payments. I have never had a problem renting a place from both large management companies or individual homeowner/landlords as long as I met whatever monthly income requirement that they had (usually ~2.5-3x the rent in my experience). I also don't have a broken lease on my record and have had pretty good landlord references from my post college apartments. I haven't needed a cosigner either.
From what I can tell the 'building credit' is mostly needed for Mortgage or Car loan, not really this kind of thing ime. Good luck!
posted by McSwaggers at 10:48 AM on October 12, 2012
I'm in my late 20's with no credit card (never had one) and a small but stable income and have had to move around essentially yearly for the last ~7 years (all over the US). I have a decent credit rating from a combination of my mostly lack-of-debt (some small student loans) and the occasional utility company that actually reported my payments. I have never had a problem renting a place from both large management companies or individual homeowner/landlords as long as I met whatever monthly income requirement that they had (usually ~2.5-3x the rent in my experience). I also don't have a broken lease on my record and have had pretty good landlord references from my post college apartments. I haven't needed a cosigner either.
From what I can tell the 'building credit' is mostly needed for Mortgage or Car loan, not really this kind of thing ime. Good luck!
posted by McSwaggers at 10:48 AM on October 12, 2012
When people do background checks and run credit history reports, they're just looking for problems. If they see you have no credit history, they just move on to other ways of proving that you're a dependable, responsible citizen.
For whatever reason, several of the late 20s/early 30s guys I work with have no credit history. These guys are traders and are very, very well off financially.
And they never have any money, because they have expensive tastes but have to pay cash for everything. They paid cash for their cars. They paid cash for their condos. One of them even paid cash for a house. They bitch about how they have to pay cash for everything CONSTANTLY.
So, if you are the type of person who wants a house or a car but isn't able (like most people in the world) to lay out 100% of the cash for it, you might want to have a credit history. Some landlords (like my current one) will ONLY rent to people with a very good credit history.
Depending on what you want/need out of your future life, it's a good idea to build credit. Obviously some people can't handle it. Whether or not you can is 100% up to you.
posted by phunniemee at 10:50 AM on October 12, 2012 [2 favorites]
For whatever reason, several of the late 20s/early 30s guys I work with have no credit history. These guys are traders and are very, very well off financially.
And they never have any money, because they have expensive tastes but have to pay cash for everything. They paid cash for their cars. They paid cash for their condos. One of them even paid cash for a house. They bitch about how they have to pay cash for everything CONSTANTLY.
So, if you are the type of person who wants a house or a car but isn't able (like most people in the world) to lay out 100% of the cash for it, you might want to have a credit history. Some landlords (like my current one) will ONLY rent to people with a very good credit history.
Depending on what you want/need out of your future life, it's a good idea to build credit. Obviously some people can't handle it. Whether or not you can is 100% up to you.
posted by phunniemee at 10:50 AM on October 12, 2012 [2 favorites]
Is there any way around this credit issue with regards to apartment applications? Or am I stuck in my current living situation until I have enough credit? How long does it take to build good credit?
You have a credit score just by being you. It's probably not stellar, but it should be more than good enough to get an apartment. It takes a lot more to get a mortgage.
"How long" it takes to build good credit depends on what "good" is. It can take 6 months to get to decent. But in order to get to the very top tier (750-800), my understanding is that you need to have had multiple types of line of credits (credit card, student loan, auto loan, mortgage) for multiple years.
I obviously need to get a credit card and start building credit. I feel like a sheltered little child - where do I even start? Do I just go to my bank and apply for a credit card? Would I even get one if I had no credit? How do I avoid getting ripped off?
You just go to a bank and apply for one. Get one that has no annual fees, and possibly a cash back. The Chase Sapphire is a popular one. I also have a Citi one. Make sure you pay it off each month. You can also get one from a bank where you do your checking.
I honestly have a limited understanding of how they even work beyond using it to buy stuff and not having to pay for it until later. Which I'd really rather not do - I'd rather just pay for things on the spot - but I will start using a credit card if I have to, if that's the only way to show landlords or loan applications etc that I am a credible person to count on for paying things off.
As others have said, you don't need a credit card.
If you have a credit card, you WILL overspend. I went for 8 years without overspending, but then I had a hard time, and wanted to treat myself to some nights out. And eventually I got $20k into debt in one year (I shit you not). Don't do it unless you must.
One of my friends got around this by buying a car. Get a good deal, haggle the interest down to 0 or 3% (you always have to haggle for the interest). Keep your cash in a bank and pay off your auto loan as you go.
You don't want a credit card. Really.
posted by ethidda at 10:52 AM on October 12, 2012
You have a credit score just by being you. It's probably not stellar, but it should be more than good enough to get an apartment. It takes a lot more to get a mortgage.
"How long" it takes to build good credit depends on what "good" is. It can take 6 months to get to decent. But in order to get to the very top tier (750-800), my understanding is that you need to have had multiple types of line of credits (credit card, student loan, auto loan, mortgage) for multiple years.
I obviously need to get a credit card and start building credit. I feel like a sheltered little child - where do I even start? Do I just go to my bank and apply for a credit card? Would I even get one if I had no credit? How do I avoid getting ripped off?
You just go to a bank and apply for one. Get one that has no annual fees, and possibly a cash back. The Chase Sapphire is a popular one. I also have a Citi one. Make sure you pay it off each month. You can also get one from a bank where you do your checking.
I honestly have a limited understanding of how they even work beyond using it to buy stuff and not having to pay for it until later. Which I'd really rather not do - I'd rather just pay for things on the spot - but I will start using a credit card if I have to, if that's the only way to show landlords or loan applications etc that I am a credible person to count on for paying things off.
As others have said, you don't need a credit card.
If you have a credit card, you WILL overspend. I went for 8 years without overspending, but then I had a hard time, and wanted to treat myself to some nights out. And eventually I got $20k into debt in one year (I shit you not). Don't do it unless you must.
One of my friends got around this by buying a car. Get a good deal, haggle the interest down to 0 or 3% (you always have to haggle for the interest). Keep your cash in a bank and pay off your auto loan as you go.
You don't want a credit card. Really.
posted by ethidda at 10:52 AM on October 12, 2012
Oh, also, since it sounds like you have never done this, get your own credit score through the free report mechanisms! It is a really good idea to use the free credit report mechanisms to regularly check your credit (either all of the companies at once once a year, or spread them out throughout the year) because identity theft followed by fraudulently opened lines of credit are dishearteningly not as rare as you would hope. And, it should be easier to clear it up if you find it on the report rather than having collectors find you.
posted by McSwaggers at 11:06 AM on October 12, 2012
posted by McSwaggers at 11:06 AM on October 12, 2012
Obviously CC companies want their customers to maintain a monthly balance. If you pay off your balance every month they call you a Deadbeat because you are not paying any interest or fees. Good for you, right? Yes, but maybe not for building credit. My banker (in Canada) told me recently that if I pay off the balance before the statement date (usually a week or so before the due date) there is no credit building occurring. As far as the CC company is concerned you have a zero balance on the statement date, you didn't use the card that month, and it does not improve your credit score.
posted by recess at 11:29 AM on October 12, 2012 [1 favorite]
posted by recess at 11:29 AM on October 12, 2012 [1 favorite]
Regarding what recess said, it is a very bad idea to pay a credit card bill before your statement becomes available. Not really for the reason of not building credit, but because people get into lots of trouble that way if a charge hits the credit card account between when they pay and when the statement comes out, because credit card companies don't consider that you've "paid" the bill unless you pay after the statement cuts and before the due date.
So, don't pay off the balance before the statement date. Wait until you get the bill, THEN pay. Your statement usually comes out around the same time every month, and is usually due around the same time every month. So if your bill comes out on the 20th of the month, and is due on the 12th of the following month, just set up your auto-pay to pay the bill sometime in between those two dates, so you're paying the bill on time and at the proper time. I don't understand why people would pay their credit card before they get the bill, but I hear that so often. Don't do that.
posted by rabbitrabbit at 11:39 AM on October 12, 2012 [1 favorite]
So, don't pay off the balance before the statement date. Wait until you get the bill, THEN pay. Your statement usually comes out around the same time every month, and is usually due around the same time every month. So if your bill comes out on the 20th of the month, and is due on the 12th of the following month, just set up your auto-pay to pay the bill sometime in between those two dates, so you're paying the bill on time and at the proper time. I don't understand why people would pay their credit card before they get the bill, but I hear that so often. Don't do that.
posted by rabbitrabbit at 11:39 AM on October 12, 2012 [1 favorite]
If you get a credit card, don't pay it off before the statement date, pay it off before the grace period ends.
Most credit cards give you a 25 day grace period after the statement date. For example, my credit card statements come in on the 13th of every month. I then have 25 days to pay off the whole amount before any fees or interests are charged. That means if I buy something on 10/14, my statement comes in for that month on 11/14, I have until 12/7 to pay it. This is helpful sometimes, but can lead you down the road to debt.
But then yes, your statement shows you using your credit card (and you don't want to use more than 30%).
posted by ethidda at 11:41 AM on October 12, 2012
Most credit cards give you a 25 day grace period after the statement date. For example, my credit card statements come in on the 13th of every month. I then have 25 days to pay off the whole amount before any fees or interests are charged. That means if I buy something on 10/14, my statement comes in for that month on 11/14, I have until 12/7 to pay it. This is helpful sometimes, but can lead you down the road to debt.
But then yes, your statement shows you using your credit card (and you don't want to use more than 30%).
posted by ethidda at 11:41 AM on October 12, 2012
Nthing that as far as finances go, in my experience landlords mostly just want to see that you have a job, aren't in the habit of running out on debts, and paid the rent on time at your last place or two.
You might bring it up as you're filling out the application— "I don't have a credit card, so my credit report's probably pretty short, but I don't have any bad debts or anything. Is that going to be a problem?" Not sure if it would help or hurt.
The two things I've found a credit card to actually be useful for— other than being a seductively easy way to get a loan with really terrible terms— are renting cars, and making dubious internet purchases. (The latter because a bad charge on a credit card is much easier to dispute than a bad charge that has already been applied to your bank account via your debit card. The laws about credit-card disputes are relatively favorable to the card holder. Relatively.)
posted by hattifattener at 12:39 PM on October 12, 2012
You might bring it up as you're filling out the application— "I don't have a credit card, so my credit report's probably pretty short, but I don't have any bad debts or anything. Is that going to be a problem?" Not sure if it would help or hurt.
The two things I've found a credit card to actually be useful for— other than being a seductively easy way to get a loan with really terrible terms— are renting cars, and making dubious internet purchases. (The latter because a bad charge on a credit card is much easier to dispute than a bad charge that has already been applied to your bank account via your debit card. The laws about credit-card disputes are relatively favorable to the card holder. Relatively.)
posted by hattifattener at 12:39 PM on October 12, 2012
Getting a credit card after 6 months of history is relatively easy, but until you have 6 months, you may have to go the secured credit card or Capital One route. I was able to get an unsecured college credit card from the bank I have a checking account with, so your bank/credit union would be a good place to start if you want to try for unsecured right away. Don't go crazy with applications as many in a short amount of time suggests desperation to creditors.
I've found this forum to be very, very helpful, by the way.
Good luck!
posted by inauthentic at 12:57 PM on October 12, 2012
I've found this forum to be very, very helpful, by the way.
Good luck!
posted by inauthentic at 12:57 PM on October 12, 2012
jenfullmoon: I super hate credit and never wanted to have one and still don't, but if the OP ever wants to buy a house, or finance a car (i.e. the reason I caved and got it), and major stuff like that, it is going to be a problem to not have credit.I'd strongly recommend not financing a car at all, actually. Better to limp along with a bike or bus pass or a $1000 beater car until you can buy a decent used vehicle. Otherwise you're renting money for a depreciating asset.
As for getting a home loan, there are plenty of banks out there that do traditional (non-FICO-based) underwriting. FHA-backed loans, in particular, are easier to get if you have no credit than if you have bad credit.
posted by sportbucket at 1:45 PM on October 12, 2012
Hah, at this point I gave up on buying a car altogether--I could technically afford a beater, but I don't want to clean out my savings in order to do it a la phunniemee's example (will need the savings to do all the constant repairs cars need, correct?) and that was why I was looking into doing otherwise. So never mind. Maybe in... a lot more years.
posted by jenfullmoon at 1:53 PM on October 12, 2012
posted by jenfullmoon at 1:53 PM on October 12, 2012
There is nothing wrong with financing a car if you have the cash and they're offering interest below inflation (3%) as long as you're not falling for their haggling tricks. (Use a calculator to figure out how much you're paying over the life of the loan.) In fact, it's a good way to build credit.
I did this with my new car, with enough down that the car will always be worth more than the loan. (Otherwise, you have to pay extra on the car insurance to cover the extra loan amount as well.)
posted by ethidda at 1:59 PM on October 12, 2012
I did this with my new car, with enough down that the car will always be worth more than the loan. (Otherwise, you have to pay extra on the car insurance to cover the extra loan amount as well.)
posted by ethidda at 1:59 PM on October 12, 2012
1. Know what your score is. I'm going to guess, assuming your work is on the books (with your SSN) that your score should be fine and qualify you for any rental application. They know crazy amounts about you, even if you've never had a speck of credit in your life.
2. Head over to your local friendly credit union. If they're for a specific employer/group they'll often have small loopholes for random people off the street to get membership. Mine asks for a one-time $30 membership in "financial education federation of america" or something to that effect. Then you're in! Then walk on up to a branch and ask to apply for a card. You can start with a $1k limit. If you would not die from embarrassment, ask for a "college/teen saver's card", which are designed to grow your limit over time. You will likely walk on out with a freshly minted piece of plastic.
3. Pay off purchases in full every month. What to put on it? I mostly do big purchases, and anything from a somewhat-sketchy website. The big advantage of credit cards is that a charge to your credit card, is not your money yet. This does not, and should not, mean you're broke when you use your credit card. It means that sometimes merchants are suspect, sometimes merchants will put a hold on your card, then release the hold later (like bars, hotels, rental cars/bikes). If you're using your debit card, thats your real money they're taking and giving back. F-that. Use someone else's money in those situations.
There are lots of people who crazy-hardcore nerd-out about credit optimization. They'd likely suggest that asking for a card (instead of getting one of those in-the-mail things) might count as a temporary "ding" in credit. They'd say you need to put lots on your card, consistently, and pay it all off. They might suggest getting different cards for different bonus points. If you're interested in drinking from the fire hose, check out Fat Wallet. But mostly, you can ignore all that, and still have a great credit score.
posted by fontophilic at 2:30 PM on October 12, 2012
2. Head over to your local friendly credit union. If they're for a specific employer/group they'll often have small loopholes for random people off the street to get membership. Mine asks for a one-time $30 membership in "financial education federation of america" or something to that effect. Then you're in! Then walk on up to a branch and ask to apply for a card. You can start with a $1k limit. If you would not die from embarrassment, ask for a "college/teen saver's card", which are designed to grow your limit over time. You will likely walk on out with a freshly minted piece of plastic.
3. Pay off purchases in full every month. What to put on it? I mostly do big purchases, and anything from a somewhat-sketchy website. The big advantage of credit cards is that a charge to your credit card, is not your money yet. This does not, and should not, mean you're broke when you use your credit card. It means that sometimes merchants are suspect, sometimes merchants will put a hold on your card, then release the hold later (like bars, hotels, rental cars/bikes). If you're using your debit card, thats your real money they're taking and giving back. F-that. Use someone else's money in those situations.
There are lots of people who crazy-hardcore nerd-out about credit optimization. They'd likely suggest that asking for a card (instead of getting one of those in-the-mail things) might count as a temporary "ding" in credit. They'd say you need to put lots on your card, consistently, and pay it all off. They might suggest getting different cards for different bonus points. If you're interested in drinking from the fire hose, check out Fat Wallet. But mostly, you can ignore all that, and still have a great credit score.
posted by fontophilic at 2:30 PM on October 12, 2012
If you use it responsibly, and know you won't rack up the debt, a credit card isn't a terrible thing to have, for credit-building purposes or otherwise. Like others have said, credit cards are super helpful for those situations where an institution is putting a hold on funds on your card (hotels, rentals, etc). Also helpful: a lot of credit cards have warranties and other protections for things you buy with the card. Read the fine print of course, but this can be helpful and offer you more safety when you're making a bigger purchase, or buying from a merchant that's a little shady.
posted by yasaman at 3:47 PM on October 12, 2012
posted by yasaman at 3:47 PM on October 12, 2012
After 20 years of using and abusing credit, at one point nearly declaring bankruptcy, receiving and fighting tax liens (one of which stuck), being taken to court by Chase and winning, going back and forth for years with CRAs (Credit Reporting Agency (Experian, Transunion, Equifax) about correcting discrepancies and removing false items, I can say CREDIT and DEBT can be a hell of a wild ride. My advice is to use it sparingly, avoid it if you can, never use it for wish-fulfillment, live within your means, don't feed monsters. It is a very educational process to examine credit reports, correct false items (nearly guaranteed to be there), and protect yourself from identity theft (not by subscribing to "products" but by educating yourself). Understand how tax cycles work in your state and on a federal level. Max out your 401k, invest in mutual funds. You needn't become a finance nerd to do this, there are many (honest) resources available for answering questions about investing. Learn how to keep your money (identity and dignity) and not make others rich off exploiting you.
Anyhow, to the point. Your mobile carrier (if you have a mobile) may be reporting you. Your landlord may be reporting you. Find out. Get a free credit report every year. Understand every line of it. Fight any discrepancies. Opt-out of everything --although you may find good arguments to the contrary.
No matter what you do, do not ride debt that you cannot pay. If you incur such debt freak about it and do everything you can to pay it off as quickly as possible.
posted by uhom at 4:08 PM on October 12, 2012
Anyhow, to the point. Your mobile carrier (if you have a mobile) may be reporting you. Your landlord may be reporting you. Find out. Get a free credit report every year. Understand every line of it. Fight any discrepancies. Opt-out of everything --although you may find good arguments to the contrary.
No matter what you do, do not ride debt that you cannot pay. If you incur such debt freak about it and do everything you can to pay it off as quickly as possible.
posted by uhom at 4:08 PM on October 12, 2012
I don't get the credit card hate. "You WILL overspend"... for someone who wants to pay for everything on the spot and live below his/her means?
Try to get a rewards card that gives you cash back or discounts for somewhere you frequently shop. For instance, Amazon.com and Chase offer a no-fee Visa card that will get you 1% cash back on all your purchases, 2% cash back on gas, restaurants, and drugstores, and 3% cash back on purchases from Amazon. Google "Amazon credit card" and you can apply online.
Charge whatever you feel comfortable with, pay it off in full every single month before the due date. You will actually save money while building your credit score.
posted by chickenmagazine at 4:11 PM on October 12, 2012 [1 favorite]
Try to get a rewards card that gives you cash back or discounts for somewhere you frequently shop. For instance, Amazon.com and Chase offer a no-fee Visa card that will get you 1% cash back on all your purchases, 2% cash back on gas, restaurants, and drugstores, and 3% cash back on purchases from Amazon. Google "Amazon credit card" and you can apply online.
Charge whatever you feel comfortable with, pay it off in full every single month before the due date. You will actually save money while building your credit score.
posted by chickenmagazine at 4:11 PM on October 12, 2012 [1 favorite]
Also not understanding the response to the OP wanting to get a credit card. I am 26 and only got a credit card very recently (as I mentioned above). I've been paying it off in full every month with no problem. I don't think there's something magical about credit cards that will turn someone who lives within their means into a crazy irresponsible spender overnight. So far the credit card has come in handy many times, and I my only regret is that I didn't get one earlier.
posted by peacheater at 7:55 AM on October 13, 2012
posted by peacheater at 7:55 AM on October 13, 2012
This thread is closed to new comments.
Your bank likely has a credit card, and if you don't care that much about the perks, it should be fine to go with that, provided there isn't an annual fee. It is easy to research credit cards online for the best deal though, e.g. bankrate.com . In your situation, I'd recommend a no annual fee card with the best cashback award possible. Don't get roped into frequent flier cards, for who you are today that's not a good deal.
Regardless of your card though, setup autopay from your bank. If they don't have this option, get a new bank. Seriously, dispense with the possibility of missing a payment by having a computer do it for you.
Use the credit card to pay for things. Keep track of how much you've spent online. Your credit card is just an abstraction for money, so treat it as real money when you use it, because that's what it is. Be responsible like you already are with however you are currently paying for things.
There ya go, all grown up :)
posted by mcstayinskool at 9:09 AM on October 12, 2012 [4 favorites]