First Credit Card
October 24, 2004 6:10 PM   Subscribe

Credit Card Filter. I’m a college student on the verge of graduating this spring. I have never had a credit card. Should I have one to start to establish a good credit rating for the future? [mi]

I have gotten through college with student loans and working two part time jobs. I am good with finances and have never needed a credit card but now that I’m about to graduate and see a car and maybe a house in the next 5 years, should I start trying to establish a good credit rating or is that not necessary?

I have a $1k purchase coming up which I can afford to purchase outright but it seems like it would be a good first credit purchase to pay off in a few months to show a good payment record. I honestly don’t know much about credit cards beyond how they work, are there any neutral sources for good information?
posted by asterisk to Work & Money (30 answers total)
 
I am going to say yes. Simply having a credit card establishes a good credit score, which is important for loans and such. Having a short credit history, or no credit history, is quite a negative when banks are looking at you.

Just be careful :)
posted by xmutex at 6:27 PM on October 24, 2004


I, like you, had "no credit" (not good or bad) when I graduated college. Circumstances forced me to buy a car, and I could not get a loan from anyone but the dealer, and thus I had no bargaining room. Also, all those commercials about 0% down and 0.9% APR? Read the fine print: not available to those without good credit.
posted by falconred at 6:31 PM on October 24, 2004


I would also say yes. It's probably always a good idea to get a credit card as early as possible in order to establish a good credit history. (provided that one is financially responsible enough to not max it out)
posted by reverendX at 6:34 PM on October 24, 2004


Yes, absolutely get a low-limit cc and use it occasionally. Charge your phone bill to it every month, if nothing else, and just pay it off. It generates the aura of "fiscal responsibility".

You also get a big bonus on your credit score for having a credit card at the same institution for a long time (as opposed to bailing for the best deal at the moment). So, lay the groundwork early.
posted by mkultra at 6:41 PM on October 24, 2004


Well it sounds like I'm on the right track then. Where should I start looking? I assume the offers I recieve in the mail are some what suspect, ie low introductory rates and high later on.

The credit union I have a checking and savings account with offers a card through Visa, would this be a favorable option as aposed to some random offer (I have a stack of Citibank junk mail that has been supplimenting fire wood in the fire place) or even the vender partner cards like "Amazon Visa Card?"
posted by asterisk at 6:53 PM on October 24, 2004


I went through my bank. It didn't help me getting a card (college student, no credit) -- I still had to have the parent cosign or whatever on it. I think it's just a name-connected thing and doesn't really help you. It does feel less shady then a ballgame credit card offer.

An option for you, if you want, would be to go to a department store that you frequent to buy clothes and get a card with them. It's usually easier (I got a high credit line, no cosign -- I did have my CC for about a year). You usually get a discount which will work favorably as you now will use it to make big purchases at once, several times a year.


My recommendation is check your score on myFico.com. Most likely it will suck and it will tell you why (multiple credit inquiries due to new loans each semester). Then youc an figure out how long it will take to get good credit if you're Mr. Perfect. Then you will cry when you realize it will take about a decade.

My only advice really beyond this is to limit the amount of credit lines you take out (don't be credit card jumping after you establish your first card -- it's tempting with all the offers). That will poop on your credit rating. Good luck and drink responsibly.
posted by geoff. at 7:05 PM on October 24, 2004


Absolutely. But again, use it for *convenience*, not for credit, and ALWAYS pay it off entirely each month. Do *not* buy anything that you could not afford outright.
posted by gramcracker at 7:08 PM on October 24, 2004


Read, re-read, and memorize gramcracker's advice. Then, take a look at CardOffers.com, a sort of credit card "review" site. Once upon a time, banks were the only places to go to get a credit card. But these days, it makes it a lot more sense to get a card that gives you some sort of side benefit, like airline miles or getting you a discount on buying a car. Cards offered through banks and credit unions usually don't give you any side benefits.
posted by profwhat at 7:34 PM on October 24, 2004


for the love of god, no.

unless you have a job or another means of paying off your purchases, you shouldn't get a credit card as a college student. in fact, if you have cash, screw the credit card and pay cash.

wait until you've got a flow of expendable income. credit card companies LOVE to give college students credit cards because they're more apt to rack up the debt on the card and then keep it there and pay the minimum balance for a long time.
posted by crunchland at 7:50 PM on October 24, 2004


Airline miles. If you can get a credit card that gives you airline miles, and you know that you will only use it for stuff that you have the money for already, and you know that you will remember to pay the bills on time, then do it.

If you have any doubt that you will only use it for stuff that you have the money for already, or that you will remember to pay the bills on time, then don't do it. Now is not a time to be optimistic about changing your spending or bill-paying habits, so be honest with yourself.
posted by Sidhedevil at 7:54 PM on October 24, 2004


unless you have a job or another means of paying off your purchases, you shouldn't get a credit card as a college student. in fact, if you have cash, screw the credit card and pay cash.

That's ridiculous. I got my first credit card in high school, and built my credit rating by making every payment on time. Last week I signed a lease for my own apartment, and at 23 I had such a good credit rating that they didn't even need a security deposit.

Get as many credit cards as you want. Your rating is based not on having them/not having them, but how responsible you are with them.
posted by XQUZYPHYR at 8:18 PM on October 24, 2004


You mentioned you have student loans, right? Good payment history and maintenance of those accounts will likely affect your credit rating more than a credit card will.

If you're going to do it, do like others said and use it only for convenience or utility. I've got my cell phone, cable, interenet, gas and electric bills all setup to bill to a card where I get miles. I have my bank's billpay service setup to make an automatic payment to the card which matches my average monthly bills.

Also might want to check the interest rates on your student loans v. the balance transfer rate on your card. The market is absolutely flooded with card offers right now. I've got a friend with horrid credit (scads of bounced checks, poor payment history, etc) and even she gets ofers for 10% over prime. if you're smart enough to avoid predatory lenders and willing to work customer service reps a bit, you can probably get them to issue a convenience check at a fixed rate which matches or is lower than your student loans.

(I'm all hyped up on credit cards today... I moved about $3700 in store cards and the remaining balance of an Apple loan onto a United Mileage Plus Gold account. Went from an avg of 18% interest to 6% fixed, and got another 3700 miles out of the deal)

On preview: XQUZYPHYR - I think part of your credit rating is based on the amount of credit you have relative to your rating and the amount of used credit to your total credit. Shotgunning a whole bunch of cards at once might not be too smart as I think that affects your rating too.
posted by nathan_teske at 8:26 PM on October 24, 2004


No do not get as many credit cards as you want. Get only a few. Everytime you get more credit cards it looks as if you need more credit to pay things off. This is very bad on your credit rating. As I said above, especially a student who has several credit inquiries a year from student loans should not be taking out more than two credit cards. MyFico (not recommending them, only one I used) shows how many credit inquiries you can do without it negatively effecting your rating.

Perhaps I'm off base on this but you should be expecting a $1500 credit line for your first card. This should generally be more than enough. I like, XQUXZFDYDSDF, use my credit card for everything to build up credit and for the protection a credit card offers against fraud and such. In fact now I rarely use my debit card, which I'm sure provides some protection but I had a friend recently who got an overdraft charge on his checking account because someone made a mistake on a purchase he made. I'd never want to be in a situation where I couldn't get money out of the ATM because of an error that could take quite some time to resolve.

Credit cards are not hard. I don't mean to undermine fiscal responsibility but if you simply do not buy what you don't have in cash, don't buy it. Those rules change as you get older and have a steady income/expendenture cash flow.
posted by geoff. at 8:28 PM on October 24, 2004


Oops I said "undermine fiscal responsibility" twice. I feel like George W.
posted by geoff. at 8:29 PM on October 24, 2004


now that I’m about to graduate and see a car and maybe a house in the next 5 years, should I start trying to establish a good credit rating or is that not necessary?

Yes, you should. But be warned that five years is not very long for a credit history, and might not have as much effect as you would hope. I got my credit score a few years ago after having had a credit card for about 5 years. The only negative was that I hadn't had it for very long - apparently it takes 10-15 (I can't remember exactly) for that to stop affecting your score. That said, it might be much worse right after you start using credit.

And you should read and take to heart everything that motley fool says about credit cards.
posted by advil at 10:32 PM on October 24, 2004


I have a no fee credit car from my bank (wellsfargo). Bank of america also has a no free credit card if you have a checking/savings acct there. its no fee. you can get your credit limit to be at around 1000 to start, and its a great way to start off.
posted by ruwan at 11:48 PM on October 24, 2004


I established credit by getting a joint card with my Mom while I was still in school. Actually, we did it mostly because it made getting me on the rent-a-cars during shared vactions easier, but the credit history was a nice bonus, especially considering that I almost never even used the card. But when we couldn't share a card anymore, it made getting one easy. If this route's open to you, I suggest trying it. Having a parent on your first account encourages responsibility because you know someone else is looking at the bill.

I also recommend going with a card offered from a credit union: you will get better rates. This doesn't particularly matter much if you're paying things off every month, but if you're at all uncertain about whether you'd have to carry a balance, Credit Unions are the least likely to do something like raise your rates to 26% just to screw you because they can (something that happened to me not too long ago). I'm not saying carrying a balance is a good idea -- it's generally an exceptionally poor one -- but sometimes stuff happens.
posted by weston at 12:17 AM on October 25, 2004


That's ridiculous. I got my first credit card in high school

Now THAT'S ridiculous. A high schooler with a credit card sounds completely and financially dangerous to me. The company that gave that card to you (unless it was secured) was banking on the fact that you'd run it up and carry a balance on it. High school != financial responsibility. In fact, since you were under 18, I can't imagine you got that card without your parents signing on the line.

Last week I signed a lease for my own apartment, and at 23 I had such a good credit rating that they didn't even need a security deposit.

I have never heard of such a thing. Even with AAA ratings, apartments always, always, always get at least one month's rent. You must live in a magical fairyland.

You also tried to fill a zippo with butane, so I'll reserve judgement.

The truth is, that banks are counting on the fact that young people are not going to be as disciplined as you. They'll max out the card(s), carry the balance, pay the minimums, and the bank will get more and more rich.

They're not in the business to build up your credit rating. They're in the business to take your money.
posted by crunchland at 3:35 AM on October 25, 2004


My credit history is only credit card credit history.

Based on it I easily qualified for a 3% (yes, BELOW PRIME) Small Business Loan of $19k. I definately could have asked for more. My FICO scores at the time put me at 59% @ 744 (where 0% is the lowest credit rank in Canada, and 100% is perfect).

That put me in a portion of the population where only 56% of Canadians had better credit than me. This gave me the ability to secure a $5k limit card without any steady income to report. I eventually gave up that card because the rates on it were exorbitant, but hey, I had it! And without a job, too!

I haven't checked my FICO lately (those stats were from March), but I should. I expect it's much higher. And I've only had a steady "job" for just over a year.

Also note, according to that FICO score, my group has a deliquency rate of under 5% on accounts. That's excellent.

So, yes, GET A CARD NOW! Just use it responsibly...
posted by shepd at 5:03 AM on October 25, 2004


The credit union I have a checking and savings account with offers a card through Visa, would this be a favorable option as aposed to some random offer

Getting a credit card through your credit union is a very good idea for a few reasons.
- it will be easier to get and you probably have some history with your CU that will make them look at you more favorably
- credit unions have an entirely different profit motive than bigger banks and have a tendency to not screw you in the fine print with their credit cards [though they may have small fees like a "card reprint fee" when you have to renew your card every four years or so]
- at my credit union, I can transfer money from my checking account to my credit card online and overnight meaning I don't have to rely on the vagaries of the US Mail to make my payments on time
- the credit union is more likely to be lenient if you miss a payment and get slapped with some "you missed a payment" fee and waive the fee [as long as it doesn't happen all the time]
- the credit union will know you and be more likely to raise your credit limit in some way that is reasonable, when you ask. Since they also do loans, establishing credit history with them is a good idea
Keep in mind, of course, that credit cards are what you make of them. Anything you put on a credit card and pay off over time will cost you more in the long run. I know this is fairly obvious but it's an easy trap to get into early on when you don't have much money. I use mine for plane tickets and gasoline and pay it off every month and otherwise pretty much don't look at it. In the US starting next year, you can get a free credit report from all the credit companies once per year which can help you get an idea of how you're doing credit-rating wise.
posted by jessamyn at 5:36 AM on October 25, 2004


If you tend to spend all your spare money on random stuff, and the only thing that stops you from buying is your lack of cash, don't get one. You'll be screwed.

OTOH, if you're naturally thrifty and only buy things that you need or really want, , a credit card won't magically make you a spender. So get one.
posted by smackfu at 6:27 AM on October 25, 2004


When I moved to the US I was in my 30s and had a job, but I had major credit problems because I was credit ghost - no history at all. It seems that is even worse than a bad history to most lenders. Lots of recent immigrants get caught out by this. Even the local credit union, who I banked with and could see the salary deposit each month, turned me down for a card with a $500 limit. I finally got around this by buying a cheap car car that I could have paid cash for from a dealer who offered very dodgy, very high interest, "we never refuse anyone" loans. I deliberately took the interest hit for a few months, then paid it off completely. Suddenly I was drowning in pre-approved loan and credit card offers in the mail and got a house loan without incident.

So yes, having a history is a good thing. I'd get the card and use it. Just make sure it's used for things you can genuinely afford and vow to pay it off completely each month.
posted by normy at 7:42 AM on October 25, 2004


GET A CARD NOW.

To put it succinctly, I was in the same boat as you (worse, since I had no student loans, which as mentioned should actually count as 'good' credit if you make regular payments) and when I tried to get a cell phone plan after getting a job out of school, I was rejected for lack of a credit score.

I've had to get a secured card (essentially a debit card but one that builds credit) in attempts to build my credit up, and it's going to take me at least 6 months to a year to get a credit rating, and that's only if the various checks on my account from the attempted purchase + attempts to get normal credit cards, haven't dragged it further down (a credit check counts as a slight negative!).

Everyone is right that the companies will throw cards at you left and right because they hope you'll be a typical student and get heavily into debt. But if you play it smart and just pay it off in full every month, you can graduate with a pristine credit score and have no worries about any credit-related purchases. I sure wish I'd done it =)
posted by cyrusdogstar at 10:39 AM on October 25, 2004


Get a card, yes, but do NOT carry it in your wallet habitually. That way when you want to use it to buy something, you'll have to remember to bring it, which will help you avoid buying stupid impulse crap with it.
posted by kindall at 11:40 AM on October 25, 2004


A few notes from an ex-mortgage loan underwriter:

- When I first started (mid 1980s) "no credit is good credit" was true. That died off in the 1990s.

- Lots of credit cards with a good history is not necessarily a good thing especially if you have high balances. Even if the balances aren't high, the possibility of the customer running up credit after a loan is completed is taken into consideration.

- A five year history isn't a bad thing when taking a person's age into consideration - a 30 year old with a five year history isn't bad, a 50 year old might have a problem. That could indicate fraud (new social security number?).

- Lots of requests for credit in a short period of time is never good.

- I'd recommend no more than three cards - gas, department store and a major (Visa or Mastercard). Or you could do another major card instead of the department store.

- Pay promptly but not necessarily in full. Letting the balance run into the 2nd month and then pay in full. It helps in setting up a history.

- There was a previous AskMe question about how long to keep financial documentation. Some lenders (not all) will accept payment histories from such places as utility companies, phones companies and landlords in place of "regular" credit. A year or more maybe requested from the lender.

And for what it's worth, I got my first credit card at 17. Buffums (an old-time department store in Southern California that's now out of business) was deliberately trying to get younger customers. I believe my initial credit limit was $150. I was working and no, mom didn't co-sign.
posted by deborah at 11:51 AM on October 25, 2004


I've had credit cards since i was 16 and i have pretty good credit.

Get a card now with a really low limit. The first one I got was 500 dollars and I only used it when I didn't want to write a check or I didn't have the cash for big purchases. When I was freshmen in college I got another "emergency" card with a 3k limit (which was great when my car got damaged). I ended up getting another one for shit and giggles and I think i have another one lying around for some reason.

Credit Card companies do worry about the number of cards that you have and your balance. Of course, sometimes having a balance on a card can be a bad thing. A friend of mine was getting a student loan and their mother was going to be a cosigner. The loan was denied because the mother had a credit card balance of a few hundred dollars (and the fun thing is that they only run credit reports every 90 days so even if you paid it off the next month, they wouldn't realize it). Now, that company was being very very stupid but that can sometimes happen with having a card.

Always try and pay it off. I grew up thinking that you should let your balance roll over and then pay it in full but from recent study, I don't think that matters anymore.
posted by Stynxno at 6:32 PM on October 25, 2004


One of the things that affects your credit rating is the ratio of available credt to used credit. The more available credit you have, the better you look (within reason - applying for a lot of credit all at once or in a short space looks bad). So get the card, use it a couple of times, pay it off, then forget about it. A new card will come soon with a better offer. Take it. Use that card a couple of times, pay it off. Forget about it. Repeat a few times over several years.
posted by eustacescrubb at 7:46 PM on October 25, 2004


I say get a card. I got my first credit card when I started college (a bit over 2 years ago)... it was a student card at Fleet with a $500 limit. About a month ago I got an Amazon card with a much higher limit. It has pretty cool bonuses - basically, you get a point per dollar spent, and 3 points per dollar spent at Amazon, and every 2500 points they'll give you a $25 Amazon gift cert. Pretty useful in terms of rewards. I'm not really sure what my credit score is, but I have always paid my bills in full every month.
posted by swank6 at 9:04 PM on October 25, 2004


"Last week I signed a lease for my own apartment, and at 23 I had such a good credit rating that they didn't even need a security deposit."

Wow, that is nice of your parents to not ask for a security deposit!
posted by Steve_at_Linnwood at 10:57 PM on October 25, 2004


My parents died in a tragic butane accident, you bastard.
posted by XQUZYPHYR at 4:49 AM on October 26, 2004


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