Paul is chasing the American Dream, looking to buy land and build a house on it in the next few years. He works hard, pays his bills on time, and has a good credit rating, but no one will actually give him any credit.
CapitolOne won’t raise his credit limit past $750 and nobody will give him a better credit card.
The roadblock might be because he’s 20. We chat with Paul by IM and offer some ideas for improving his situation.
(Photo: Sam Wilkinson)
paul: I have a good job and a credit rating of 720-730 depending on who you check it with, but I can’t actually get any credit from anyone.
paul: And capital one seems to think that $750 is plenty of credit. I can’t rent a u-haul on that, let alone buy anything more than the gas that gets put in the truck every month.
paul: I pay off the card every month before I even get the bill, but no increase.
paul: I make more than the average household income in the area where I live (documentable), yet noone will take me seriously. Any suggestions?
benpopken: What happens when you ask capitol one to raise your credit limit?
paul: I tried last night, its an automated process, and the recording I got was “We review this account periodically and will notify you when we want to raise it. At this time there is no other evaluation process available”
paul: To be fair they did raise it in February from $500, but still how do they expect me to use the card when most of my business purchases are over the 750 dollar mark. I end up using my check card most of the time and covering all of my purchases with money that I shuffle over from Ing.
paul: I don’t like doing it that way, and that doesn’t help my credit at all, but unfortunately it’s the only option that I’ve got.
benpopken: have you tried opening a credit card with anyone else?
paul: Yep
paul: I’ve been denied with everyone who hasnt sent me a pre approval letter first
benpopken: Considering your age, it might be a lack of credit history
paul: Even my bank won’t give me a card after 3 years of loyal usage
benpopken: Well you’re young, credit-wise
paul: I’ve been trying to do this myself, but it looks like I’ll need some help
paul: I intend to buy some land and build a house in the next couple of years so I’m trying to focus on this now so that it isn’t a problem later.
benpopken: right, that’s going to be hard without a credit history
benpopken: See if you can get a parent to sign you on as an authorized user on one of their credit cards, that should boost your credit history
benpopken: Do you have a car?
paul: Yes, paid for in cash
benpopken: take out a loan using your car as collateral
benpopken: put the loan in a high yield online savings account, or a CD
benpopken: then pay back the loan all nice and it will help build your credit history
paul: Sounds like a good idea. I’ll look into it.
paul: I’ve made it through college and most of my life by working hard beforehand and only spending money I have thinking that that was what would get me ahead later.
paul: Turns out it hasn’t really helped me at all for credit, although it is nice to not have thousands of dollars worth of school loans to pay off.
benpopken: Yeah unfortunately that kind of excellent ethic doesn’t show up on paper
paul: *shakes fist*
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Sorry for the duplicate post. Site glitched.
I agree with wildhobo, I got a Citi card just after I turned 18 and they started me off with a $2500 limit. I kept a balance with a rate of %18.25 so i called a year later and they knocked it down to %11.9. In my experience they are great to work with.
Plenty of opinions here, but I don’t see anyone picking up on the poster’s problem — the pre-approved cards. Pre-approved cards are notoriously higher-risk, but almost always have low limits. You’re not going to get very far if each CC you apply for is only willing to give you a $500-$1k limit.
Go to a REAL bank/credit union which you have an existing relationship and get a card through them. Also try AmeEx. I’ve seen them issue ridiculously high limits to people I wouldn’t loan $1000 to.
Go to a REAL bank/credit union which you have an existing relationship and get a card through them.
Excellent advice. With no credit history whatsoever I was able to pick up a credit card from my credit union (9.9 and 2k). This was six months into college, when I was seeing significant amounts of money passing through my savings and checking for paying tuition, parking, books, etc. Parents were not connected in any way, other than providing shelter.
Three years later I’m at 2.9k, and receiving 1-2 cc offers in the mail every day. I paid the balance off in full every month and never missed a payment, so the only money they made off me was interest on savings/checking accounts and transaction fees for cc. They did bump my % up to 10.9, but that was a 1 point bump for all members.
I should also add that the mail offers are getting better every year, so the monthly full payoff must be positively altering my credit (somehow).
What is your first clue that they don’t care?
Ben, that is just about the worst advice I have ever seen on this site, and you’ve had some real steamers, but this… Take a paid-for car and borrow money against it? Have you ever had a paid for car? That you paid for yourself? I cannot imagine taking a depreciating asset that the owner smartly paid cash for or at least paid-off, and then using it as collateral for a loan. All in the name of boosting what Paul has self-described as good credit score. Its stupid on top of stupid.
You never asked “Why?”. Why are you trying to raise your credit score? You have a paid-for car, you’re cash flowing your business, you have a better than average income, you’re young, and obviously a bit of a go getter. So what on Earth do you need all this credit for? You don’t need to bring this risk into your life. Young Paul, with no car payments, no credit card payments, no student loan payments, no car-as-collateral loan payments, could own a home and have no HOUSE payments in a relatively short period of time. He could be totally debt-free by 25 or 27 or 30 and own his home. But noooooo. No, no. Quick-draw Ben is dragging him back to the land of payments so he can be average.
But it HAS gotten you ahead. You don’t know how far ahead you are Paul. You are rockin’ financially in a way that most only dream about. Paul you are well on your way to the American Dream. If you want a mortgage, then go down to the credit union and get pre-approved. If they deny you, then I’m sure they’d be happy to explain why. But do yourself a favor and slow down for a minute. Don’t get caught in the go-go rich lifestyle. Rent cheaply, and pile up cash for a down payment. The more you can put down, the better. We’d all like to build. I’d like to be driving a Cadillac. I’d like to do lots of things. When it comes to buying real estate, you don’t always end up getting what you initially set out looking for.
And building? Man, I think its a mistake to build before owning a few houses. Have you ever walked thru a house and said, “What were they thinking”. They weren’t thinking. Once you live in one for a while you’ll see what works and what doesn’t. Building sounds like a lot of fun, but its typically a long, difficult process even when all goes well.
Seriously, Paul, download the Dave Ramsey Show podcast and you’ll realize just how well you’re doing. And don’t let these debt-mongers drag you down.
@thrillhouse: I whole-heartedly agree with owning a place or two before even considering building. If everyone thinks banks & car dealers are scum & conmen, they’ve never worked with the construction industry. After a couple of remodels, you learn what works, what doesn’t, what’s worth spending money on, and what quality work looks like. After you’ve done this a few times, you learn real quickly that a $5,000 AC costs less than a $2,500 one, and a $350 toilet is less expensive than a $100 one. Likewise, the highest-priced and lowest-priced bids probably both have shoddy workmanship involved.
I dont understand how all this works. I am 23 years old and it seems like I get a letter from AMEX every month saying they have raised my limit. Just got a letter last night saying that they had raised it to $27,500. I guess just my past history of having a high balance that is paid in full every month.
@paulcrist: i applied for all my BoA stuff online. they love that. plus, i think radioshack is on a debt binge lately…getting a store card there might not be too hard (but it might not help you too much either).
i would tend to agree with thrillhouse though. if you’re looking at taking out a mortgage in 3-5 years, that’s plenty of time to rack up a down payment. if you have 20% or more to plop down on a house, don’t worry so much about what your credit history is like. a good loan officer will recognize your ability to handle debt & will secure a mortgage for you.
@thrillhouse:
It’s a nice thought to say “continue living credit free”, but when push comes to shove a crappy credit score means you’re going to get terrible mortgage rates.
I’m 23, with an excellent job. I don’t want to divulge salaries, but I alone make more than the average household income in Fairfield County, CT. I paid for my brand new 2006 German car in cash because noone would give me a loan. I have one credit card, from Capital One, with a $500 limit.
I have no negative marks on my credit report, it just doesn’t really exist. I have no financial worries other than “When I want to buy a house, will I be able to?”
It’s really unfair that people who earn considerably less money than I do get approved for these cards and I don’t. I feel like I’m being denied for cards since my history shows I don’t need them and therefor won’t ever pay late. That would be fine if my credit score was a convenience, but like I said: mortgage rates. :
@jorach:
No. Mishandling your money will get you into terrible mortgage rates. A credit score is not, not a measure of success. And if the only type of loan being offered to you hinges on your crappy or non-existing credit score, then you need to walk out the door and find a place that looks at the person, and not just a number. Thats assuming that you do handle your money well, and have the ability to prove it, such as paying your landlord early or on-time for 2 years.
That being said, every lender will try to run your mortgage based on your FICO score first. Its just easier. And thats ok. But if they have a brain and know how to use it, then they will be able to offer something called manual underwriting, which looks at the person. No loan officer in his right mind will deny someone with their financial life under control and who is trying to buy something appropriate. Also, you may need to look at and FHA loan. There’s nothing wrong with them, but they are a little different and geared towards first-time buyers.
As for the cards, if you don’t need them (and it certainly sounds like you don’t), then why do you want them? This need to play the game of ‘building the credit score’ is a myth.
This can be done. You don’t need credit cards. You can live debt-free. Go read Dave Ramsey’s books, or heck, just call his radio show. He’ll be more than happy to explain how to do it and answer all of your questions.
I have a capital one card since I was 19. I am 27 now. I was given a $300 limit until I was about 24 when they raised it to $500, in January they upped it to $1000 where it is today. I have 3 CC’s with limits in the $100,000-175,000 range. 3 cards with bofa all above $20,000 and a few that are a little under $10,000. I couldn’t get any credit cards over $2000 until I paid off my car. After that I did an app-o-rama and got 6 out of 8 credit cards that I applied for.
This guy seems responsible enough and is looking for some buying power with his credit, but the problem is he has no credit record.
Alot of you who are actually responsible with their money who refuse to use credit cards will almost always end up with the short end of the stick when they decide to buy a home or something. Credit score itself is not everyting. Credit history is everything. I charge everything I can and always hold a balance on a few cards, not HUGE balances, but enough to be using it but not more than I can afford to pay off in a few months. There are way too many great rewards and offers that credit card companies give to people, yet many responsible people who can actually benefit a great deal hate credit cards.
Go figure
Hmm that bites here in canada i got a 5000 limit on my CC when i was 19. mind you it was a month after i was approved for a Goverment held student loan (OSAP).
I’m also 20 and this just happened to me. I was with a Credit union for over 10 years and I have had direct deposit for 4 years and a checking account since I was 16. Never bounced a check, have a ridiculous amount of money in the account. I asked to sign up for a credit card because I needed one for a business trip to Denmark for an employer where I have worked for 4 years. Everyone I had ever talked to said that credit unions will just give you a card, and mine wouldn’t.
The loan officer had this look that she didn’t care from the get go and said well I can get you a co-signer sheet. So I reluctantly got the sheet filled out and the week of my trip the lady calls me and says the co-signer form was not the Visa application, and that I would need to get 2 references that were not family members prove my income (which is a joke because I have direct deposit with them) and then the kicker. My parents who cosigned would need to get 2 references and prove their income. They have been at the branch since they were 16 and have direct deposit.
So I left work sped across town pulled out my money market, and opened up an account with another credit union that was all to happy to get me the 4 figure credit card limit my trip required. So now I’m in the process of shutting off direct deposit closing out automatic withdrawals etc.
What I did learn from this is that even credit unions will screw you, and that supposedly the best way to build credit is to get attached to high dollar cell phone bills which is supposed to build credit quickly.