“I am 19, and have never owned a credit card, only debit cards. I have had a 47.50 (or so) debt in the past due to a large overdue fine to a Hollywood Video. I took my sweet time in paying that off and now after one credit card refusal, I expect that it has damaged my otherwise non-existent (to my knowledge) credit score, which (if I understand things right) puts me in a heck of a hole. How do I get out of it? I’m assuming that not building any credit, then going into debt just messed me up and I need to know how to get things right, but if I can’t get a card, how can I get good credit? This is a really unpleasant situation, especially with Christmas coming around.
Any tips you guys have for me would be tons of help, I rely on you guys for all my consumer-related stuff!
Thanks a lot,
Brian”
Since you’re just guessing about your credit report, you should actually check it: Annualcreditreport.com
Here’s how to get your credit score.
There are ways to build credit without history, which we’ve covered in Your Good Name: Build Credit With Loans & CD’s, HOW TO: Get Your First Credit Card, and How To Improve Your Credit Score With Department Store Credit Cards.
But Brian, hold on a second before you go running off and doing all that. I’m sure that your family will understand that you’re a poor student. It’s not necessary to get a credit card to pay for Christmas, there’s plenty of no-cost/lo-cost ways to give presents. And if you have trouble paying off a $47.50 video store fine, how good do you thing you will be at paying down a credit card racking up interest? Until you increase your cash flow, being denied for a credit card could be a blessing in disguise.
(Photo: Getty)
UPDATE: Brain writes:
I guess the one thing I wanted to at least let you know (whether the post is updated to reflect or not) is that I phrased that a bit poorly…when I got that debt, I was unemployed. I am now making about $200 a week after taxes. It’s not much but I figured it’d be enough to pay off small purchases on a card like food, or gas, you know?Thanks again,
Bri
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Oh, and I maxed it out within a few months and it cost me a fortune, especially once they started charging me monthly over-limit fees
Live and learn.
Don’t don’t don’t get a credit card.
Get a checking account with a “visa debit” or “mastercard debit” card. As long as you run it as credit (but is still comes out of your checking) you have all the same protections.
Don’t get in the “credit” trap. Building credit is WAY over rated. All a credit score does is allow you to borrow money (admittedly some insurance companies are looking at it but you can get around that by actually talking with them). You can still get a prime mortgage rate if you find a company that does manual underwriting.
Pay for things in cash. If you can’t afford it, DON’T BUY IT.
Stay away from secured credit cards. Most of them are scams.
19 + Wants a CC = NO! Learn to manage your cash first. Then you can start moving to the credit game.
Credit cards in general are NOT scams. They’re not “traps” and they aren’t out to get you. Sure, if you get into debt, I see how for some bizarre reason, you might think it’s all their fault and none of it is yours, therefore the cards must be a scam. But if you are good at managing money, you won’t have a problem with credit cards. Stop managing well, you get into trouble. Credit cards are not evil, they are just tools for purchasing. If you’re not sure if you can handle it, get a store credit card, but get it at a store that your mom or dad shops at, not one that you shop at. Since you’re probably not going to buy ladies clothing (though that’s a totally different issue), you’re not likely to max out the account. BUT, you’ll still build credit and you can get mom a gift for mother’s day, Christmas, birthday and arbor day.
UPDATE: Brain writes:
Fun mistake.
@Imaginary_Friend: A prepaid card is a good idea, but a real credit card with a lower limit is also a good idea.
I’ve had a card since I was 16, when my parents set a whopping $300 limit on one linked to theirs. I got to learn about credit limits (never went over) within a limited budget.
Even now, when I applied for a new card (I have 2 total), I call and ask the company to lower my spending limit. I know how much I spend each month, so why do I need an extra $2,000-$3,000 on my limit that I’ll never use?
The credit card rep was surprised that I wanted to lower the limit, but she was happy to do it.
@QWGHLM, true, but Brian said he wanted one fast, in time to do Christmas shopping, that’s why I recommended Amex. Their customer service is the best, in my experience.
When I was 18, I had a hard time getting a credit card too. I joined a credit union at 19 and bought a car with my parents as co-signers and within 6 months, I was inundated with offers. Ironically, the ones with the highest credit limit were from companies that had turned me down in the past. Go figure.
A credit card with a low limit might be ideal in some situations, but in others (trying to get a home loan, for example), it can work against you. Income to debt ratio and all that… I have about a dozen cards with very high limits, but I pay them off every month without fail.
@backspinner: Being added as an authorized user on a card will not work for much longer to bump up a credit score. The new Vantage credit scoring models ignore AU accounts.
The best advice I can give for rebuilding credit is to hit up the Creditboards.com forums and take advantage of all the people willing to help step by step.