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Great post. By the way, I have the answer to this: > No credit I had the same problem because I avoided credit cards when I was younger because I thought it w

Great post. By the way, I have the answer to this: > No credit I had the same problem because I avoided credit cards when I was younger because I thought it was a bad habit, and I was self-employed so I couldn't verify any salary. It meant I had no credit and I got rejected for low end credit cards - a yucky cycle. Eventually a smart bank manager I knew gave me a plan to fix this: I went into the bank and got a "secured loan" - what you'll do is deposit about $1000 into the bank (or whatever amount you want) and get a CD for it that you can't touch. It'll pay something like 2% in today's climate. Then you get a loan secured by that CD for something like 2.4% - seriously, the interest rate on a secured loan is very low because the bank has your CD sitting there and you can't get it... there's virtually no risk. Okay, now, have your loan set to auto pay so you don't have to worry about it. You'll get 12 "paid on time" records in the next year and it'll cost you very little. Actually, it's a little better than that even, because it's a different kind of credit from a credit card. Credit cards are "revolving", this sort of loan is something else... so it'll permanently boost your credit a little bit for the next 7 years until it falls off your record. I had no credit. Got a secured loan like this. 3 months later, was able to get a crappy credit card from Capital One, very low limit, high interest, no benefits. Just charged some small purchases to it and paid in full each month. After a perfect year between the secured loan and the Capital One card, was able to get an AMEX gold card with no limit on which was important because I was having business-related payments that'd sometimes be a lot in a short period of time. Also wound up getting two free one way international flights from the points from the card. So yeah - secured loan is the way to go. The difference you pay between the CD's interest rate and your loan interest rate is well worth it to have credit.

hammerdr 16y ago
My father did this for me while I was in high school. If you have the opportunity to do this for your kids, do it. It's a hundred dollar jump start to life.
hugh3 16y ago
Yeah, when I first moved to the US the bank offered me a "secured credit card" deal whereby I would lend them my money for no interest and they would lend some of it back to me at some nonzero rate. I told them that they could go fuck themselves, and if they wanted proof of my creditworthiness they can damn well phone up my bank in my home country and ask them about me. Four and a half years later I still have no US credit cards and no US credit rating. I haven't really found a need for it, though locals occasionally look shocked at the idea.
- lionhearted 16y ago
  > Four and a half years later I still have no US credit cards and no US credit rating. I haven't really found a need for it, though locals occasionally look shocked at the idea. This might turn out to be very penny wise and pound foolish. Sooner or later you might want to buy a property to live in or for investment reasons, and oftentimes you'll only realize you want to buy a place six months or a year before you want to buy. That's not long enough to build a good credit rating to get a decent mortgage - you're very possibly throwing away thousands of dollars of your future money to save yourself... like $20 now. And you don't pay interest on a credit card unless you carry a balance - pay in full each month. I only spent $150 on a credit card once because it had excellent benefits and I got $600 of free airfare from that card. I've paid $0 in fees or carrying a balance besides that in my life, aside from that $20 for a secured loan. Why not build a credit score? - there's no real downside, it doesn't take long to do, and might make a big difference for you later.
  - Encosia 16y ago
    "No real downside" is only true if you have perfect discipline and no bad luck. If that were very common, credit wouldn't be such a phenomenally profitable industry. Betting on credit is like betting against the house in Vegas.
    - nostrademons 16y ago
      It's more like decent habits. It's not all that hard to look at the bill, see your "Total balance", and then write that number on the check. I think you can even set up autopay to do it for you. The folks who get in trouble with credit cards are the ones who look at the bill, see "Minimum payment", and write that number on the check. Up until recently, that number was a lot more prominent, so maybe people who had no idea what credit was could be forgiven for this. But they're the ones who get in trouble with debt. People who understand that having a credit card means paying it off in full each month usually end up coming out ahead (via cashback) of where they'd be if they always pay in cash.
      - 16y ago
btilly 16y ago
My wife and I ran into this problem in grad school when we first wanted a credit card. (We discovered the hard way that hotels prefer to be paid with credit cards than cash. When this happens on the same day the ATM system breaks down, well...) We asked for one with a $200 limit and got denied. We went to the manager of the branch, pointed out what our bank account was at, pointed out how many months in a row we could max out the card we were asking for out of the bank account we had been keeping there, and said that if we didn't get the account, that money would move to the bank across the street. The next thing we knew we had a card with a $500 limit. :-) (The limit was raised fairly quickly thereafter.)
tomjen3 16y ago
>So yeah - secured loan is the way to go If you want to play their game yes, but I would refuse to pay the bank just for the privilege of paying them more money. If the bank isn't willing to give you a low limit, high interest credit card, take your checking account, etc elsewhere.

hammerdr 16y ago

My father did this for me while I was in high school. If you have the opportunity to do this for your kids, do it. It's a hundred dollar jump start to life.

hugh3 16y ago

Yeah, when I first moved to the US the bank offered me a "secured credit card" deal whereby I would lend them my money for no interest and they would lend some of it back to me at some nonzero rate. I told them that they could go fuck themselves, and if they wanted proof of my creditworthiness they can damn well phone up my bank in my home country and ask them about me. Four and a half years later I still have no US credit cards and no US credit rating. I haven't really found a need for it, though locals occasionally look shocked at the idea.

lionhearted 16y ago
> Four and a half years later I still have no US credit cards and no US credit rating. I haven't really found a need for it, though locals occasionally look shocked at the idea. This might turn out to be very penny wise and pound foolish. Sooner or later you might want to buy a property to live in or for investment reasons, and oftentimes you'll only realize you want to buy a place six months or a year before you want to buy. That's not long enough to build a good credit rating to get a decent mortgage - you're very possibly throwing away thousands of dollars of your future money to save yourself... like $20 now. And you don't pay interest on a credit card unless you carry a balance - pay in full each month. I only spent $150 on a credit card once because it had excellent benefits and I got $600 of free airfare from that card. I've paid $0 in fees or carrying a balance besides that in my life, aside from that $20 for a secured loan. Why not build a credit score? - there's no real downside, it doesn't take long to do, and might make a big difference for you later.
- Encosia 16y ago
  "No real downside" is only true if you have perfect discipline and no bad luck. If that were very common, credit wouldn't be such a phenomenally profitable industry. Betting on credit is like betting against the house in Vegas.
  - nostrademons 16y ago
    It's more like decent habits. It's not all that hard to look at the bill, see your "Total balance", and then write that number on the check. I think you can even set up autopay to do it for you. The folks who get in trouble with credit cards are the ones who look at the bill, see "Minimum payment", and write that number on the check. Up until recently, that number was a lot more prominent, so maybe people who had no idea what credit was could be forgiven for this. But they're the ones who get in trouble with debt. People who understand that having a credit card means paying it off in full each month usually end up coming out ahead (via cashback) of where they'd be if they always pay in cash.
    - 16y ago

btilly 16y ago

My wife and I ran into this problem in grad school when we first wanted a credit card. (We discovered the hard way that hotels prefer to be paid with credit cards than cash. When this happens on the same day the ATM system breaks down, well...) We asked for one with a $200 limit and got denied. We went to the manager of the branch, pointed out what our bank account was at, pointed out how many months in a row we could max out the card we were asking for out of the bank account we had been keeping there, and said that if we didn't get the account, that money would move to the bank across the street. The next thing we knew we had a card with a $500 limit. :-) (The limit was raised fairly quickly thereafter.)

tomjen3 16y ago

>So yeah - secured loan is the way to go If you want to play their game yes, but I would refuse to pay the bank just for the privilege of paying them more money. If the bank isn't willing to give you a low limit, high interest credit card, take your checking account, etc elsewhere.