Establishing Your Credit
I am very new to this. I am a full time college student and want to get into REI. I do not have any credit what so ever. I have been reading many different books about it. One of the methods they recommmend to establish you credit is to open a savings account in a community bank after a couple of weeks ask for a passbook/signagture loan. Once you get that loan go to a second community bank and open a savings account with it. After a couple of weeks do the same thing and ask for a loan. Once you get it pay back the first loan you took out. Reapeat the process a couple of times to build up your credit worthiness. You have probably heard about this method already. In the end you have good credit and you build a credit line in different banks.
My Question is wont each new bank pull up my credit history and rating every time i go in and ask for a loan, even though i may have a savings account with them already? Will this bring my credit rating down and wont they ask me why is the reason I am applying to so many loans in the last couple of moths???
What would you recommend to build your credit? Any advice would really help out a lot. THANK YOU ! 
just open a cesured card like capital one and dont seek alot of different credit because of the inquiries, it only takes 3 months now not six to get a fico or beacon score so dont try for any instant credit without waiting 3 months then go and get your score. keep the balances at 0 every little bit of a unpaid balance hurts the score.
One good thing to do is to open multiple accounts at diferent banks/CU period. Savings, checking etc. A couple credit cards would not hurt. Use them for everthing and pay them off monthly. I know in college I got a no annual fee card and have used it since. The length of time I have had this account now is a very good thing.
This is a good way to do it... no its not going to drag you down...they are loaning against the money you have with them...its secured... contrary to belief secured credit cards are not the most beneficial..... the bank route would be the way to go....
Quote:
On 2003-09-28 19:50, montana wrote:
I am very new to this. I am a full time college student and want to get into REI. I do not have any credit what so ever. I have been reading many different books about it. One of the methods they recommmend to establish you credit is to open a savings account in a community bank after a couple of weeks ask for a passbook/signagture loan. Once you get that loan go to a second community bank and open a savings account with it. After a couple of weeks do the same thing and ask for a loan. Once you get it pay back the first loan you took out. Reapeat the process a couple of times to build up your credit worthiness. You have probably heard about this method already. In the end you have good credit and you build a credit line in different banks.
My Question is wont each new bank pull up my credit history and rating every time i go in and ask for a loan, even though i may have a savings account with them already? Will this bring my credit rating down and wont they ask me why is the reason I am applying to so many loans in the last couple of moths???
What would you recommend to build your credit? Any advice would really help out a lot. THANK YOU ! <IMG SRC="images/forum/smilies/icon_confused.gif">
i don't know if this would work but i heard that if you open a savings account with say..$500, wait a month, then get a loan secured on the savings, pay off the monthly payments. Also, take the $500 and add a couple hundred and open another savings account at another bank and wait a couple months then get a loan secured on the savings and pay it monthly, not at once. take the money and put it in another savings account for your payments to the two loans. don't be mr./ms/mrs. obvious and do more, use the money to pay off the loans to build credit.
I have not tested this but its a shot if you have no/bad credit.
Over the long term this will work, but on the short term you will look like a credit risk. Not a bad idea if you are willing to take the time to build your credit worthiness.
Here's a suggestion for you. Lets say you get a cc with a $1000 limit. Go to a local jewelry store and purchase an item worth $900. Take it home and sport it for 3 - 5 days and then return it (don't get anything you're going to get attatched to). What this shows TransUnion, Equifax, and Experian, is that you had a balance of $900 that was paid off on time and ahead of pymnts, boosting you credit score. NO BILL, NO PAYMENTS, NO PROBLEM!
Your credit limit is already set - $1000, buying and returning does nothing for your rating... timely management of payments - over time - does ....
Quote:
On 2003-10-18 02:05, homeinvestor wrote:
Here's a suggestion for you. Lets say you get a cc with a $1000 limit. Go to a local jewelry store and purchase an item worth $900. Take it home and sport it for 3 - 5 days and then return it (don't get anything you're going to get attatched to). What this shows TransUnion, Equifax, and Experian, is that you had a balance of $900 that was paid off on time and ahead of pymnts, boosting you credit score. NO BILL, NO PAYMENTS, NO PROBLEM! <IMG SRC="images/forum/smilies/icon_lol.gif">
I'm not a big fan of the passbook/borrow/repeat plan. I'd suggest the old fashioned way:
1. Start with fuel cards. Easily gotten. Apply once per month (skip a month if you're conservative and patient) with different companies. Rotate use of them because not all report to all agencies, and some report to none. When you have a handful, it's time for phase II.
2. Try specialty retailers. Tire stores, Radio Shack, the Limited for Men. Use them, pay them, Move to phase III.
3. Lower-tier department stores. Penneys, Mervyns, Kohls, Belk's, your local Federated chain (not Sears--they're tough). Use them, pay them, move to phase IV.
4. At this point, MC/Visa/Amex should be knocking at your door. You can pick and choose, or go on any number of websites that try to match you with very low rate/low annual fee cards put out there by issuers who are themselves choosy, and who don't try to market to you.
At the same time all this is going on, it would be nice if you had at least one installment loan (auto, boat, etc.). This is the kind of loan where you have a fixed monthly payment. This adds "balance" to your credit report.
There are websites around with explanations of FICO scores, including FICO's own (which only puts out what they want you to know). www.creditinfocenter.com is pretty good on the subject.
I go for the savings accounts, and a small credit card, and keep a low ballance.
Good luck
RK
Here is a good way to boost your credit rating if you have someone that is willng to do it for you (i.e. your parents.) It's called borrowed credit. Have them put you on a couple cards as an authorized signature. In a few months their good payment records for those cards will show up on your report. Just be sure they have a good payment record or you will inherit their bad credit.
If you have $1000+ in reserves I would say to put that into a CD. Ask the bank then for a loan secured against that CD in the ammount or as much over as the bank will give you. Put that into a savings acct. Be honest if the bank asks you what you are doing--tell them you are looking to establish your credit.
The loan amount must be for over $1000 and in effect for at least 6 months if I remember right. The cost spread between the interest you are receiving in your CD and savings and paying in the loan should be fairly small. Once this 6 months is done ask if you can borrow double that amount this time. Repeat this process a few times and you should have good enough credit to at least get a decent credit card.
I'm no expert but i've found that FICO scores do not really take into account the QUANTITY of credit you have....only the QUALITY.
With a few accounts open, a credit card maybe, a decent job, and your newly good credit you should be able to get approved for any full doc mortgage.
A word of advise--I've been told by several sucessful investors that they recommend buying at least 5 properties before buying a home to live in. My goal is to have my passive income pay for the mortgage, property tax, and insurance for the property I purchase. Also consider a rehab because capital gains tax is exempt up to $250,000 for single people if you have lived in the home for two years out of the last 5. If you don't need $250,000 but maybe 1/4 of that you only have to live in your house for 6 months!!!
Quote:Also consider a rehab because capital gains tax is exempt up to $250,000 for single people if you have lived in the home for two years out of the last 5. If you don't need $250,000 but maybe 1/4 of that you only have to live in your house for 6 months!!!
Warning! To get the partial nonrecognition there has to be an acceptable REASON for the move, like a job change far enough away to satisfy the deductibility moving expenses standard, moving for ones health, or other unforeseen circumstances. See Sec. 121 of the internal revenue code.
http://www.swlearning.com/tax/wft/wft_2004/wft_2004_biz_entities/ch06/diggingd/digging_deeper.html