how do you build credit when you don't need it?

Student Lounge College Life
1

<p>I have a credit card with Citi and BofA. I've never used either. I've always used my debit card. If i'm trying to build credit, and use these cards, won't I be charged an interest rate? this is the main reason why I haven't been using credit cards. Do I really need to buy stuff with the credit cards? Can't I just transfer money from the credit card to my debit account (BofA) and then pay the credit card back on time?</p>

<p>Also, are there other ways to build credit? Can't I take out a huge loan and just keep the money under my bed and pay back when it's time? hahaha</p>

<p>I'm clueless. please help me out!</p>

<p>thanks :)</p>

2

<p>Use your credit card instead of your debit when you do make purchases (e.g., groceries, dorm items, etc.) and pay on time/early.</p>

<p>The other ways you are proposing are just plain silly...and would cost you interest.</p>

<p>Just use your card and actually be a responsible adult.</p>

3

<p>As long as you pay off your credit card each month in full, you won't be charged any interest.</p>

<p>Good luck!</p>

4

<p>not applicable to your situation, but we had my two kids in college both apply and receive credit cards . We (parents) kept them and periodically use the cards for purchases. The we pay balance promptly. Kids should have good credit history when actually (some far off day in the future...haha)) earning an income</p>

5

<p>Always read the fine prints. Some credit cards will start charging interest the moment you charge your purchase, but most won't. In the majority of the cases, if you pay everything off by the end of the billing cycle, you'll incur no interest. You also need to watch out for excessively high penalty charges if you're a few days late.</p>

6

<p>My Citi Bank credit card is actually not activated. Should I activate it and switch between using that and my bank of america card to improve credit? This will probably be more of an inconvenience than it's worth huh?</p>

7

<p>In a few years, I think you'll be happy that you take the time to build your credit history. It's well worth the trouble provided you do not go over limit etc...a lot of people tend to over-spend, that's something to watch out for..</p>

8

<p>If you don't want to use your credit card, take out a small loan and put it in the bank and make payments (ask bank how long you need to make payments in order for it to report to the credit place--and then make payments for that long and then pay it off--make sure there isn't an early payment penalty!)</p>

<p>As long as you pay your credit card off in full every month, there will be no interest. I think that there are some other threads that have a lot of info on this topic, so you might read thru that. The parents forum might actually get more responses based on their experience.</p>

9

<p>just make small purchases on your card periodically then pay it.
i would avoid taking out loans if you don't need them</p>

<p>thats a little drastic.</p>

10

<p>I agree. Once a month, say in the middle of the month, put something on your credit card. A pizza or a book or just shampoo or something. It doesn't have to be something expensive. Then, always pay the bill pretty darn early (so there is NO CHANCE it can be even one day late - allow a lot of time for mailing and processing). You will have a good credit rating before you know it.</p>

11

<p>^ but make sure you wait until the bill comes out to pay off whatever you charge. If you don't (pay in full before the monthly bill comes out), the credit agencies (which determine your credit score) will always see a monthly balance of $0, and think that it is an inactive card. Gotta show activity :)</p>

12

<p>Personally I use my credit card for virtually all of my purchases. I don't even carry cash anymore and I really can't remember the last time I used my debit card. Credit cards have much more consumer protection than debit cards and are infinitely better than cash. Keep track of what you spend and pay off the balance and you're golden. They're really not that big of a deal unless you're irresponsible with money. If you can pass college classes you can use a credit card responsibly.</p>

13

<p>The concept that a college student needs to build up a good credit record is greatly overblown. What the student needs to avoid is building up a bad one. If you graduate, get a decent job, and don't have a bad credit record, or in fact have no real credit record, it is not going to be difficult to be able get whatever credit one needs for starting out in the 'real" world. An issue the OP should consider is that just the fact of having multiple credit cards, even if not used, can lower somewhat your credit rating, and thus you might consider cancelling any you do not intend to use.</p>

14

<p>
[quote]
The concept that a college student needs to build up a good credit record is greatly overblown. What the student needs to avoid is building up a bad one. If you graduate, get a decent job, and don't have a bad credit record, or in fact have no real credit record, it is not going to be difficult to be able get whatever credit one needs for starting out in the 'real" world. An issue the OP should consider is that just the fact of having multiple credit cards, even if not used, can lower somewhat your credit rating, and thus you might consider cancelling any you do not intend to use.

[/quote]
</p>

<p>I would disagree with this. Although 'no credit' isn't as bad as 'bad credit' it's still not great. Most people should at least have a credit card that they use and pay off right away. This shows that you can use credit responsibly and make payments on time. Doing that over a ~2 year period will look very good on a credit report. Remember also that things like student loans, if you have any, will also show up on your credit report. Thanks to a recent change in the law, you can now get a credit report from each of the three major agencies once per year at no charge. </p>

<p>In addition to establishing a good credit record, there are several other benefits to using/having a credit card. Check with the terms and conditions, but most cards have a 'grace period' (usually a month) to pay off the balance without incurring any interest. If you do that, then it's just like paying with cash... it costs the same. In effect you get an interest free loan on the money for about a month. Another huge plus is the fact that you get to review your purchases before you pay for them. For example, if you buy something on the internet and something goes wrong you can raise a fuss with your credit card company and they'll take care of it BEFORE you actually pay any money. With a debit card, the money comes out of your account right away and then you have to fight for it back. The same is true of any fraud or ID theft... with a credit card you're never actually out any money but with a debit card you have to fight to get your money back in your account.</p>

<p>Another similar situation is when you check into a hotel or rent a car (or similar situation) where they need to take your card details 'on hold.' In those cases they usually put a hold on your account for an amount until you check out or return the car. If it's a credit card then it's money that dosen't exist and then when you check out it is replaced. However, if you use a debit card they put a hold on your REAL money... depending on the amount in your checking account at the time that can be a problem (especially if you don't know about it) until they put the money back. </p>

<p>Also, although it's not a smart idea to use credit cards to carry a balance (and pay the high interest rates) it's nice to have that resource available for an emergency if required. </p>

<p>Finally, to help with payments look for a card that you can control via an online account. This helps a lot with keeping track of things and paying the monthy bill. With my card, it's linked right to my checking account so I just have to click a few buttons once a month and that's it. </p>

<p>If abused, credit cards can cause huge financial problems; however, if used properly and strategically they can be a tremendous asset for convince, providing financial safeguards and building good credit.</p>

15

<p>With the recent multi-billion dollar charge-offs from large U.S. banks related to subprime loans, some banks are seeking foreign capital infusions. What that means to the average consumer is that credit will be much harder to come by, not only are banks tightening their underwriting standard to avoid additional losses, their previous charge-offs are impacting their abilities to fund loans & even continue day to day operations due to capital adequacy requirements (see multiple X foreign capital infusions, they're desperate!).</p>

<p>Having a good credit history helps one negotiate a better interest rate when a car loan is needed in the future. It will also help negotiate a better lease/loan term when a first home is rented/bought...With your own credit history (assuming it's good), you will not need other people to co-sign or guarantee your financial obligations in the future, that's more freedom to you, use it wisely...</p>

<p>Having multiple credit cards & not using some was not a consideration that impacted any loan decisions at all, at least not in the bank that I worked for.....what they (& federal regulators) looked at though, was a positive cash flow from repayment source, among many things...The credit report lists in details pastdue history. It's important to be current on all obligations...</p>

16

<p>Having an additional credit card that you don't use won't hurt your credit score. In fact, closing such accounts can actually LOWER your credit score in the sort term. A longstanding account that's in good standing, even if you don't use it, helps your score. The general rule of thumb is that if you're planning on applying for credit (major loan, e.g. car, house ect.) in the near future then you shouldn't close any credit accounts. </p>

<p>A year or two ago banks would give loans (of seemingly any amount) to just about anyone no quesitons asked. Now with the messed that has resulted from such practices, banks and being much more careful. You can still certainly get loans, but you must establish that you have good credit and can make payments on time. Without either a credit card or other credit device (e.g. a loan) then you're credit record won't contain any such positive information about you... and that will be a problem when you come to apply for a loan... especially these days.</p>