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I do not know where to begin financially.

mhunter 3 10 August 11, 2015 at 06:15 AM in Finance
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I'm currently a senior in college working a co op job as a assistant project manager intern at a construction company. Short story I do not have any credit and I will be graduating soon. My parents do not believe in me getting a credit card and will not help me cosign. The only big asset to my name is my car and I paid cash for it. What should a 21 year old kid do to start his financial portfolio with no credit is my real question?

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#2
I would say your best shot in getting a credit card approved at this point is with your bank that you have a checking account with. Go to their local branch sit down with the banker and tell them u want to open a credit card. Back In the days I got my first credit card with chase after being with them for a few months and no credit record. As long as you had your checking account in good standing you should not have a problems in getting a cc with them. Other than that secure credit card is your other option. Good luck
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#3
yes do that go to credit karma and set up an account and see what it shows, got to some stores like home depot macys khols and when you need to buy something open a store account and pay off your bill.

First rule for a good credit score is NEVER carrry a balance unless it is a zero percent offer Smilie
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#4
here is your questin....

What should a 21 year old kid do to start his financial portfolio with no credit is my real question?

Fist of all, I don't see any question about credit cards. But I agree with you parents... you get a credit card you will spend alot more money.

Single best thing you can do when you young IMHO... is to max out your Roth IRA. You can only put in money which you have earned legally.

About you company credit cards ect... I have no answers.

I will add that it is sad that if you did not get a car loan, usually a dealership will do anything to make it happen and that would be a big building block to your credit history. I personally never got a car loan in my life (always paid cash) and got credit cards in schoool. But I puchased a condo at a young age and that was my BIG boost.

Lastly, Pay your bills on time ALWAYS!!!
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Last edited by joshuaNH August 11, 2015 at 08:26 AM
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#5
Quote from mhunter View Post :
I'm currently a senior in college working a co op job as a assistant project manager intern at a construction company. Short story I do not have any credit and I will be graduating soon. My parents do not believe in me getting a credit card and will not help me cosign. The only big asset to my name is my car and I paid cash for it. What should a 21 year old kid do to start his financial portfolio with no credit is my real question?
First, pull your credit report from at least one of the bureaus, at https://www.annualcreditreport.com/index.action . This is the official page where you can get your free reports each year, as mandated by law. Check those reports regularly (at least once a year. You can check the report from one bureau every 4 months, to space them out throughout the year, as well).

Second, set up a budget, and stick to it! Cash is probably preferable now, and use whatever budget method works for you (envelopes, spreadsheet, Quicken, mint.com). If you can budget now, you'll be in a great position for the rest of your life.

Once you can set up and stick with a budget, then look at getting a credit card. For your first, you may need a secured card. Talk to your bank and see what they can offer you. Do not carry a balance, ever, except on 0% promotions, and even then make sure to pay it off well before the promo ends.

Pay all of your bills on time. This includes rent, utilities, cell phone, medical bills (work out a payment plan for big bills; most providers are willing to do this), credit cards (when you get one), gym memberships, everything. Set them up to auto pay if you have trouble remembering. While not all of these places regularly report your payment history to the credit bureaus, they will send unpaid bills to collections and those will definitely show up and hurt your credit.
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Marshall: Have the rest of you guys figured out by now that mmathis is the smartest guy on SlickDeals?
#6
Wow... no to all of the above. There's some gems in the above responses, but the OP is asking about how to get credit.

Apply for a credit card geared towards college students from a credit union or one of the major credit card companies. Google "credit cards for college students." Banks and credit card companies understand people your age who have been busy with school don't have much credit history to rely on. Now is the best time to apply for these cards because sometimes they require proof that you're still in college (verification of enrollment, copy of college ID, etc).

Use your credit card for everyday spending like groceries, utilities, car gas, etc. Pay it off every month!!! If you pay it off every month, you will not incur any interest charges. Only charge as much as you can afford to spend. If you don't have the cash to pay for it, then you don't have the credit to pay for it either. Use the credit card as a tool of convenience in lieu of cash. It is a tool for your toolbox that will help you build better and greater things in the future. The interest rate shouldn't matter to you if you pay off your bill every month, on time.

Do not pay your bill late! You should never be missing any payments. If you're a person who forgets like me, then pick one day (say the 30th or the 1st of every month) and schedule all your bill payments online in advance. You get bonus points if you find a bonus opening offer for whatever card you choose. Try to find one with no annual fees and a low interest rate. Once you have better credit, you'll get offers for better cards and will want to switch your main (daily user) credit card. If your first card is fee free, then you can just keep it unused in a drawer (i.e. sock-drawered) somewhere safe because the age of your credit cards help your credit score. You'll want a low interest rate in case of extreme emergencies where you really, really, really have to carry a balance. Maybe you even qualify for a card that will get you a 1-5% cash rebate on all your purchases?

Do not carry a balance on your credit card!!! Not only does this make you pay interest charges, it DOES NOT help your credit at all. For some reason, many people believe carrying a balance helps your credit score. It does not help. Really. I'm 110% sure on this.

Actions that DO NOT HELP your credit score:
- Carrying a balance
- Paying your bill(s) late
- Maxing out your credit limit

Actions that DO help your credit limit:
- Having a long standing history of paying your bill on time (shows discipline)
- Having a low utilization ratio (only using a small % of available credit: shows responsibility)
- Unused credit cards are still good to keep bc a $0 bill every month is still considered a bill that is current/paid on time and adds to your credit history
- periodically checking your credit history reports for free from the 3 major credit reporting companies to make sure everything is looking good and proper

If you decide not to carry a balance and schedule your bill payments in advance, then you get a 20-30 day grace period from the time you buy an item (i.e. take it home) to the time you have to fork over the cash to pay for the item. Yay, that is 20-30 days where your cash can earn a little interest in a savings or rewards checking account somewhere before you use it to pay your bills! Make your money work for you.

If you do decide to carry a balance on your credit cards (which I DO NOT RECOMMEND WHATSOEVER), this is how credit card worked when I read the fine print eons ago... I say this bc I don't know how the Dodd-Frank Act changed this. Frankly, I don't care about these rule changes bc I personally never carry a balance so these will never apply to me and that's one less thing to care about... there's other more important things to spend my time thinking about... like my career, family, personal ambitions, the pursuit of happiness, etc. Again, I view money and credit scores (credit history) as tools to get other things accomplished.

Back to credit cards - theoretical situation:
Let's say you get your first credit card on Jan 10 and start charging stuff on it. Your statement period closes on Feb 5 and the bill is due Feb 25. Everything you charged from Jan 10 to Feb 5 will be interest free if you pay in full by Feb 25. You only pay the amount you owe for the items you bought and nothing more.

If you only pay half of the bill and elect to carry a balance, then the interest rate applies to any unpaid purchases from the day you bought it, not the day the bill is due. Even worse is that any new purchases after Feb 5 will have the interest rate applied to it from the day you bought it. All of that interest will keep accruing daily until you pay off your balance in full. You will pay what you owe for for the items you bought plus accruing interest (extra monies you really don't want to give away for free). Any payments you make that will not pay your balance off in full will make you balance go down a bit, but the balance will be still growing at exponential rate (miracle of daily compounding interest working in the credit companies' favor) so that eventually it will be very very difficult to pay the balance off in full and reset the grace period clock again.

tl;dr
Get credit cards geared towards college students bc they are easier to get. Don't be afraid of credit cards because they can be great tools for better things in the future. At the same time, don't let yourself get taken advantage of either.
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#7
Don't get a credit card. Your parents are wise not to cosign for you. Try to live on the cash you make and on budget in order to develop the ability to control where each dollar goes.

It gets me everytime when people worship FICO credit scores. The last thing a society beginner needs is to think they can do anything as long as they have credit cards. A credit card is a door to debt. Your financial profolio is better built on your asset such as cash based investment, rather than how much you like to be in debt.

Of course you will not listen because every colleague graduate or near graduate thinks he/she knows everything. That's the norm.

No millionaire ever said they accumulate their wealth from credit card reward points or the free miles. It is a misconception that you need credit cards to be someone with sophistication.

You mentioned that you paid cash for your car, if you earned that money, then you obviously know one thing or two about money. Don't change that philosophy. Open a Roth IRA / Health Savings Account and start contributing money from your salary as early as possible so the compound interest works for you. And throw in as much into your employer sponsored retirement accounts such as 401k or 403b up to the max amount and then save as much as you can and put them in low load mutual funds with at least 10 year of good track record. Don't forget to leave a 6mo emergency living expenses in some place with near zero risks (e.g. not investment account) and readily available to you in case you need it.

Once you have accomplish all the above, keep learning new stuff and take entrepreneur courses and open your own business if you have good ideas. Or learn other skills to make yourself more employee-able.
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Last edited by teetee1 August 11, 2015 at 05:34 PM
#8
Quote from komondor View Post :
yes do that go to credit karma and set up an account and see what it shows, got to some stores like home depot macys khols and when you need to buy something open a store account and pay off your bill.

First rule for a good credit score is NEVER carrry a balance unless it is a zero percent offer Smilie

IMO, Credit Karma isn't very accurate but it is a good starting place if you want to know where your credit score range is.

In general, department store cards offer very high interest rates, very low intro offers, and very low incentives. I do not recommend getting these unless you're an avid shopper of a particular store and use it to stack with store deals (like kohls and their coupons).

Carrying a balance on a 0% offer will not help your credit score. A higher % of your available credit will be used which will lower your score bc of the high utilization ratio. However, 0% APR intro rates and balance transfer rates can be great tools if you use them wisely.

A great credit score will get you 0% offers. This will in turn lower your credit score, but the object of getting a great credit score in the first place is to convince lenders to loan you large amounts of money at a low interest. You can then use the loaned monies for other things that you want like a nice car, a home mortgage, starting capital for a new business, some investment that will net you a positive gain in value, etc. (This is called leveraging your credit.) Please note that you still need to pay the monthly minimum payments on any 0% offers and the total balance when the offer rate expires.

One idea for any 0% intro rates you get on any credit card you get: charge everything you need onto the credit card. Pay the minimum monthly payments and place the difference between the minimum payment and the balance into a savings/rewards checking account that earns 5%. When the intro rate ends, pay off the balance of the credit card in its entirety. You get to keep the 5% interest that your money earned.

Once you figure out leveraging your assets, then you can figure out credit arbitrage. Have patience young jedi and build up your toolbox slowly but surely.
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Last edited by musicdef13 August 11, 2015 at 05:20 PM

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#9
You get credit from paying your bills. Make sure bills that you pay are in your name such as utilities, cell phone service, and anything else.
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#10
There's a lot of great ideas here, but I disagree on this point:

Quote from teetee1 View Post :
No millionaire ever said they accumulate their wealth from credit card reward points or the free miles.
I've taken business classes where successful self-made multi-millionaires came in to guest lecture about what they did to get where they are. Many of them talked about taking risks and leveraging their credit to get there. Again, the point of a good credit score is to convince lenders that you are a good investment and will eventually return their money. Hopefully, they will give you money to make more money and then you will return their money with a little bit of extra and you keep the rest of the extra for yourself. This is called a win-win situation. Money is not a zero-sum game; it can be an advantageous tool for all parties.

You can apply this on a smaller scale to personal finance. Why not encourage the OP to use all of the tools at his disposal in addition to the other saving methods you have described?

You encourage the OP to open a business if good ideas are available, but how will you convince the bank to give you a business loan to start? Or do you use your own personal funds to start? That's very risky, to both you and your family's well-being! In light of that, who would take the risk to start a business?

To all those saying no to credit cards: how do you get lower interest rates on a home? Houses and even condos generally require a mortgage to afford. Or do you wait forever stockpiling your cash, which gets eroded by inflation, until you have enough to pay cash in hand? Or do you apply for mortgages with a so-so credit score and take whatever interest rate on that 15-year or 30-year note that banks might "generously" dole out to risky investments like you? How do you expect millennials to afford a place to live and things that make our lives easier or are you okay with us being priced out of anything affordable until we can pay cash in hand? Even apartment rental applications nowadays use credit scores to decide whether or not you'd be a good renter. Not every landlord will take a larger down payment or every renter will agree to a high than market monthly lease to by-pass an applicant's bad credit score. Why not just build a good credit score from the get-go when it is easy and wait for it to be useful down the road?

How do you rent a car when you go on holidays? How do you book airline tickets online? How do you do all of the other things that are easy to do by credit card? Yes, there are ways to do all of that with checks and cash but they are inconvenient, time-consuming, and often more expensive.

Why not use the tools society have made available to your advantage? I think it's best to develop good habits from the start. Yes, credit cards can be scary and "bad" to people with bad habits. But credit cards can be great tools and good habits can be cultivated to those who are willing to do so. Consciously making good habits is a way of life and pretty soon, those good habits are unconscious actions that take no effort whatsoever so you can spend your time focusing on the more important stuff - family, career, life goals.

In developing countries without similar credit systems to ours, people regularly become vulnerable to loan sharks with scary high interests and threats to safety/physical well-being just to afford life's necessities (food, water, seeds to grow food). And they might still live in shanties or mud huts. Should we go back to that just because people are scared of credit?
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#11
Quote from musicdef13 View Post :
To all those saying no to credit cards: how do you get lower interest rates on a home? Houses and even condos generally require a mortgage to afford. Or do you wait forever stockpiling your cash, which gets eroded by inflation, until you have enough to pay cash in hand?
Please don't go overboard with your example and think people who use cash do not invest.

Quote from musicdef13 View Post :
You encourage the OP to open a business if good ideas are available, but how will you convince the bank to give you a business loan to start? Or do you use your own personal funds to start? That's very risky, to both you and your family's well-being! In light of that, who would take the risk to start a business?
This comparison does not make sense at all. Where can I get a business loan that will be forgiven if my new business go under? You made it sound like there is a dramatic difference between using cash savings and using business loan. When a person is in debt, the debt will be collected in many forms. It is not like you can get a free ride by declaring bankruptcy [wikipedia.org].

Quote from musicdef13 View Post :
How do you rent a car when you go on holidays? How do you book airline tickets online? How do you do all of the other things that are easy to do by credit card? Yes, there are ways to do all of that with checks and cash but they are inconvenient, time-consuming, and often more expensive.
There is a thing called debt card. It does what the credit cards do except going into debt.

Quote from musicdef13 View Post :
There's a lot of great ideas here, but I disagree on this point:

In developing countries without similar credit systems to ours, people regularly become vulnerable to loan sharks with scary high interests and threats to safety/physical well-being just to afford life's necessities (food, water, seeds to grow food). And they might still live in shanties or mud huts. Should we go back to that just because people are scared of credit?
I am not sure where in my message that gave you an idea that people are scared of credit. I think it is a terrible idea for a young adult, not yet fully financially independent and well informed but think they are entitled to everything as long as they have a plastic in hand.

It's probably informative to learn a little about how we get here with this credit culture by watching this short video:

How credit and debt became a way of life [youtube.com]

Then you can check out the documentary Inside Job (2010) (IMDB) [imdb.com] to understand how this culture and too much debt has destroyed many household during the 2008 recession and that we are still not learning anything from it, and letting the financial institutes to create money from debt and prevent any regulatory effort by the government.

I can go even further and accuse the cash-for-clucker program put more people into debt by buying new cars they can't afford. The fact is the majority of the population is short-sighted and have forgotten the common sense of buying things only if you can afford it. The nature of the credit card, to many people, is the opposite of this common sense.

Just watch the movie, I am tired of debating this over and over while you think that you have total control of how your credit card is used. You are the minority to not be taken advantage by the credit card companies. But we are talking about a negative impact to the economy well-being in a population. It's a different scope of thinking and one should take responsibility before he/she promote the credit card idea even when the motivation was good.

I currently have two personal credit cards and a corporate AMEX card with credit score of 809. I used to think credit cards are god send just like you. Not any more. The reason I haven't got rid of them is because I am part of that group of people with principles (and currently saving aggressively) so it doesn't bother me with my spending behavior. I also understand not all people can do what I do and it is not fair to spread the idea of how wonderful credit cards are blindly.
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Last edited by teetee1 August 11, 2015 at 07:46 PM
#12
whats your goal in getting a credit card-better credit-cash back-buying online etc

have you checked your free credit reports
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#13
Good for you for thinking ahead. Having a good credit score is key because so many things rely on it these days from insurance rates to business loans to hiring criteria to, of course, loan products such as credit cards and mortgages.

Also, good for your parents for not cosigning. Cosigning is the worst of all worlds. The cosigner has all of the risk and oftentimes none of the reward. The person that needs the cosigner (you in this case) has all the power to charge up the credit card (or stop paying on the car loan in another case) and, if they default, the cosigner is on the hook for everything. This is a bad idea all the way around.

For you, take musicdef13's advice here:
Quote from musicdef13 View Post :
Apply for a credit card geared towards college students from a credit union or one of the major credit card companies.
Most credit union's have some sort of "fresh start" program where they'll issue you an unsecured credit card that is sometimes related to how much money you have on deposit with them. Try for this type of card first as it is better than a secured card because it should have no application fee nor annual fee, unlike most secured cards, and should have a much lower interest rate.

I would avoid store cards. They can do more damage to your credit score than good. Stick to cards from major issuers (VISA, American Express, Discover, MasterCard).
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Last edited by Brian1 August 11, 2015 at 09:53 PM
#14
If anything, I think you're making assumptions that the OP cannot and should not have a credit card. I think the fact that the OP is asking questions about how to start somewhere signals that the OP is ready to at least be armed with some knowledge.

Yes, people who don't use credit cards can be investors too. But not many people can go or do buy a house + closing costs with cash in hand. More than likely, the OP will apply for a mortgage when the time comes to buy a home and will need a high credit score to get a decent interest rate on that mortgage. Also, paying a house in full upfront vs. paying a 4% mortgage and using the rest to invest in index funds for ROI of 6-8% yearly is a personal decision. I'd rather have the OP have more options than just one option.

Uhhh... I think if you should ever open a business, you should research more into the differences between business loans and personal loans. One of the biggest rules of thumb that I've heard that is to keep your business assets completely separate from your personal assets so that issues in one area won't affect the other. Because yes, there is a difference between personal and corporate bankruptcy. Declaring corporate bankruptcy shouldn't decimate your personal assets if you've incorporated correctly.

Debt cards? Oh, you must mean debit cards... which are not helpful when you go to buy something like gas for $20 and the gas station tries hold $200 as an authorization charge and you really only have $50 in your checking account. Y'know, since the rest of your money is in a savings account as part of the "pay yourself" principle so many financial gurus espouse. You're not spending more than you have, but you don't exactly have enough to cover the purchase + authorization charge + anything else you need to go buy. Think of all the places that hold authorization charges... gas stations, restaurants, hotels, amazon.com, etc.

Oh, so you have and actively use credit cards but tell others not to get them? Credit cards are only for special people with principles, like you? Who's to say the OP doesn't have the foundation to cultivate a similar disciplined integrity and aggressive saving style? So "Do as I say and not as I do?" You're sounding a bit elitist there...

I'm tired of all the fear-mongering about credit cards and the rest of the finance industry. I'm part of the minority because I am well informed about my decisions. But if you tell someone "Don't," you're not informing them to be knowledgeable. You're eliminating options and increasing the fear and mystery around easy concepts, which scares people away from wanting to learn to better themselves.

I don't care about the rest of the population. They're sheeple who only look at the "hot deals" section and nothing else. OP is one step above the others by going to the finance section and actively asking questions. OP, too, can be part of the minority that makes credit cards work for them. Who knows? Maybe one day we'll be the majority.

In the meantime, stop with the fear-mongering! You said "Don't." You haven't said people are scared of credit, but you're advising the OP as one who is. Yes, be cautious and caveat emptor but those are guidelines for everything and not specific to credit cards.

I've never said people with credit cards feel entitled to everything. It seems like you're projecting... Yes, credit cards may be bad for a young adult... so let's inform him of the benefits and pitfalls of such a tool, make the OP financially independent, and help OP become a not-so-young adult who is financially independent and capable of doing whatever OP can imagine to do.

Not all of us young millennials are entitled. Plenty of us are willing to work hard if someone would be willing to help us get better informed. If anything, we're an over-cautious lot because according to some surveys, less of us are invested than previous generations bc we've watched some of our parents lose it all in the stock market.

I'm not trying to attack anyone's post or anything, but it doesn't take a special and unique person to figure out how to use a credit card. Sure, I guess you can think you're special if you're not in debt. However, I prefer to think of those in debt through their own means (excluding medical situations or extenuating circumstances out of their control) as lazy dummies who need to take some time to sit down and learn about all the tools available and how to use them well.

People who use credit cards responsibly and to their advantage should be the status quo. Yes, I know normative statements =/= positive statements. But if the older, more knowledgeable peers keep saying us young'uns are dumb and can't handle it then we will keep believing we are, indeed, dumb.
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#15
Quote from musicdef13 View Post :
Uhhh... I think if you should ever open a business, you should research more into the differences between business loans and personal loans. One of the biggest rules of thumb that I've heard that is to keep your business assets completely separate from your personal assets so that issues in one area won't affect the other. Because yes, there is a difference between personal and corporate bankruptcy. Declaring corporate bankruptcy shouldn't decimate your personal assets if you've incorporated correctly.
I think several things are being confounding here. While you're correct that someone with an incorporated business should keep the business "stuff" separate from their personal "stuff", a loan applied for as a startup, or even by many established small business, still holds the individual, not the business, liable. Therefore, the individual's credit score would be needed for the application and would be affected by the payment record of the loan moving forward.

In the end, I agree that establishing one's personal credit score by applying for and using credit cards can be very financially wise for a whole host of things - the application for a loan for a business being one of them.
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