Posted: Sun Aug 20, 2006 9:36 am Post subject: Now, if you'll just place your foot squarely in the trap...
Well, I know it's been a long time in coming, but I've finally come up with this post about credit cards and stuff. I don't know if anyone remembers, but I was part of a fairly long IRC discussion where I was opening some people's eyes to how things work. Anyway, here's what I have. Please ask questions.
Basically, I start from the assumption that one has no credit to speak of built up:
1. Open a savings or checking account at a local bank. Check out local credit unions as well as larger chain banks, since the local ones are slightly more likely to offer what you're looking for, which is to. . .
2. Open a "starter" credit card. Sometimes secured against your checking or savings account, sometimes with a deposit, but always what you need, which is to build credit! These starter accounts are a way for you to build the kind of credit that really matters (i.e. with the credit bureaus like Transunion and Equifax), so that eventually you can apply for credit with other places.
3. What you shouldn't do is make the rounds to retailers and apply for credit cards there. Leave that until you've built up your score a little with your starter account. Lots of people do this, and end up inadvertantly screwing themselves in a way that takes years to repair (more on that below).
4. When and if you get yourself your start-up credit account, go over the terms and conditions like the proverbial D&D Rules Lawyer. It's actually better to do this before you get the account, but most people don't, and it won't hurt as long as you do read the terms and conditions.
The reason why you have to go over the T&C like a rules lawyer is because you're most likely to get tripped up by something that doesn't make sense, but it's in the rules anyway, and you're the player, not the GM, and many creditors are not lenient with the rules just because you don't know them. You didn't know that the due date was the 3rd this month instead of the 8th? Tough! And yes, that's perfectly legal because it's in the T&C.
Credit card niceties that your parents are used to like due-date grace periods or due-date extensions just for the asking are a thing of the past. Oprah's telling everyone that credit card companies will lower their interest rates if you ask, which just ain't the case.
5. You may or may not have been getting offers for credit cards by mail already, and after you get your starter account, you'll see an increase. Ignore every single one of them, even the ones that say "You are pre-approved!" The "pre-approved" thing is a trick. They expect you to know #3 (above) and say "Aha! If I'm pre-approved, that means they don't have to check my credit! I can't lose!" You'd be wrong.
In this case, "pre-approved" means that you have a name and a social security number, and that's it. If you send back the application for that supposedly pre-approved credit card, it'll be like any other application. They still have to check your credit scores, and (get this!) you can still be declined for your pre-approved credit card and take a hit to your credit score.
6. Other stuff you should know (continued from above): One thing that a lot of people don't know is that when you apply for a credit card, they check your existing credit score to see whether it's a good idea to let you borrow money from them.
What even fewer people know is that the number of these inquiries can also have a negative effect on the overall score! On eBay, people can look at your history and your scores all day long and it's no big deal, but that's not how it is with the credit bureaus. So if you go around to Best Buy and Target and Sears and Victoria's Secret and apply for credit cards, that'll be four separate marks on your credit score, even if you get approved for all of them. Now, if you got approved for all 4, and you took good care of all 4, well good for you, it's gonna pay off for you in the long run. But if you get turned down for all 4 applications, you've got negative marks on your credit bureau report and nothing to show for it.
If you think the world of credit scoring and credit cards is screwy now, let me tell you: You have no idea. The entire industry is set up to trap people.
If you are the kind of person who buys something with your credit card then immediately pays it off, you are a bad customer, in the eyes of the industry, although nobody will come out and say that. Why would you be seen as a bad customer? Think about it: If you buy and pay off right away, you're not paying any interest. (Note: At least not the way things are set up now, but the day is coming that if you buy something, it will begin accruing interest immediately, not next month or on the due date, like your parents are used to.)
What creditors want to see you doing is barely keeping your head above water with your spending habits. Spend $500 this month, but only make a payment of maybe $100. Then after six months or so, make a big fat payment to get your balance down a little, so you can go on spending. What's great about that? Because if you've got a running balance, they're charging you interest on that balance. If you're running a tab of, say, $3000 bucks most of the time and you usually only throw $100 at it every month, well heck, they could be taking half your payment and sticking it straight into their pocket, meaning you've only made a $50 dent in what you actually owe.
That's the unfortunate drawback of easy credit: Eventually, spending more money than you actually have will bite you in the rear. It may take its time, but it'll happen. _________________
Gender: Joined: 13 Mar 2006 Posts: 6077 Status: Moderator
Posted: Sun Aug 20, 2006 9:47 am Post subject:
...
I'm never getting a credit card
I'm serious... I'll build up my credit with small loans or something... but after all the horror stories I've heard, I don't think I'll ever own one. _________________ Come into my den let me hear you cluck
You can be my hen and we can f(Bu-GAWK)
A bite to the leg, it's time to play
Baby, let me be your egg that needs to get laid.
- CEO Nwabudike Morgan
"The Chicken of Lust"
Gender: Joined: 12 Mar 2006 Posts: 3369 Status: Moderator Location: Punctuation
Posted: Sun Aug 20, 2006 2:42 pm Post subject:
Wow, thanks for that. I'll probably be getting one in the somewhat-near future, so this helps. My mom explained the whole bad customer thing, and I plan to follow that religiously. I'm not giving them my money when I don't need to.
Gender: Joined: 12 Mar 2006 Posts: 842 Status: User Location: CA
Posted: Sun Aug 20, 2006 6:32 pm Post subject:
Quote:
Oprah's telling everyone that credit card companies will lower their interest rates if you ask, which just ain't the case.
That actually isn't true. I called my credit company last week and they lowered my interest rate by 6%. All I had to say was, "I am a good customer and have been using your credit card for over two years. I have received many offers with lower APRs than the one I am receiving from your company. Lower my interest rate or I will switch companies." Ten minutes later, they offered me two lower rates, one of them really low, but variable, and one of them not as low, but fixed. I went for the fixed rate, screw that variable crap... that's what gave me a high interest to begin with.
But yeah, I guess the "magic call" isn't a guarantee... like, if you're a cruddy customer and you have only had the card for six months, they won't do it, I'm sure. For me though, they were totally willing to help me out.
Yeah, that's what I'm going to do too. I don't want to have to pay companies so I can use my own money. (Although it's much more convinient.) I'll just go to the bank more often.
Thanks for all that info, though.
Last edited by Otogi-san on Sun Aug 20, 2006 9:13 pm; edited 1 time in total
Gender: Joined: 12 Mar 2006 Posts: 1416 Status: User Location: Above whatever's below me.
Posted: Sun Aug 20, 2006 9:12 pm Post subject:
I'm sticking with gutting it out.
I'll live in a shitty apartment, buying only what I can buy with cash on had, as long as it means I don't have to use a credit card. _________________ beep beep I'm a jeep
Gender: Joined: 12 Mar 2006 Posts: 3191 Status: User
Posted: Sun Aug 20, 2006 9:32 pm Post subject:
Don't you need a credit rating to have an apartment? :/
I'll probably end up getting a credit card sooner or later D: But I want to stick with debit and bank accounts and all that stuff as long as possible and charge most stuff to that. _________________
Oprah's telling everyone that credit card companies will lower their interest rates if you ask, which just ain't the case.
That actually isn't true. I called my credit company last week and they lowered my interest rate by 6%.
I'm sorry I can't show actual figures to prove my point, but statistically speaking yes it is true. There are certain people with awesome credit (like yourself, Terri, good job by the way) who can get lowered rates from some companies, just for the asking.
(Speaking to all, not just Terri) --
I should stress that it doesn't hurt to call your companies and ask, and even give them the "I'm switching to another company" line. But keep in mind that the person who you are dealing with on the phone has zero control over whether or not they can do it. They've got pre-set response handed down from on high for what you're asking for. If they'll do it for you, cool! But if you talk to a manager and even after the switching-companies line they still don't do it, just go ahead and switch companies.
Being nasty to the person you talk to on the phone is like abusing the kid at the register at McDonald's for not being able to serve you a blueberry milkshake: You're just making his day worse, and if there is ever a Great Accounting at the Pearly Gates, you better believe your behavior on that day will come up on the "Reasons why you should spend eternity in Hell" side of things.
My point is that Oprah et.al. are making it sound like everyone but complete scumbags can get that kind of treatment, and it isn't the case. There are some companies who won't do it for anyone, even if they've had the account for 30 years and have never had a late payment and they have a diamond-encrusted platinum credit score. I know: Mine's one of them, and my co-workers have worked for or with other companies who don't either.
fruiterian wrote:
Don't you need a credit rating to have an apartment?
Not unless you're moving into a rather upscale complex (or a complex that has delusions of upscaleness). But if you're a student, or moving into the kind of place that most everyone moves into when they're done living with their parents, your first-and-last month deposit will do just fine. These days, a lot of places don't even ask for a previous renter reference. It costs money and hassle to check your credit and/or references, and a lot of landlords don't bother.
It might vary by location, though. You might run across a complex that has laundry strung between windows, bunches of shifty-looking guys with their shirts off sitting on the steps drinking and smoking, and the sound of their women screeching at the brats emanating from their standing-open front doors, and they'll still require a credit check, a hefty deposit and multiple references. You might also find a nice upscale complex where everyone wears clothes from Land's End and the walls are extra soundproofed, and they'll move you in with your first-and-last and a handshake.
Gender: Joined: 12 Mar 2006 Posts: 842 Status: User Location: CA
Posted: Sun Aug 20, 2006 10:20 pm Post subject:
I dunno, I guess there could be variability, but I have always had to do have a credit check before moving into an apartment... even the shady ones by the university.
Gender: Joined: 12 Mar 2006 Posts: 1226 Status: User Location: A valley full o' Pioneer.
Posted: Sun Aug 20, 2006 10:38 pm Post subject:
Cyberpumpkin wrote:
fruiterian wrote:
Don't you need a credit rating to have an apartment?
Not unless you're moving into a rather upscale complex (or a complex that has delusions of upscaleness). But if you're a student, or moving into the kind of place that most everyone moves into when they're done living with their parents, your first-and-last month deposit will do just fine. These days, a lot of places don't even ask for a previous renter reference. It costs money and hassle to check your credit and/or references, and a lot of landlords don't bother.
Huh, that's weird, because I'm moving into an apartment complex that is inhabited mostly by students, and my first and last month deposit didn't do just fine. They check everyone's credit. Maybe it's a much nicer place than it appears to be. Or maybe I just got lucky and hit one of the few that does, but it seems like, judging from what you said, they should have just taken my word and my check and called it a day.
Sharp wrote:
I'm gonna live in a shaq.
Fuck, he's going to be pissed. _________________ Married to Terri.
Gender: Joined: 13 Mar 2006 Posts: 1513 Status: User Location: Engaland
Posted: Sun Aug 20, 2006 10:40 pm Post subject:
I have a credit card, but I'm pretty good with it. My credit rating is superb. They tried to up my limit, thinking I was a sucker, but I only asked for the minimum ($2000 for a minimum student card).
I'm gonna have a stellar credit rating when I'm done school, and then once I get my degree to teach....I'll be able to get a killer mortgage for a house. Woooo! _________________ Yep.
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Well, I know it's been a long time in coming, but I've finally come up with this post about credit cards and stuff. I don't know if anyone remembers, but I was part of a fairly long IRC discussion where I was opening some people's eyes to how things work. Anyway, here's what I have. Please ask questions.
