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Author: CCMint Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308340  
Subject: A Student who wants to Build Credit Date: 9/16/2007 11:07 AM
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Hi,

What is the best way for a student to start building credit? I'm not employed at this time and I don't have any established credit. I was thinking I could use the credit card to pay off my monthly private loans payments, which look like they will be draining me of all my money. This will help me build my credit after school. Right now I will use it to buy small things to build some credit now.

The past week I've been searching Google and not sure what should look for? This is all new to me and need some guidance on choosing a card. Should I get a student credit card or a normal credit card? My main goal is to build credit and use the card to pay off my monthly student loan payments. The credit card will be paid off that month.

thanks, John
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Author: SethNC One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 260826 of 308340
Subject: Re: A Student who wants to Build Credit Date: 9/16/2007 5:58 PM
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If you want to build credit and be responsible about it, I would do it this way:

1 - Make those loan payments on time EVERY month. Those loans will help you build credit just like a credit card will.

2 - Get a credit card, but don't use it. To make sure it's hitting your credit report, use if for a tank of gas or something small like that when you first get it. There's no reason to use it for more than $50/mo. Then pay it off IN FULL every month. Do this for a few years and your credit should look pretty good assuming you haven't done anything that would mess it up.

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Author: dswing Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 260856 of 308340
Subject: Re: A Student who wants to Build Credit Date: 9/17/2007 3:35 PM
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Hi,

Realize that this is coming from someone (me!) who got into a sink-hole of credit card debt in my studen tyears, and I'd never advise anyone to get credit when they don't have any income and probably won't have significant income for several years. That said:

1) Don't worry about it. Really. You have a student loan already, and on-time payments over many years will mostly take care of your "establishing a credit history" problem. If you throw in a small car loan somewhere along the line, that too will add to your debt and credit history, so the whole "I need a credit card to establish credit" argument is a bit hollow.

2) Creditworthiness has about as much to do with stable employment history and income as it does with payment history. Until you have a full-time income that is trackable back at least 1 year through your tax returns, you won't be in the category of "ideal borrowers".

3) All that said, most people need/want a credit card just for the convenience of it, plus some other benefits like secure purchasing over the Internet or whatever. So, go ahead and get a student card through school, and just keep the limit to the basics, like $500 or $1000. Use it only when cash is an inconvenient or impossible option, or for travel protection or emergencies. Do not use it for EVERYDAY stuff!

4) What NOT TO DO:

* Get multiple cards
* Carry revolving balances month to month
* Use cards to pay bills or rent when you are short
* Use cards for consumer wants: stereos, DVDs, vacations
* Pay late and incur late fees/interest rate spikes
* Let your interest rates rise into double-digit territory! If you can't have a 9.9% interest rate or LOWER, DON'T GET A CARD or KEEP A CARD!

If you do any of the things on the NOT TO DO list you will wind up in my shoes and spend the bulk of your 20's and 30's crawling out from under stupid debts. Student loans are bad enough.

~dswing

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Author: SeeFoolRun Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 260873 of 308340
Subject: Re: A Student who wants to Build Credit Date: 9/17/2007 10:07 PM
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Paying a loan with a credit card is a very bad idea from the start.

You may have the best of intentions, but sooner or later something will come up & it's too easy too simply convince yourself "I don't have to pay the balance in full this month. I'll pay the minimum & get caught up next month."

I was thinking I could use the credit card to pay off my monthly private loans payments, which look like they will be draining me of all my money. So instead of your loan payments draining all of your money, your CC payment would. And that's better because________?

You said you're not working. Where's the money for the loan payments coming from?

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Author: aounfest2007 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 260986 of 308340
Subject: Re: A Student who wants to Build Credit Date: 9/19/2007 10:38 AM
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Hi! I'm a student, too! Be cautious with credit, but don't be afraid of it. If you use it wisely, it can be a great and convenient tool for building good credit; (every so slightly) delaying payments so that you can hold onto and earn interest on your money, longer; freeing you from carrying large amounts of cash, which can be unsafe; and you can even earn rewards! (Hey, if you're gonna spend money, you may as well get some perks for doing it, right?) :D

Don't be scared, but I'm one of those people who charges every little thing to my card. I have AMEX Blue Cash, and enjoy getting a percentage of my purchases back.

I've run into no trouble at all. I pay my balances in full every month, and my credit score is in the healthy 700s.

I'd have to recommend you get an AMEX. Their customer service is excellent, they're very upfront about what fees they do and don't charge, they have great rewards programs, and I really can't say enough good things about them. I have heard that AMEX will report a misleadingly high Average Daily Balance to the credit bureaus, but I utilize such a small portion of my available credit that I don't worry about it.

Which brings me to another thing: provided you don't have a compulsive spending problem, go for high credit limits. If a credit card company offers to raise your limit, accept. If you want to request an increase online, by all means do it. You'll be rewarded with a higher FICO for a favorable available credit-to-debt ratio.

Much as I love my AMEX though, it's not accepted everywhere. For that reason, it's a good idea to also carry something else, like a Visa. (I have the Sharebuilder rewards Visa, and it's going great so far.)

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