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Building Credit: Getting a credit card

Discussion in 'Pre-Dental' started by xatlasb, Feb 10, 2014.

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  1. xatlasb

    xatlasb

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    So with the upcoming hunt for housing, most of the listings state that they will be checking credit reports. My parents have always advised me against having one during undergrad, so now I'm wondering if I should get one now to build some credit so I can successfully find an apartment?

    What is everyone else planning no doing? I also have been awarded the Navy HPSP, so I presume that proof of that scholarship should suffice to a landlord as steady and stable payment, but I'm not sure and it's beginning to stress me out.
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  2. sjv

    sjv Member Bronze Donor

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    You should obtain a credit card for the sole purpose of building credit regardless of your housing situation. Part of your credit score calculation is length of credit history, payment history and type of credit, none of which you can improve without some form of credit whether that be a credit card or a loan.

    As long as you pay your bill on time (try to pay in full, better to not carry a balance) and minimize utilization (keep below 30%, lower is better), you can easily build a strong credit history that will follow you for the rest of your life.
  3. Combine33

    Combine33

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    Not to mention having a good credit score is somewhat rewarding personally. Look into Discover, they are pretty helpful to the college kid with none to limited history.
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  4. Glimmer1991

    Glimmer1991 SDN Gold Donor Gold Donor

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    Proof of your living stipend should surely be enough.

    However, I disagree with your parents' advice. So long as you are a person with common sense (and I know that you are), a credit card is a great tool to have. I am 22 and have used credit cards for over 4 years. My parents cosigned on my first card, but I was able to get a Discover card about 3 years ago without any help. I have an income, but it isn't a huge one. I currently have 3 credit cards and switch which one I am using based on the rewards they offer.

    DO NOT EVER MAKE LATE PAYMENTS. ALWAYS PAY OFF THE BALANCE IN FULL. If you do that, there is no reason not to have one. Not only are they immensely more convenient to use than cash, but you need to be building credit. Plus, if you get a card with good rewards (all 3 of mine have great rewards), you can do a lot with the cash back. You can also save good money by using the "online stores" that CCs offer. I am not a big spender and always spend well below my means. Even with my minimal income and spending, I rack up about $250/year in rewards. Is that a ton of money? No... but it's better than nothing at all, which is what you get by using cash!

    Even as a very young person, I have a credit score in the "excellent" range. The only thing holding my credit score back is the age of my credit history--it's still very young. I'm confident that once I've had my cards for just a few more years, I will be in the 800+ score range. So, by the time I graduate dental school and actually need to be taking out non-government loans (car, house, practice, etc.), I should be able to get awesome interest rates.

    Though I bet this is a long shot because they seem averse to credit cards for you (which, like I said, is what I consider to be totally unfounded), your parents could add you as an authorized user on their card. This would get you an instant credit score. Do not even consider doing this unless your parents have EXCELLENT credit and no delinquencies. I am not an authorized user on my parents' card because I don't really need the boost in score, but I was talking to them yesterday about adding my younger brother so he could more easily qualify for a card at some point. He's just 18.

    Basically, as I understand it, you can get on your parents' card for a month or two, get an excellent credit score, and then easily qualify for a card of your own. At that point, your parents could drop you as an authorized user. Your score will drop, but at that point, you'll have a card and will be able to build credit just like anyone else. Do some Google searching on this, and talk to your parents about it.

    Maybe I am unusual, but I have never been tempted to charge too much money to a credit card. I have never even come remotely close. I have never missed a payment, and I pay off everything. Also, I've read that making multiple payments throughout the month on your credit card can help boost your credit limit, so I do that, too--and I think it has worked. It's incredibly easy... though I have automatic payments, anytime I go online to check my card statement, I just click a button and it pays it.

    I have credit limits that are honestly sort of ridiculous for someone with my income, but like I said, it has caused no problems for me. It is also very helpful because my credit utilization ratio is extremely low. This is one of the biggest determinations in your credit score. You want your utilization to be very low.

    My parents have helped me with my score over the years by allowing me to make purchases on my cards for things they will pay me back for, and then just transferring me the funds so that I can pay off my cards. So, instead of giving me 50 bucks for groceries, I instead just charge that 50 bucks to my card... and then they transfer the 50 bucks to my BofA account. I use the money to pay off my statement. Hassle free, especially since no cash is ever dealt with.

    Unlike lots of other things in finances, credit cards are actually pretty easy to research and understand. I'd begin by making an account at creditkarma (yes, they are legit). Though they can only estimate your credit score, they are a fantastic tool and are free! I find that the score they estimate for me is always within 5-10 points of my actual credit score.

    I also would apply for just one card to begin with. If you apply for a card for which you are not pre-approved, the credit company is going to do a "hard pull" on your credit history. This negatively impacts your score, but it is a necessary thing in the beginning. Conversely, if you apply for a card for which you are pre-approved, they only do a "soft pull" and your credit score is not negatively impacted. So don't just go crazy with the applications--the hard pulls stay on your credit report for 3 years, but I think they are only figured into your score for 2. I applied for a Belk card (and was approved) 2 years ago before I knew any better, and there that hard pull sits on my credit report, making me annoyed. :) Once you have good credit, you'll get pre-approved offers in the mail ALL the time. I do, at least.

    Sign up for something with good rewards and no annual fee. I highly recommend the Discover it! card. (https://www.discover.com/credit-cards/student/) The cashback bonus is fantastic (1% back on everything, 5% back in categories that revolve quarterly, and the shop discover store which allows you to get cashback on online purchases). Beginning recently, they even give you your FICO credit score for free on your monthly statement. I have had a Discover card for longer than anything else... and in the beginning, they were the only card that would approve me.

    I am not a guru on this by any means, but I think credit cards--and particularly the rewards you get by using them and having a good credit score--are really interesting. Feel free to shoot me any more questions! Oh, and if you want a referral for the Discover card, I'd be more than happy to help!! I've never done it before, but I think they might actually give you money or something. :)
    Last edited: Feb 11, 2014
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  5. nomad12

    nomad12

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    Get a special type of credit card called a 'secured credit card'. It reports to all 3 credit agencies and is the best way of building credit if you have none.
  6. Glimmer1991

    Glimmer1991 SDN Gold Donor Gold Donor

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    Also, the good news for you is that you won't really *need* a credit card until you are done with school. Four years is a perfectly acceptable amount of time to build an excellent credit score.
  7. Jerm174

    Jerm174

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    I am a Canadian citizen planning to attend an American school. This might be a dumb question but is credit score universal? Would I be able to receive the same interest rates for student loans in the US and Canada (if it is at all possible)?
  8. NMC2010

    NMC2010 τετέλεσται

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    Can't really add much to what Glimmer said, but I know my mom (in Ohio) and sister (in Maryland) both have Discover and wrack up airline rewards for highly discounted to even virtually free fights. Can be very useful for people who live far away from home. I'm going to be getting one once I graduate undergrad too - should be easy to maintain in DS.
  9. Glimmer1991

    Glimmer1991 SDN Gold Donor Gold Donor

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  10. Jerm174

    Jerm174

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  11. Illfavor

    Illfavor

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    If you are not responsible, then you shouldn't have a credit card. If you can be, then it may be a good (but not at all necessary) idea to have one.
  12. hs2013

    hs2013

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    Might as well ask a question as well in this topic. I'm 19 and have no credit history. Would it be a good idea to get a credit card solely for gas and some fast food expenditures? If I use it for just those things, pay it off in FULL each month, and do this for probably another 7-8 years would it build me a good credit score by the time I'm financially supporting myself as a dentist hopefully?
  13. Glimmer1991

    Glimmer1991 SDN Gold Donor Gold Donor

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    It's a great idea if you're responsible, but you're probably going to need your parents to co-sign.

    Here's a pretty concise (but good) article: http://www.creditcardinsider.com/insider/how-do-i-get-a-credit-card-and-build-credit-if-im-under-21/
    It also mentions the authorized user possibility, which is still a good one.

    Also, just for everyone--on dental town, there is a great thread on making money off of your credit cards. When we are business owners and making large expenses, you can get TONS of miles/rewards if you use the right cards.
  14. Combine33

    Combine33

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    Remember that credit report/scores are based on not only your status with that particular lender, but also the diversity of your credit portfolio. Getting a small card with not much activity will get you started on the path to excellent credit, but you also need loans and other types of credit. You don't have to worry about that right now, but know that it take time and diversity for great credit.
  15. Glimmer1991

    Glimmer1991 SDN Gold Donor Gold Donor

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  16. xatlasb

    xatlasb

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    @Glimmer1991, thanks so much for all the advice and tips! I'm going to talk to my Dad today (after my midterm) about all this. I did my basic research last night about the basics concerning credit, and learned about APR and annual fees and the different rewards. I'm also a member of BofA, and was looking at BankAmericard Cash Rewards for Students as a good option, but I noticed that you mentioned the Discover it! card offering a 5% cash back on certain categories and 1% on everything, which seems a little bit better than the BofA card.

    Anyways, I'll send you a PM with any further questions or clarifications as I really appreciate the thorough and clear responses that you seem to always provide to our SDN community. :)
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  17. Glimmer1991

    Glimmer1991 SDN Gold Donor Gold Donor

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    I recently signed up for the BankAmericard Cash Rewards Platinum Plus Visa. It's good because you get 3% back on gas all year round. (Discover usually has gas as a 5% bonus category during one quarter of the year. During that quarter, I use Discover... but I use the BankAmericard for gas at all other times.) The card also gives you 2% back on groceries, and has no annual fee. If you redeem your cashback as a statement credit into your BofA account, you get an extra 10% on what you redeemed. It's a good card. ...All that being said, though, I'm not sure if you would qualify as a first-time cardholder. I'm sure the other one you're looking into has perks as well, though!

    I still greatly prefer my Discover, though, and would choose it if I only had one card. The free FICO credit score is very useful. The 5% categories are good, and the ShopDiscover store is great. I make online purchases all the time just to get the extra cashback. All you have to do is link to the store's website through its ShopDiscover page, and you get an extra % back (usually 5%, but sometimes more!).

    For example, WalMart is on ShopDiscover. I got my brother an XBox game for Christmas. Sure, I could just waltz over to WalMart and buy it. However, I made the purchase online through ShopDiscover. I got 5% back on the game that way. WalMart has an "in-store pickup" option, so I just over immediately and picked up the game from the customer service area. Took me maybe 10 seconds extra, and I got 3 bucks back. Is that a ton of money? No. Is it worth a few seconds of my time? Oh yeah! Those 3 dollars add up.

    I have also used ShopDiscover for buying a Macbook Pro. 5% back on a 3k purchase is significant!!

    You can redeem your cashback bonus as either a direct statement credit or for partner giftcards. If you redeem for a giftcard, you get extra money. For example, $45 cashback dollars can be redeemed for a $50 gift card at Starbucks. Some stores have even better deals--$40 cashback dollars gets you a $50 giftcard to Brooks Brothers. Tons of major companies participate in both ShopDiscover and the cashback redemption program. It's nice!

    The only drawback to a Discover is that it is not quite as widely-accepted at stores as, say, Mastercard and Visa. However, I VERY rarely run into this problem. Off the top of my head, the only place that doesn't take it is a fast food place called Cookout. I think they are a smaller chain that is only in the south. :)
    Last edited: Feb 11, 2014
  18. sjv

    sjv Member Bronze Donor

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    Discover is also fairly generous when it comes to approvals and credit limits with no or limited credit history making the Discover IT a great first card. Very similar cards would be the Chase Freedom, Citi ThankYou Preferred (Citi also has some great student cards), AMEX Blue Cash Everyday, and as mentioned above, BankAmericard Cash rewards.

    If you don't get a Discover card or Barclaycard or Walmart credit card which provide a free monthly FICO score, you can also monitor your credit score using https://www.creditkarma.com, http://www.creditsesame.com/, or https://www.quizzle.com/. These will provide a "FAKO" which is similar but not entirely accurate but will give you a good idea of your credit score and closer monitoring of trends.
    Last edited: Feb 11, 2014
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  19. Glimmer1991

    Glimmer1991 SDN Gold Donor Gold Donor

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    I know I mentioned CreditKarma just briefly earlier, but sjv is right... it's a GREAT site! Super useful in many ways. I'd suggest that everyone make an account. It's eye-opening and a good planning tool.
  20. fayevalentine

    fayevalentine See you space cowboy.

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    I was recently approved for the Citi Forward Student card with a decent limit, with no credit history whatsoever. I would recommend you try out that card. Also, if you head over to the website myfico.com and browse around on there, people offer a lot of great advice for getting different credit cards, keeping your score high, and so on. Good luck!

    edit: I wasn't required to have a cosigner for this card btw.
  21. Glimmer1991

    Glimmer1991 SDN Gold Donor Gold Donor

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  22. xatlasb

    xatlasb

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    Yes, I applied and got approved for the Discover it card! Should be coming in the mail by Wednesday I'm hoping. I think my limit is $500/month, which seems kind of low to me? I'm about to purchase a flight to Europe and was hoping to put it on the card (I have the cash in my debit to pay for it) but I guess I won't be able to do that.
  23. sjv

    sjv Member Bronze Donor

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    That is on the low end but typical for someone without any credit history. After a few months of successfully paying your bill on time you may want to ask for a credit limit increase or apply to another card entirely.
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  24. Glimmer1991

    Glimmer1991 SDN Gold Donor Gold Donor

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    They're always low at first for people with no credit history, but they will gradually increase. I think I started around there 3 years ago, and now my limit is much higher! (Seriously, I would never want to spend anywhere near my limit within a month period.)

    When you get the card, make sure you go online and update your graduation status (PM me when you get your card and I'll tell you how to do that). I just updated my graduation info last week (to say that I had graduated) and got a sizable CL increase.

    Also, when you go to request a CL increase in general (with any card), ask them if it will require a "hard pull" on your credit. You want to avoid those if at all possible.

    Don't forget to make a creditkarma account, too! You can link all your CCs, bank accounts, and loans.
    Last edited: Feb 17, 2014
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  25. xatlasb

    xatlasb

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    Ah, I see! Thanks again for your help! :)
  26. sjv

    sjv Member Bronze Donor

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    In your case, I wouldn't worry about hard pulls at this point. Despite the initial ding of your credit score (usually 3-5 points), your score will recover fully in 90-180 days and the hard pull will be removed entirely off your credit reports in 2 years. Unless you plan on applying for any mortgages in the next 2 years, it won't make a difference as the credit limit increase (decreased utilization) is more valuable than a single hard pull at only one of the 3 credit bureaus.
  27. Faux

    Faux

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    NFCU is a very liberal bank if you can somehow get in. They gave me a 15k credit card a little over a year ago. The highest one I had at the time was a 7k cit card.

    Alliant is very nice as well.
  28. 52192

    52192

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    Does anyone know if dental students qualify for student cards or is it just for undergrad?
  29. sjv

    sjv Member Bronze Donor

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    Either is fine, a student card is simply targeted towards students with limited or no credit history. You don't absolutely have to apply for a student card but you're more likely to be approved as the requirements are generally lower.
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