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Seriously, No Credit Score

You’re that one college student. Your parents have the car in your name, you were a part of credit union so you still have joint-access on your bank account, you’ve worked jobs and they all have auto-paid to that account you have. To make matters worse, the background check your college apartment runs turned out with nothing on you, even though you’re twenty-two! You know the manager though and he’s going to be making money off of your and the 4 friends you have coming in to rent this larger apartment out so he lets that slide.

Fact of the matter is: you have zero credit history, and a FICO of Pointer={Null}.

Awkward story. This is Me, and I’m supposedly a student learning about Financial Planning. I can tell you about “Yield” and “Earnings Per Share” in stock markets, I can monologue about knowing when to refinance your home and fun software available to consumers to track your expenses and get on top of your budget. Determining when to file bankruptcy may be out of my league now, but I can certainly help you understand the major considerations to make before filing bankruptcy such as identifying secured debt and reminding you that student loan debt doesn’t leave you if you file bankruptcy.

But. I. Don’t. Even. Have. A. Credit. Score.

What do I do? Well, I’m a man with a plan, and I intend fully to get myself that credit score, dream of 800’s.

Where do I even begin? I know the basics and book learning: Never have more than 15% of your limit on credit cards, don’t pay your bills late,  Have accounts that are older than 10 years, have cycle credit and fixed credit that you pay regularly and on time (I.E. spending on your credit card for bills and paying it off, and having a mortgage or car payment).

But, I’m not starting from 0. I’m not even starting from 300! I’m starting from Value = Null!

Here are some Ideas I’ve heard and read about starting to build a credit score.

  • Get a secured Credit Card
  • Get a Credit-Builder Loan
  • Co-sign for a Credit Card or Loan
  • Become an authorized user on another credit card

I want to know what YOU did. I can do a google search or a www.ninja.com search (ninja’s don’t know anything about building Credit! Trust me, I’ve asked a ninja)

Ask a Ninja.PNG

Now, these ideas are ideas. I want action items. How does one actually accomplish this? Here are my honest thoughts, but to shake it up I’m going backwards, from dumb to least dumb

1.Co-Sign for a Credit Card or Loan –

Unless your parent is highly trusting of you, or intentionally wants to make themselves get in a rough place credit wise themselves if you ever mess up, this sounds like a bad idea. If you are late on a payment or lose your job and can’t pay or a variety of other issues, guess who has to pay? The person who cosigned with you. Maybe not financially and you can pay them back next month with the late fees on top. But it will damage their credit too.

Steps:    a) Go in with the Co-Signer to a credit institution
b) Fill out the application with them and sign their blood to your blood
c) pay on time every time or ruin the relationship with whomever co-signer is

Score on the Can-To-Should-Do scale is Probably-Not : 1/7

2. Get a Secured- Credit Card –

I’ll be honest. I wouldn’t know what this was if I hadn’t asked 3 Certified Financial Planner® (CFP®) Designee’s and a couple of college professors about how to build a credit score and they shared this concept. Secured Cards are designed to build credit, break your way into the system and get that score. However, you have to give them the money equal to the amount you have “On Credit” and it isn’t given back until you’ve paid that amount. The benefits are that your money you are almost loaning from yourself is reported to Credit Bereaus! Really, it just seems like a cheap way, yes there is a fee, to get in on your own. #Independent

Steps:    a) find a secured credit card company, your bank probably has one or NerdWallet.com has reviews on secured credit cards
b) bring in a wad of cash and fill out the application
c) use it: pay tuition, buy noodles and ramen, or deliver your girl some cute flowers.
d) Make sure you set a billion reminders and auto pay to pay that on time! Don’t mess this up, its fool proof. You’re the fool, and the proof is in that you’re paying to use your own money.
e) close the account at the end and you should have credit now.

Score on the Can-To-Should-Do scale is Probably-Should : 6/7

3. Credit-Builder Loan

This is like a normal loan, but you don’t get any of the money from the loan. This forces you to save your money, and the payments get reported, so save on time. Not a bad way to force yourself to start saving! Then at the end, you get your own money back in the new account plus that credit score. Note that these do have fees. It may be good to consider Credit Builder Loans and Secured card loans to see what’s better, though I’d guess secured is better rates because you have to have the money in hand.

Steps:    a) Find your company: credit unions, and online lenders like selflender.com are options
b) link up that auto pay so you don’t hurt yourself, and set reminders!
c) wait a time frame, usually 1 year while making payments
c) get your money and credit score.

Score on the Can-To-Should-Do scale is Probably-Should : 5.5/7

4. Become an authorized user on another person’s card

I bet your parent, or sibling could work for this. If you can pull this off you get all the perks of their spending habits to build your history, but you aren’t legally required to pay for anything they do.  Check with the bank they use and make sure they will report it on your name if you become authorized.

Steps:    a) check that the agency you want to use will report on your record
b) Ensure that the person you want to use is reliable!
c) get your name on that card
d) wait a time frame, probably about a year and check in with them periodically
e) do nothing. You should have a credit score

Score on the Can-To-Should-Do scale is DO-IT-NOW: 8.4/7

 

Now, that you have all these ideas from my mouth. What has worked for YOU! Let’s move from theory to practice. I’m going to open some accounts and get my score moving and I’ll promise you some updates on how it’s working out next week!

Shouldn’t you be getting your score started now? Share your actions with me and join in the Credit Creating Revolution with me.

 

-Jacob Brad Johnson is 22 years old and a student at Utah Valley University (UVU). He is actively pursuing a degree in Personal Financial Planning and intends to prepare for and become a Certified Financial Planner® (CFP®) Designee. He is involved in the Financial Planning Association at UVU and has been an intern at Searcy Financial Services. He’s competed ballroom dance at a national level and yes, he doesn’t have a credit score. Yet!

 

 

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