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I Got A Credit Score!

Remember my article “Seriously, No Credit Score?” Well. Guess who got a credit score?

 

This guy did!
Despite all of the suggestions and thoughts I had, I discovered that the process was a little bit harder than expected.

The Process

First off, applying for credit isn’t as easy as you’d think, I got turned down on a credit card before I wisened up and realized I couldn’t get the best card ever because of my lack of a record. So, I applied for a secured credit card and put about $50 bucks as collateral. MasterCard gave me a $200 limit against my initial deposit, which I intend to utilize for a few things here and there, and then pay it off immediately. This will give me a revolving credit style that is beneficial.

Second, I applied for a line of credit at my credit union. They offered me $100, $200, $500, and $1000 limits, depending on how much I was willing to take on in APR. I chose the $500 option, because I know it isn’t smart to utilize more than 25% of your credit limit. I could make a significant purchase on this limit and auto-set it to pay from my checking and savings at the end of each month.

The third thing that I did was apply for a Credit Builder Loan through my credit union. I locked up $500 of my own money, and I am paying my credit union back that same $500 (it’s basically a forced savings) at the end of the year. I get my $500 back plus most of the $500 I payed them, and I’ll have an entire year of credit payments on my account.

 

Thoughts about each option:

Credit Card: This one is the most fearful for me. If I’m late on payments, or never use it, I easily lose a lot of money, $50 plus $35 (explain these amounts), and it goes on my record. I still have this card in the envelope because I accidentally delivered it to my home address while I was living in Kansas City. I recently returned home, so I intend to start using it now. Cards like this have a VERY high APR, and the first time you mess up they slap you with a fee and your APR goes even higher. If you’re gonna get a card like this, pay it off immediately and put 12 reminders on your phone, your girlfriend’s phone, and your dog’s phone (Yes these exist. http://www.dailymail.co.uk/sciencetech/article-2547788/Even-Fidos-got-dog-bone-Owners-stay-contact-pooch-using-video-phone-pets.html ), and put it on Autopay if you can. (Voluntary Automation :D)

Line of credit:. This is basically the same as the credit card, but because it’s with my credit union, it isn’t as expensive, and it’s linked to my account, meaning they have it on Autopay for the entire amount (or just a percentage if I so choose. Which I don’t.) I might act a little bit intense, but I’m big on not spending more money than I have.

The biggest pitfall with having a line of credit is feeling that you are able to live outside your means. If you do that, and only pay the minimum required payments, you are stuck paying huge interest on your credit cards. If you remember from previous articles, you should have an accountability partner who you can use to keep you from overspending.

Credit Builder Loan: This one is easily my favorite. It’s so simple that only took 15 minutes because it was through my bank . It’s super cheap,  you pay monthly and put it on auto-pay. I can pay early if I want or can pay off the entire balance at any time. The total cost to do this for an entire year is about $35 dollars.

zero-to-hero-graphic
My actions moved my score from zero to… almost hero

The Results:

Now on to the powerful part. I got myself that credit score. First credit scores are never amazing, and they have a lot of weak points. For example, my score shows that I only have 1  month of history reported. It shows that I have 5 or 6 inquiries onto my accounts. It’s also through Credit Karma, so it’s got some slight sway depending on what I want to use the credit for (http://www.goodfinancialcents.com/how-to-find-your-real-fico-credit-score-free/ Jeff Rose Has a good article about some issue with getting credit scores like this)

He explains in his article that he found his score in the 750’s, and went through a huge process to find a real credit score. After that, his intern figured out his score, and it was low 600’s, but he had no credit cards or credit history.

My issue is the same. I have 1 credit card, 1 loan, and 1 line of credit. Because of that I have a low number of accounts, my average open length of an account is very low, and the amount of hard inquiries that I’ve had in the last few months shows to be 3 for my credit scores. These can be bad signs and reduce my score.

BUT I HAVE A SCORE!

There we go! 669 and 664. 2 of the 3 credit bureaus.

What’s your story about your credit history? Share in the comments below!

 

 

-Jacob Brad Johnson is a Personal Financial Planning student at Utah Valley University who enjoys board games, West Coast Swing dancing, and helping his friends to save money on taxes. He strives to become a Certified Financial Planner designee and help the world to live their dreams and retire with confidence.

SFSJacob (4)

Shout out to Briana! Thanks for helping to edit and reformat this article!

-Briana Beers graduated from BYU with a degree in English and editing. She’s currently a stay-at-home mom who moonlights as an editor in her rare spare time. When she’s not chasing her kids or cleaning three week old food splatters off the light switches, she enjoys reading, baking, and spending time with loved ones.

 

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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!