I have no establishment of credit and I want to build credit. What is the safest and best way to build credit fast?

PFC Private RallyPoint Member — Wed, 21 Feb 2018 21:51:27 -0500

I’ve been told credit cards are a good way but I’m unsure because credit cards are a red flag in my head. I’m just unsure.

Response by CAPT Kevin B. made Feb 21 at 2018 9:59 PM

CAPT Kevin B. — Wed, 21 Feb 2018 21:59:31 -0500

Get the Military Star Card and pay it off every month. Just charge for stuff at the exchange that you usually buy with cash. Don't be late on payments. That starts a track record with the credit bureaus.

Response by SSgt Dan Montague made Feb 21 at 2018 10:26 PM

SSgt Dan Montague — Wed, 21 Feb 2018 22:26:11 -0500

Credit card is fine IF you are responsible with it. This is how I use mine. I don't use my debt card to pay for stuff. I use my credit card. I only use it for day to day purchases. I never spend more than what I can cover in cash. I never use it for a line of credit for large purchases. Most important, always pay 100% of it off when the statement comes. It takes some time to get use to seeing a large bill every month and paying it all off. It seems to feel painful to do so. Just remember, that money you used on the card is the same amount of cash you would have used throughout the month anyway.
Just don't double dip with the credit card and large withdraws of cash.

Response by MSgt Steven Holt, NRP, CCEMT-P made Feb 21 at 2018 11:43 PM

MSgt Steven Holt, NRP, CCEMT-P — Wed, 21 Feb 2018 23:43:07 -0500

Talk to your local banking institution. Many of them will do $400-$500 signature loans to help get a credit history built. Take the $500 (0r whatever you get), put it in a separate account and use those funds to pay the loan payment. Sure, you'll have to put a little of your own money to cover the interest but it starts building your history and you don't have to put yourself in a financial bind to pay the loan.

Response by SGT Private RallyPoint Member made Feb 22 at 2018 12:45 AM

SGT Private RallyPoint Member — Thu, 22 Feb 2018 00:45:01 -0500

Having a credit card is like asking yourself, "Do I need it, or Do I want it." Believe me, with a credit card the answer would be, "I want It."

Response by CA Delete D. made Feb 22 at 2018 6:52 AM

CA Delete D. — Thu, 22 Feb 2018 06:52:38 -0500

You can opt for secured credit cards instead of unsecured. You'd develop a credit history and would not be as inclined to indulge an impulse to buy.

Response by SPC David Willis made Feb 22 at 2018 9:19 AM

SPC David Willis — Thu, 22 Feb 2018 09:19:23 -0500

If you have absolutely no credit than CCs are really the best way to build it. I would recommend only using it to pay for gas and paying it off immediately. Also if you can get a car loan for a decent interest rate, maybe 5-7% but no more than 10% that's a very good way to do it as well.

Response by LCDR Private RallyPoint Member made Feb 22 at 2018 9:48 AM

LCDR Private RallyPoint Member — Thu, 22 Feb 2018 09:48:24 -0500

Credit is a measurement of risk-- as in, the risk a bank or other institution assumes in lending you money. The better your credit score, that indicates to an institution that you are more likely to repay the money they loaned you according to the agreed upon terms of the loan because you have demonstrated a history of having done so with other lenders/ institutions. Having no credit only indicates that you have no track record of borrowing and paying back debts, so the banks have no measure of how likely you are to honor your debts. Managing your credit score is like a chess game-- requiring strategy and patience-- and it gets more complicated as your score goes up. Fortunately it is pretty easy starting out so long as you don't end up in a hole. The only way you end up in a hole starting out is to not make payments on time.

Revolving accounts-- credit cards-- are a good way to start if you have no credit history. They will build a little credit, but you are not going to see huge improvements in your credit with ONLY revolving accounts. They are a stepping stone to building just enough credit to get a lower rate on a bigger loan. Like pretty much everyone else advised, get a credit card with a low limit (say $500) and keep up with the payments. Bonus if you get a rewards card, because then you are getting something for nothing especially if you are paying off the balance every month thereby not racking up any interest.

BTW-- American Express waives all fees for active duty military. Just in case anyone following didn't know that. I use an AMEX Platinum for almost everything I buy, then just pay it off every month. (Annual fee is over $600 but is completely waived so it costs me nothing to have it and the rewards program is pretty epic.) I do NOT recommend going that route just starting out, because AMEX is a tricky card to own-- no spending limits. It takes a lot of discipline to not overspend, and a healthy buffer in your bank account (say over $1000) in case you do make a larger purchase one month-- new TV, new tires for the car, etc. so you don't end up carrying a balance.

I would recommend going to one of the military credit unions (the Army equivalent of Navy Federal-- or Navy Federal... they don't discriminate against our green brethren and are a pretty good overall institution) for a regular Visa or MasterCard. The rewards programs won't get you into the fancy airport lounges the way the 'high dollar' cards will, but you'll get some cash back or gift cards. Better than nothing. If it is through the same bank your direct deposit goes to, you'll likely be able to get a lower interest rate because you have a history with that institution just by having a checking and/or savings account with them. Do not get a whole lot of cards. 1 or 2 to start. More does not equal 'better' when it comes to building credit. Having too many cards-- even if you have no debt on any of them-- could be detrimental to your score.

Unsecured loans-- signature loans-- are better than credit cards at building credit, but the interest rates are pretty terrible. With signature loans, it is ALL risk because there is no collateral the bank can collect if you default on the loan.

A really good way to get credit going is with a secured loan-- like buying a car. With no credit, your interest rate is going to suck. If you have someone (a family member for example) who has a good credit history who is willing to co-sign for it in order to get you a lower rate that would be the best. I co-signed for a car for my sister whose ex-husband had completely tanked her credit by playing fast-and-loose with the IRS a few years ago, and it got her credit in good enough shape that she just qualified to purchase a house. It takes discipline, but it works wonders for your credit score.

Don't get anything new, fancy, or expensive. Shoot for the $5K-$7K 'certified used' range. Take a multi-year loan (say 3-5 years) and make the payments on time. Even if you are tempted to overpay on it in order to give them less in interest-- don't. The longer the loan, and the longer the history of making payments on time the better it is for building your credit.

Disclaimer: The loan only counts for building credit if it is a 'official' loan that gets reported to the credit bureaus. Banks, auto dealerships (although you are NEVER going to get a better deal with dealer financing than you would at a bank... ALWAYS finance with a bank), department stores, etc. Loans from friends or family members and making payments to them don't count.

Another disclaimer: Used car dealerships absolutely PREY on junior service members. Take an NCO with you if you have one who is willing do go in order to put more experienced eyes on the terms of the sale, or at very least-- take the contract back to your command (tell the dealership you are going to have a JAG review it) before signing it. If they tell you that you can't-- that the deal is only good that day and you can't leave and come back-- walk away and NEVER look back. If they don't want to let someone look over the contract-- it is because they are screwing you. You might want to ask around your command as well. Sometimes a base will have a listing of 'untrustworthy dealers' you know to avoid, or word of mouth amongst your fellow Soldiers could also steer you away from the crooks.

A lot of this is very basic info. Please do not read into it that I am trying to insult anyone's intelligence. I'm starting from square 1 because I don't want to assume someone already knows something and end up giving 'bad' advice as a result. Good luck.

Response by SSgt Victor Cooper made Feb 22 at 2018 10:06 AM

SSgt Victor Cooper — Thu, 22 Feb 2018 10:06:57 -0500

Usaa credit card, my score jumped 35 points in month and a half

Response by LCDR Private RallyPoint Member made Feb 22 at 2018 10:45 AM

LCDR Private RallyPoint Member — Thu, 22 Feb 2018 10:45:37 -0500

Building credit is important yes, but it is far more important to build good financial habits first.

As with anything, "Slow is smooth, and smooth is fast".

As credit cards go, you want to look for lowest possible rates...not highest limit. Pay off your balance each month, and you'll see credit score rise, as well as available credit line.

Another option you should SERIOUSLY consider...why rely on credit? I don't know your current personal situation, but I sure wish when I was younger, single, and not responsible for much more than rent, food and gas, that I had saved money towards paying cash for future "needs". Sure, it may take time to buy an acre or two, build a home yourself, all while driving a used car you paid cash for...but when you're middle aged, have a mortgage, two car payments, a maxed out credit card, etc...those lost years don't seem so long ago after all :)

Response by CSM Eric Biggs made Feb 22 at 2018 3:41 PM

CSM Eric Biggs — Thu, 22 Feb 2018 15:41:02 -0500

Why do you want to build credit? Our entire society is backwards when it comes to debt. A credit score simply tells the world how much you like to borrow money. Why is no credit score worse to banks than a bad credit score? Because if you don't have a score they don't know how much money they will make off of you in interest, nor do they know if you will pay back the money at all.
Here is a random idea; use cash for everything, save money and when you need to make a big purchase you will have the money to buy what you need. If you spend less than you make and save money for a little while you will be much better off than anyone who has a credit card and an 850 credit score and you will still not have a credit score.
Check this out.
https://www.daveramsey.com/blog/living-without-credit-score

living-without-credit-score

Response by Sgt Kelli Mays made Feb 22 at 2018 3:51 PM

Sgt Kelli Mays — Thu, 22 Feb 2018 15:51:23 -0500

PFC Private RallyPoint Member im on my phine noe, but whrn im bsck at my computer, I'll educate you on this subject for i am an expert with 31 yrs experience

Response by SFC Robert Lee Rice made Feb 25 at 2018 7:59 PM

SFC Robert Lee Rice — Sun, 25 Feb 2018 19:59:00 -0500

Get about 4 credit cards,use them lighty;PAY off EVERY bill,BEFORE ITS DUE. Every time..

Response by Lt Col Charlie Brown made Feb 28 at 2018 2:58 PM

Lt Col Charlie Brown — Wed, 28 Feb 2018 14:58:25 -0500

Borrow money you have so that you can pay it back in a timely manner. This could be a car loan or a credit card. Just one credit card and use it for gas and groceries and pay in full each month. You will find that they will start to raise your credit limit. Don't be tempted to charge more than you can pay off each month.

Response by CW3 Jeff Held made Feb 28 at 2018 8:06 PM

CW3 Jeff Held — Wed, 28 Feb 2018 20:06:50 -0500

What do you need credit “fast” for?

Here’s a bit to think about. Instead of chasing credit why not buy yourself a few acres of land? They are not “making land anymore” so grab a chunk in a nice place before it gets priced out of your range?

There’s different kinds of credit. Credit cards (revolving); short-term (vehicle); and long term (developed property). Having a credit card and a car payment typically shows lenders that you are responsible (if you make all your payments on time) and can be trusted with higher credit card balances, or larger vehicle loans.

However, cash is still King. No problem having a credit card for emergencies - they are not meant to live off of - and having a sensible vehicle loan is understandable. But with a chunk of cash in the bank you will never have to worry about having enough to pay for whatever you want.

Buy a few acres somewhere and limit yourself to a small credit card and a vehicle with low payments.