Got no credit history?Follow

I don't know about down there, but up here you're going to have to pay a damage deposit on an apartment, most likely 1st and last month's rent, and that's going to be well over $500. Insurance usually requires first and last month's payment as well.

$500 for a year or two isn't a big deal.

Yes, but the other side of that is that you don't realistically get anything tangible in return. If you put $700 down on an apartment, you're getting a place to live. If you put $1000 down on a car, you're getting a way to move from point A to point B.

If you're putting $500 down on a secured card, you're not getting something with direct utility to your current situation. It's good for your future, yes. But it still sucks. Particularly when you have a 20% APR on top of it. That's a lot of money invested intangibly in the future.

That's why I approve of the new, lower-down options. They're still wildly profitable for the companies offering them (I mean, guaranteed repayment AND 20% APR?). But they demand less of the adult accessing them.

But because of their high APR on top of the down payment, I still approve of them more for rebounding from bad credit than I do for establishing initial credit. If the same company would be willing to give me a low-limit card with the same lack of credit, but is blocked from doing so from blanket legislation, I think that's a problem for everyone. I agree that young adults shouldn't be unprotected at all, but I do think that an all-or-nothing approach isn't the way to handle this.

And if the lender doesn't want to give that no-credit applicant a card that isn't secured, fine. It's their money.

APR is irrelevant if you pay your balance every month.

Paying off your balance reduces your credit score? In bizarro land maybe. Showing you can keep up with your expenses is the definition good credit.

Edited, Aug 29th 2013 2:57pm by Xsarus

The idea being that if you borrow 1000 dollars, but pay it off right away, the person loaning you the 1000 dollars didn't make anything on the deal. Of course for credit card companies, they make money on the initial transaction, fees and percentages from the retailer, etc.

I'm not 100% sure if the whole "perfect payback with zero balance is not good for your credit score" thing is true, but even if it's not as good as keeping a small balance and making prompt and on time payments, it cannot be as bad as having poor payment histories or no payment histories at all.

Sure you do. You get a card that you can use to make convenient purchases. Which is the kinda the point of having one, right? So you don't have to carry cash around all the time? Unless the utility you want is to be able to buy stuff you can't afford, which again puts us right back into the whole predatory lending thing. They are directly acting to reduce your ability to borrow more money than you can realistically pay back. How did you think that was going to happen?




/shrug. This is the solution they came up with. How do you propose they protect young adults from their proclivities towards abusing credit cards without heavily placing the kinds of restrictions you're complaining about. It's like you want "those other irresponsible people" to be restricted, but not you. But you're financially in the exact same position. And thus, you're treated just the same as them until you can prove you can be responsible with credit.

I'm not seeing how you think this should work.



Except when it was just their money, they did give out unsecured cards to no-credit applicants. But because of the higher risk, they had to charge higher fees and interest. And this resulted in too many of those young people racking up huge debts. Part of the credit card reform fixed that by legislatively mandating limits on that sort of thing. So it's no longer about them doing what they want with their money. If it was up to them, they'd give you that card, put a 29% rate on it, and let you sink or swim based on your own decisions with that credit. But it's not.

I asked this question when I was talking to my bank to get a mortgage. If you use your card and pay off the balance every month that will build credit. If you don't use your card at all, it won't build as fast, but keeping a balance on your card has no significant effect. A lot of people think it does, they're wrong.

I hear most of the poors get a used Lexus since they are so cheap and all.

It certainly hasn't hampered mine.

It's sort of tangential but my husband and I ran into some trouble when we were buying our current home. We couldn't get a mortgage because neither of us had any credit whatsoever. And here I was thinking that never having been in debt was a good thing. :T

Not having credit sucks. And I imagine it sucks even more if you have no one to help you out.

Edited, Aug 30th 2013 2:46am by Kawohni

It is. But, when asking someone to lend you a couple hundred thousand dollars, having a history of taking your debts seriously and paying them on time is a good thing as well.

Xsaurus, I'll take you at your word on the revolving debt/paid debt thing. I had heard otherwise like many others but it wouldn't be the first time conventional wisdom was mistaken. I'm past the point of consciously trying to build credit anyway and maintain and grow my credit rating by just not borrowing a lot of money and promptly paying off the money I do borrow. It's just crazy enough to work!

The APR on my card is still high enough that I don't feel like leaving it there just to cost me more. If it's the same return on my score either way, I'll take the lower debt.