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 Post subject: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Mon Oct 22, 2012 5:35 pm 

Joined: Mon Oct 22, 2012 5:28 pm
Posts: 1
Here's some history: I have been an authorized user on my dad's credit card since 06/2008. That card was closed almost four years later and another card opened, again with me as an authorized user. These cards are always paid off in full.

My credit reports show the old card and not the new card. I understand this is a problem I need to take up with the credit card company.

Using sites like CreditSesame.com, CreditKarma.com, and from seeing my information after being denied a Capital One Student Card, I can tell that I have no credit scores. Nada.

I called one of the credit reporting agencies and was told that one card (even one open for four years), is not enough to generate a credit score. I need not just one, two, or three, but FOUR, FIVE, or SIX cards before I will start to earn a credit score. What?? This sounds ridiculous to me!

Is this true? Am I being misled? Why is one card held for a very long time not enough to generate a score for me? I'm entering the time of my life where credit is becoming very important. I was told (by my parents and by my financial advisors at my bank) that being an authorized user should build up my credit score over time. What's wrong here?

Thank you!


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Mon Oct 22, 2012 7:21 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 278
Location: Atlanta, Georgia
I'm sorry, taysel, I don't understand why you would have no credit score after four years of being an authorized user on your dad's credit card either. I did the same thing with my dad starting when I was 14, paying in full monthly too, and it definitely did build good credit for me. Maybe it has to do with the fact that that card -- your oldest credit account -- was recently closed? Even still, that does not make sense to me. Also, advice that you need four, five, or six cards to build credit is totally crazy/wrong. It has been widely recommended that parents help their responsible teens to build credit through this very method of piggy-backing as an authorized user on one credit card, so I don't see why it didn't work here. Did you confirm that they have the right dates for your first credit card (i.e., that it was part of your credit file for all four years)?

As an aside, I would recommend that you look into quizzle.com, which provides a totally free credit score report and tons of tools and resources for dealing with credit agencies and building your credit. After hearing about it from Clark Howard, a well-known consumer advice guru based out of Atlanta, I got my report for free and was able to confirm the accuracy of my history (there is also a tool to contest and fix errors): http://www.wsbtv.com/news/news/clark-howard-shows-you-how-to-get-your-free-credit/nFBhz/


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Mon Oct 22, 2012 7:24 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5316
I think the issue might be the CARD Act. As I understand it, since 2010 being an authorized user does not help your credit score. That explains why you have older entries but nothing new.


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Mon Oct 22, 2012 7:39 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 278
Location: Atlanta, Georgia
DoingHomework wrote:
I think the issue might be the CARD Act. As I understand it, since 2010 being an authorized user does not help your credit score. That explains why you have older entries but nothing new.

That's interesting. I had not heard that before. I tried to research more about this, but haven't been able to find much. Although, I did find this one speaking point from a Chicago Tribune article, May 2012, which supports what DoingHomework is saying:

Can't do a secured card? One option is to be an authorized user. Here, you share an account with a parent or guardian.

It's a quick way to establish a credit history, but there's also a drawback, says Anthony Sprauve, a spokesman for FICO, which calculates credit scores. Because you're not liable for the debt, your payment history — a key element in calculating your credit score — is not reported to the credit bureaus. Only the amount you borrow gets reported.

As a result, it will take you longer to build a solid credit record. "Becoming an authorized user is often better for someone who is trying to repair their credit, rather than establish it," Sprauve said.


http://articles.chicagotribune.com/2012-05-18/business/sc-cons-0517-started-20120518_1_credit-history-credit-utilization-ratio-curtis-arnold


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Mon Oct 22, 2012 7:46 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 278
Location: Atlanta, Georgia
And I found this guide from the Consumer Credit Counseling Service of San Francisco, which is actually quite informative about the pros and cons of being an "authorized user":
https://www.cccssf.org/education/publications/authorizedcreditcardusers.html


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Tue Oct 23, 2012 7:58 am 

Joined: Thu Jun 23, 2011 3:24 pm
Posts: 87
imo, be careful of getting credit "just" to create a credit score. That said, a few thoughts...

thought 1: If your financial plan is to remain debt free, your credit score may not matter so much. Employers who check credit want to make sure you're not a bad risk as an employee; if you explain that you have no debt that should address most concerns. Rental car companies may run your credit if you pay with debit or cash, and when they see you have no score they may require a large(r) deposit, but it's not completely impossible.

thought 2: if you do plan to borrow money soon-ish, there are ways to get credit in your own name now to start building a score, but they typically cost you more than if you already had a credit score since they usually have higher fees and/or interest rates than 'standard' lending. Some examples include:
-secured credit cards (but not pre-paid credit cards, which I believe the scoring agencies treat as debit cards so no impact on your score)
-high-fee 'starter' cards (not sure what they're really called, but typically they start with very low limits, then increase the limit over time if your payment history is perfect)
-'credit builder' personal loans at a local/small bank (kind of like a secured credit card in their structure, you put $ on deposit and separately they loan you $ and you pay it back, creating credit history)

thought 3: I am old enough that I paid my student loans off long ago, so I don't know this - someone else on this forum will, though - seems like once you start paying off student loans that would create a credit history & therefore a credit score. If you *don't* have a student loan maybe you have a good start to a debt-free life :)


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Tue Oct 23, 2012 1:56 pm 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
I don't plan on being in debt, but the DR theory of shooting the credit agencies the bird isn't practical.

There is your plan, and then there is reality. Optionality is worth something.

To the OP, open up a "starter card", pay off in full, wash rinse repeat.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Wed Oct 24, 2012 8:38 am 

Joined: Sat Jun 06, 2009 11:49 pm
Posts: 262
Location: Cincinnati, OH
Scam artists in the mortgage industry screwed up the Authorized User cards for everyone. There were people that would add someone to their credit card as an Authorized User for a fee, a month later that person would apply for a mortgage and their credit score and report would reap the benefits of that Authorized User account (length it was opened, etc.).

Now, Authorized User accounts are worthless as far as credit scores go.

I can speak from personal experience, that 1 or 2 credit cards (in your name, not Authorized User accounts) will give you a credit score and history. Currently I have 2 credit cards, never had an auto loan, never had a mortgage, and my credit scores are in the upper 700's.

It takes work, and attention, but it is as simple as

1) Open 1 or 2 Secured Credit Cards - pay close attention to the annual fees. I had used Orchard Bank, but I believe they were sold to Capital One.
2) Charge no more than 30% of the limit each month. $300 limit = $90 max per month
3) Pay the cards off each month
4) Rinse and Repeat

Credit cards are one of the easiest ways to generate credit scores, and increase credit scores in a short amount of time (by paying them off). However, your scores will feel the beat down if you are late.

_________________
T.C. Strait
Ohio Loan Officer / Manager @ Mortgage Broker
NMLS ID 164070
Ohio Mortgage Solutions
Ohio FHA Mortgage


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Wed Oct 24, 2012 9:05 am 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 278
Location: Atlanta, Georgia
Wow, thanks for all the information, TCstr8. The scamming backstory is very interesting. I never would have thought of that!


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Wed Oct 24, 2012 10:40 am 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1605
Location: Seattle, WA
TCstr8 wrote:
never had a mortgage
...
Manager / Loan Officer


Do as I say, not as I do?


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Wed Oct 24, 2012 12:07 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5316
TCstr8 wrote:
I can speak from personal experience, that 1 or 2 credit cards (in your name, not Authorized User accounts) will give you a credit score and history. Currently I have 2 credit cards, never had an auto loan, never had a mortgage, and my credit scores are in the upper 700's....


My wife and I both have nearly perfect credit. Neither of us have ever had a legitimate negative and the couple of "bad" ones we've had have been corrected through legal means. (Long story that I think I've posted before but basically we've gotten legal sanctions against a huge corporation for attempting to collect a debt that was not ours by fraudulently putting information on a credit report. And we almost had to sue a judge and got a court ruling against another person quashed because of illegal actions by a court!)

But when we applied for a mortgage we had several "negatives" come up including not having high enough balances and not having enough open lines of credit. Bizarre. Still we are both in the high 700s so I guess they just need something to give the loan officer something to make it feel like the check was worthwhile.


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Wed Oct 24, 2012 12:32 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1605
Location: Seattle, WA
DoingHomework wrote:
But when we applied for a mortgage we had several "negatives" come up including not having high enough balances and not having enough open lines of credit. Bizarre. Still we are both in the high 700s so I guess they just need something to give the loan officer something to make it feel like the check was worthwhile.


I believe (don't quote me on this) that they are required to give you the top few items that negatively impact your score. When your score is high, those negatives really scrape the bottom of the barrel, which can really seem bizarre. Also were you to try to correct them, you might do more harm than go.


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Wed Oct 24, 2012 12:47 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 278
Location: Atlanta, Georgia
stannius wrote:
Also were you to try to correct them, you might do more harm than go.

Hi stannius, I'm curious about this statement you made. Can it negatively impact your credit to dispute something on your report that's false? Or if you dispute something but ultimately no change is made on that item as a result?


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Wed Oct 24, 2012 1:49 pm 

Joined: Sat Jun 06, 2009 11:49 pm
Posts: 262
Location: Cincinnati, OH
stannius wrote:
TCstr8 wrote:
never had a mortgage
...
Manager / Loan Officer


Do as I say, not as I do?


Was wondering if anyone would catch that. Just doesn't make sense for me. Single (and planning on staying that way), can pick up and go if need be, etc.

DoingHomework wrote:
But when we applied for a mortgage we had several "negatives" come up including not having high enough balances and not having enough open lines of credit.


I assume you are talking about the "Key Factors That Adversely Affected Your Credit Score"

My scores are 790, 791 and 801 and my report shows the following:

TIME SINCE MOST RECENT ACCOUNT OPENING IS TOO SHORT
LENGTH OF TIME ACCOUNTS HAVE BEEN ESTABLISHED
TOO MANY INQUIRIES IN THE LAST 12 MONTHS
TOO MANY ACCOUNTS WITH BALANCES
THE NUMBER OF INQUIRIES HAS ADVERSELY AFFECTED THE CREDIT SCORE

Those factors are a joke. I've never paid them any attention as a loan officer.

_________________
T.C. Strait
Ohio Loan Officer / Manager @ Mortgage Broker
NMLS ID 164070
Ohio Mortgage Solutions
Ohio FHA Mortgage


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 Post subject: Re: Fact or Fiction: One Credit Card Earns You No Credit
PostPosted: Wed Oct 24, 2012 5:35 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1605
Location: Seattle, WA
LeRainDrop wrote:
stannius wrote:
Also were you to try to correct them, you might do more harm than go.

Hi stannius, I'm curious about this statement you made. Can it negatively impact your credit to dispute something on your report that's false? Or if you dispute something but ultimately no change is made on that item as a result?


No, definitely not. Correcting inaccurate information on your report is almost certainly a good thing.

I am just referring to the mandated, as TCstr8 puts it, "Key Factors That Adversely Affected Your Credit Score". Sometimes trying to adjust the factor in question might actually lower your score, since the positive factors aren't listed, and are probably higher.

But I should caveat that I'm just guessing, since the score algorithms are secret.


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