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 Post subject: I Need Help Choosing and Applying for a Credit Card
PostPosted: Mon Mar 25, 2013 8:07 pm 

Joined: Mon Mar 25, 2013 7:57 pm
Posts: 4
My wife and I do not have any credit cards, but recognize that we need to be building credit as we discuss buying a home sometime in the future. Because I was an idiot as a teenager, I have a credit score of 636. I have two student loans still open and being paid on time totaling $1,500. These will be paid off in the next couple of months. My wife was named jointly on a credit account at two different furniture stores with her mom right when we got married, totaling about $2,500 and was paid in full with no late payments. Her score is 732.

Three questions for you guys in the know regarding credit cards and credit scores:

1. Should we apply for a card together to help boost my score or should either of us apply as individuals?
2. Do you have any specific cards in mind we should consider, given our simple goal of building the best credit possible to get the best rate on a mortgage?
3. Is there anything I haven't thought of that I should know?


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Mon Mar 25, 2013 8:17 pm 

Joined: Mon Nov 01, 2010 5:15 pm
Posts: 1151
You don't need a credit card. Just keep paying the student loans on time.


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Mon Mar 25, 2013 8:21 pm 

Joined: Mon Mar 25, 2013 7:57 pm
Posts: 4
How much can I expect her and I's scores to improve by just paying off that loan? How will those two scores impact a mortgage rate we're offered in the next 3-5 years?


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Mon Mar 25, 2013 8:29 pm 

Joined: Wed Nov 07, 2012 6:21 am
Posts: 141
There are some easy ways to help you build credit while being responsible. You might want to consider one of these two options (or even both) for rebuilding your credit.

Answers to your questions in order:

1. You might want to consult someone more knowledgeable, like a bank employee

2. Get a secured credit card. This is different from a normal credit card or a prepaid credit card. Prepaid credit cards are like debit cards. With a secured credit card, you can get a credit card worth 50% to 100% of your deposit. Your deposit gets used if you default on paying what you owe. Prepaid credit cards do not build your credit, but secured credit cards do. Here is a page that you can use to find a secured credit card based on your personal preferences.

http://www.nerdwallet.com/secured-credit-cards

3. Go to a bank and tell them that you want to deposit $1,000 into a certificate of deposit for 6 months and that and the same time you want to borrow $1,000 to be paid back over 6 months and use the certificate of deposit as collateral. No bank will turn this down as there is no risk for them and they come out even if you never pay and ahead if you do. On your side, your credit score improves. You can do this at multiple banks at the same time to improve your credit rating faster (so long as you have the income to be paying them all off concurrently).

Also, I read somewhere that you should keep purchases on your credit card around 10% or so of the credit card's max for credit-building purposes. (Not sure how true this is, but I read an article on it somewhere)


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Tue Mar 26, 2013 12:30 pm 

Joined: Mon Mar 25, 2013 7:57 pm
Posts: 4
We have discussed secured cards before, and they are an option should I (with my 636 score) not be approved for a traditional card. But since we're pretty sure my wife would be approved, I'm wondering if it would be better to apply jointly.


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Wed Mar 27, 2013 3:42 am 

Joined: Tue Mar 05, 2013 6:57 am
Posts: 5
She should apply for cards since her score is pretty good then add you as an authorized user. As long as the cards are in good standing with good utilization ratios it will help boost your credit score as well. Then you can apply for cards of your own.


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Wed Mar 27, 2013 1:36 pm 

Joined: Wed Mar 27, 2013 12:38 pm
Posts: 8
Location: Richmond, VA
You may also want to check out http://creditkarma.com. It will give you your free credit score and an overview of the types of cards you might qualify for based on your score. I used it when I wanted to switch from a flyer mile card to a cash back card.

They also have these simulator programs where you can enter certain scenarios about how to help your credit and it will estimate the results. Might help give a clearer picture on getting your own card or going on your spouse's card.

_________________
Blog: http://thriftgenuity.com
Twitter: http://twitter.com/thriftgenuity


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Wed Mar 27, 2013 6:47 pm 

Joined: Sat Jun 06, 2009 11:49 pm
Posts: 262
Location: Cincinnati, OH
Few things:

1. Being added to an existing card as an authorized user will do very little to nothing in helping you apply for a mortgage. A wide spread scam a few years ago, whereby people with good credit would add strangers to a credit card as an authorized user to boost their scores (for money of course) caused the credit bureaus (at least for a credit report scored for a mortgage) to disregard authorized user accounts

2. Even with a 636 credit score, you can probably get an unsecured credit card by yourself. Probably won't be any rewards or a great rate (although rate shouldn't matter if you are paying off in full each month - which you should to help your credit as much as possible). So I would advise you to apply JOINTLY with your wife, to help you get the best credit card possible. As a JOINT account holder, it will boost your credit score as if you were the sole account holder.

3. You should, without a doubt, get some revolving debt in order to help secure the best mortgage terms down the road, unless your wife will be applying by herself for the mortgage. Mortgage lenders will use the lowest of yours and your wife's middle credit score. So if your middle is a 640 and hers is a 740, that would cost you about 2.75% (of the loan amount) additional in closing costs. So you need to get your credit score as high as possible.

All of the above is based off the 10+ years that I have been reviewing credit reports for mortgage applicants. Hope that helps.

_________________
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: I Need Help Choosing and Applying for a Credit Card
PostPosted: Wed Mar 27, 2013 8:23 pm 

Joined: Mon Mar 25, 2013 7:57 pm
Posts: 4
Thanks T.C., that's super helpful. We'll probably look at applying jointly this week. Next step for us will be to figure out which card to apply for.


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Thu Mar 28, 2013 8:31 am 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1609
Location: Seattle, WA
TCstr8 wrote:
3. You should, without a doubt, get some revolving debt in order to help secure the best mortgage terms down the road, unless your wife will be applying by herself for the mortgage. Mortgage lenders will use the lowest of yours and your wife's middle credit score. So if your middle is a 640 and hers is a 740, that would cost you about 2.75% (of the loan amount) additional in closing costs. So you need to get your credit score as high as possible.


Just curious: What are the pros and cons of applying jointly? When my wife and I bought our house, I had both the credit score and income to carry the whole loan myself. My wife's score wasn't far behind, and we applied jointly partially so it would bring her score up a bit.


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Fri Mar 29, 2013 9:24 am 

Joined: Sat Jun 06, 2009 11:49 pm
Posts: 262
Location: Cincinnati, OH
stannius wrote:
TCstr8 wrote:
3. You should, without a doubt, get some revolving debt in order to help secure the best mortgage terms down the road, unless your wife will be applying by herself for the mortgage. Mortgage lenders will use the lowest of yours and your wife's middle credit score. So if your middle is a 640 and hers is a 740, that would cost you about 2.75% (of the loan amount) additional in closing costs. So you need to get your credit score as high as possible.


Just curious: What are the pros and cons of applying jointly? When my wife and I bought our house, I had both the credit score and income to carry the whole loan myself. My wife's score wasn't far behind, and we applied jointly partially so it would bring her score up a bit.


Really it just depends on the situation. If Spouse A has significantly better credit than Spouse B, and Spouse A can afford the home on Spouse A's income along (debt ratio wise) then they would save significant money in closing costs. If both Spouses have similar credit scores, and nothing funky going on with income, then they could apply jointly.

Basically what I look at, is trying to find the cheapest and simplest route to get the end result. So if one of the Spouses is self employed, which raises the possibility of the underwriter to raise additional questions or require additional paperwork, then I would advise to do the loan in just the W-2'd spouses name (assuming they qualify).

Each situation is different but that is the nuts and bolts of how I make my recommendations. Try to keep it simple and easy.

_________________
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: I Need Help Choosing and Applying for a Credit Card
PostPosted: Sat Mar 30, 2013 1:13 pm 

Joined: Sat Mar 30, 2013 1:06 pm
Posts: 2
I definitely agree with TC's advice. You shouldn't have a problem qualifying for an unsecured card, especially with your wife as an underwriter.

I would definitely be very cognizant of the "idiot" things you did when you were a teenager though - while they might have been stupid, very intelligent and experienced people can slip into debt very quickly with their first credit card. With her credit score you can probably get some pretty decent credit lines ($3-4,000+), and having that kind of cash flow flexibility is fantastic and super convenient - but also dangerous. It can be easy to spend thousands of dollars in no time at all, and then find yourself in a bad debt situation and just end up making your credit debt worse. There are a ton of solid articles about this, but here's a solid step by step guide to getting your first card, as well as some utilities to help you with budgeting (like mint or another finance management tool) as well as some things to monitor your credit score.

http://www.credit-authority.com/credit-card-blog/how-do-i-get-a-credit-card/details/


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Sun Mar 31, 2013 4:01 am 

Joined: Sat Dec 10, 2011 7:25 am
Posts: 690
I think one of the scariest things I hear people say is I need a credit card. I work in the credit card industry and occasionally have to listen to credit card collections calls. Let me tell you they are terrible and eye-opening; yes people do experience crisis like health issues, loss of jobs etc., through no fault of their own but many with scary huge balances can't tell you what he money was spent on. What they all share in common is they are desperate, stressed to the limit and often without hope. They are on a never ending search for a balance transfer to a new card with no interest period. They are just delaying th enivitable. I wish you and anyone else thinking of getting a card could listen with me and see for yourself it is an eye opener.

First I would work on paying off all debt should be your focus. Then you can save for a big down payment. Bankers like big down payments it lessens their risk. The credit score will take care of itself!

Oh yes no doubt someone will point out how he, she or they use their credit card responsibly. Well good for them! I say why risk it? I agree with the poster above me credit cards can be like heroin...just don't get started.


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 Post subject: Re: I Need Help Choosing and Applying for a Credit Card
PostPosted: Sun Mar 31, 2013 9:28 am 

Joined: Sat Jun 06, 2009 11:49 pm
Posts: 262
Location: Cincinnati, OH
RayinPenn wrote:
Then you can save for a big down payment. Bankers like big down payments it lessens their risk. The credit score will take care of itself!


Working in the mortgage industry, I can tell you that credit scores NEVER take care of itself. The vast majority of mortgages are secruritized/insured by Fannie Mae/Freddie Mac/FHA/VA. All of these entities allow for lenders to do a "manual underwrite" if the automated underwriting system won't approve the file. However, I know of very few lenders that will actually do it. Why? Because they don't want to risk the loan not getting securitized/insured by Fannie/Freddie/FHA/VA. If it doesn't, then they are on the hook for the whole thing.

In a perfect world, your theory might work, but in the mortgage world, it isn't even close.

I do agree, that unsecured debt is a slippery slope, but if you can't manage your debt/credit cards, then you probably shouldn't be buying a house.

_________________
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: I Need Help Choosing and Applying for a Credit Card
PostPosted: Sun Mar 31, 2013 3:32 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1833
RayinPenn wrote:
I work in the credit card industry and occasionally have to listen to credit card collections calls.

What exactly do you do in the industry? Your entire point of view seems to be colored by your experiences there and only by the bad side of it. I actually make money from credit cards via rebates. I never pay an annual fee and I don't pay interest since I pay the card off every month. And my FICO score is over 800.

Credit is a tool. It can be useful but if it isn't used properly, it can really hurt you.

Your attitude seems more akin to "I've seen a lot of people who have been hurt by hammers, so no one should ever use a hammer."


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