Where can a 23-year-old with no credit history, no established bank account, and no debt turn to start building their financial future?
#creditbuilding #financialadvice #bankingtips
Establishing Credit
If you’re looking to build credit from scratch, consider these options:
– Apply for a secured credit card to start establishing a positive credit history.
– Become an authorized user on a family member’s credit card to piggyback off their good credit.
– Look into credit-builder loans offered by some banks and credit unions.
Opening a Bank Account
Here are steps to take when establishing a bank account:
– Research banks that offer accounts for individuals with no credit history.
– Consider online banks, as they often have fewer requirements for opening accounts.
– Look into credit unions, which may offer more personalized services for new customers.
Avoiding Debt
Tips for maintaining a debt-free status:
– Create a budget and stick to it to avoid overspending.
– Use cash or debit cards for transactions to avoid accruing credit card debt.
– Consider setting up automatic payments for bills to avoid missing deadlines and incurring late fees.
By following these steps, you can lay the foundation for a strong financial future and start building a positive credit history.
Something to keep in mind is that open-ended questions are going to get open-ended answers. I’ll try to be a little more concrete:
Banking: Which one doesn’t matter *that* much, things are mostly the same. Some banks might have policies that are annoying, or fees that rub people the wrong way. People here are likely going to recommend credit unions for banking, and I don’t disagree (I have one myself), but for your ‘first bank experience’ I would recommend PNC. They’re big, have local branches, and lots of ATMs.
Credit: I can’t give you advice on building credit specifically. I think my first credit card was through my bank many years ago. Having a history/accounts with a bank *might* make them more likely to approve you for a card. It’s also nice to be able to manage savings/checking/credit all in one place, especially when starting out. Otherwise, I have had decent experiences with Citi.
Don’t use Discover, they calculate their interest differently. The goal is always to pay your cards off monthly, but sometimes you may have a big purchase. Don’t let anyone use your credit (not parents, siblings, cousins or friends). If someone tells you they will give you the money in two weeks, it is usually a lie. Start small, you want to pay your credit cards before they are due, not on the due date. You cannot skip a month. Don’t ever carry a balance on a store card, they charge everyone the same, high interest. Yes, you need to bank at a credit union, not PayPal, they are not a bank. Stay away from payday loans. If you are still living at home, save as much as possible.
Well first brother. Find any simple bank institutions, a chequing and a saving accounts. Get yourself a credit card. Any payments you make pay it right after, so you don’t catch yourself with owing later. If you can lease something cheap that you want, do it! Pay your phone bills by credit card. You can do it. Over time, you will get to the yellow mark scores. I’m already close to 800 and I’m in my 20’s
If you know any relatives who can explain you further. I suggest you to. Me, I started when I was 18 by asking one of my parents how it works. Over the time, I told them I will get a credit card. So before turning 19, I forced them to give me away my phone bill, so they I would pay it directly from my credit card instead of having to etransfer my parents. Once I was 19, I signed up for a credit card.
Prime directive
It would be a good idea to start building some credit history, but just go into it with the mind that credit cards are very dangerous things
Set your credit limit low, like $500
Edit: I heard capital one has good secured cards
I mean you don’t need a secured card. Pretty much every bank will open you a credit card with like 1000$ limit. Not sure how it works in the US, but in Canada when you have a mobile, that counts towards your credit score (they generally open like a 300$ credit line limit and report it every month).
No major credit history is better than bad credit history.
There are also some tools that help you build credit (generally used to fix bad scores). You get a subscription that you pay like 20-30$ a month and they report it to credit bureau and a good payment an imaginary credit line. Little risk here and the benefit is that it’s mostly like lending companies doing this, so after some time you automatically pre-qualify for a loan with them (but some banks offer this tool as well).
Good luck with your journey.
Open a credit union account. Mine can be done with a $5 deposit. Then have them issue you a safe secure credit card. Go from there.
I assume you have savings / emergency funds? 800+ credit scores are just ways to create more debt or a fancier access to instant gratification. Borrow money from yourself is best as double emergency can happen and drain both your cash and credits.
If you don’t want to deal with going into a local bank location, opening a bank account online is super easy. I personally bank with Charles Schwab. The benefit being that if you ever want to start investing to like a Roth IRA, you can do it all there.
As for credit cards, maybe go for the secured route if you have no credit history. Just remember to always pay it off and to not spend any money on it that you normally wouldn’t.
I didn’t start doing any of this until 2 years ago. Now I have great credit and my finances are awesome.
I would go with a local bank in your area that is well known. Personally I like the cash reward credit cards with BoA.
Make sure you know what the interest rate is but as long as you pay your payments in full each month and keep a minimum balance you shouldn’t have to worry about it.
Start with just 1 credit card. Only use it if you’re able to pay it off in full. Even if you just use it for gas/groceries.
Customer service inside the bank is usually very friendly and can explain everything to you in more detail.
Not sure which bank is the “best” but I’ve only used BoA and Amex (lots of places don’t accept Amex FYI).
Use your credit card and pay it off every month
I mean if PayPal is good for your needs and you haven’t had any issues then stay with them they also have a decent savings account with synchrony and also their PayPal cash back card you can try to start there for credit but synchrony can be a toss. Up approval wise so I suggest you better get a discover card ethier the normal route or the one you need a 200$ deposit don’t worry as they give you the money back after you use the card and pay offs a few statements in time.
Just start simple. Find a local bank or credit union that has a free checking and savings account, and go open both. You need to use the savings account to start building an emergency fund.
You also need to start your credit history journey with some no annual fee credit cards. I would suggest Discover and Capital One. They both have pre-approval tools, so you will have a good idea if you are going to get approved for the card you want before getting hit with a hard pull.
Read some books on personal finance. I always recommend A Simple Path to Wealth to start with.
And there are lots of resources on the Internet. It takes time to learn all the important stuff, but just keep trying. Knowledge builds up in layers after repeated exposure and practice.
Fidelity or Schwab cash management. Easy and they pay god interest rates. When you have more cash open a Barclays saving account.
Highly recommend Capital One, it’s what I started with and never had issues.
1. Open a 360 Checking account. It’s free, you’ll get a debit card to access that money. Use this account to deposit your checks and pay off your credit card.
2. Apply for their Quicksilver Credit Card. Can get it with no credit history and there’s no annual fees. You might have a small credit limit like $500 but they automatically increased it over time for me and now I’m at a $3500 limit for that one. To build credit, never use more than 30% of your monthly limit but ideally stay around 10% (aka $50 if it’s a $500 limit). Pay it off in full each month by the due date.
3. Open their high yield savings account (360 Performance Savings). They pay you money to keep it in there. Currently they pay you 4.25% interest (APY) – for example, I got $70 for the $20,000 I have saved in there.
Get the Capital One app and you can manage the payments and check it often easily in there.
Honestly it’s great that you’re considering all of this but in your 20s the single best thing you can do is figure out what you’re good at and develop your skills in it. Doing everything you can now to really maximize your income will pay dividends for the rest of your life.
Start with a credit union for a bank since they have less fees. If you have a little money saved that you can put away, then use it to obtain a secured credit card to help you build credit borrowing from your own money. Most people start building credit buying a car. However, you’ll get charged a ridiculous interest rate that way. The other way is to get either a clothing store, electronics, or a gas credit card to build credit.
My bank builds credit as well by taking small loans out that are like 200-500 and paying those off over a matter of months. If you do so, it builds credit as well.
Whatever you do, don’t go into debt now! You’re ahead of the game right now. Getting into debt puts you behind.
I was in your position 10 years ago. Bank I chose is a local to me credit union with a free checking and high interest savings account. I now have a mortgage with them.
I chose Capital One for my secured card. They gave me a $250 secured credit line. I used it exclusively for my gas purchases for years. It’s set up to pay off automatically on the due date from my checking account, so I’ve never missed a payment and never paid interest. CapOne increased my limit to $500 after, like, a year or two, then $750 and they refunded the $250 deposit a while after that, but they were very stingy with any subsequent increases. If you go with Capital One and you demonstrate prudent card usage (never pay interest), then I recommend applying for a different card in a couple years once you’ve extablished a credit file.
Don’t forget you also need to bone up on some insurance basics. Too many people suckered into the extended warranty for their earbud purchase at Best Buy. Too many young people suckered into permanent life insurance policies.
Capital one 360 checkins and savings.
Free and easy to open from anywhere
Get a credit card and use it just be sure to pay it off each month. Buy a car (easier said than done with no credit). Get credit karma and let it help you track your progress.
Unfortunately no credit is treated as bad credit. You need a simple credit card to start building credit history.