Building our credit - secured credit card?

[beansmama]

We're planning on buying a home sometime in the next couple of years (I wish sooner...but you know!) and I think we should start working on our credit. We couldn't even get a loan for a car (only $5k) without a co-signer...sooooo...yeah.

We're doing the Dave Ramsey plan, although, obviously, not perfectly. I really don't want to have to worry about finding a special bank with someone who can underwrite a loan and yaddi yah, once we have the funds to buy a house. I'd rather just do it the easy, lazy way ;)

Anyway, we have no debt, which is apparently our problem. No car loans, student loans - credit cards. Just $5k in the savings and our normal bills (electric, internet, netflix). Dh has a couple minor neg. marks on his credit - a non-paid medical bill under $50 from *years* ago, and a late payment. Everything else is good - everything paid off in a timely manor, no late payments, closed in good standing - but they are *closed*...which is the point!

Okay. Sorry, I'm rambling!

I want to get a credit card to use once or twice a month, paying it off immediately (I'm thinking it would be used for one thing, and one thing only - like gas for our car).

Thing is, I've had credit cards in the past. I currently have a $165 "line of credit" on my ING checking account and guess what? I ALWAYS owe them money. Not that big of a deal, since there is (basically) no interest, but STILL! I'm not very good with temptation..and I feel like me and a credit card would probably be a bad mix. My good intentions to use it for gas would soon turn into junk food and shoes...or something.

So I'm thinking of getting a secured card. Our credit isn't TERRIBLE - it's "just okay", so I think we could go the "normal" route, but i don't really think that'd be wise - considering. I've been checking out the secured card options - they all have annual fees (under $55, from what I've seen), interest rates varying from 9-23% (yikes! But like I said, I'd literally be paying it off as soon as it went through!).

Does anyone have expirience with secured credit cards?

My impression of them is that I'd be giving some company, oh, let's say - $200-$500 to open the card, plus $50 fee, and they'd give me a card - I'd use it to buy Gas, go home, make an online payment - they'll report it to the credit companies, repeat. Done enough it'll improve our credit.

Oh - and I'm looking into cards that report to ALL 3 credit companies...if that matters. I think it does. Hm.

Anyway, thanks!

[rhiandmoi]

As long as the are credit cards, and they report to the CBs it's good. Make sure you get one that is a credit card and not a debit card. Also, you might consider getting something like a Target card or a gas card that is only good at that one store and has a low limit. This helps control binge spending, but also builds a credit history.

[TiredX2]

Basically ditto to the PP.

I would, in your position, consider a credit card from a place that you already regularily shop.  I think the Target card is only good at Target, but some branded cards are good anywhere and it sounds like that would not be a good choice for you.  I've actually been thinking about a Target card because you get 5% off, which is pretty huge.

What are you spending your ING line of credit on?  Do you mean you pay it off each month and then use it again or are you not paying it off?  If you run it up and then pay it off each month that really isn't an issue--- that is exactly how I use credit cards.

Lastly, why does DH not just pay the medical bill?   

I'm not really getting the advantage to you of a secured credit card.  The only reason, IMO, to go with a secured card is because you cannot get a "regular" card.  If that is true and it is worth the, generally, exhorbitant fees to get a card I would consider it.  But my goal would be to use it as a transition point only (a $50 fee on a card you can only spend $200 is terrifying when you look at it from an interest standpoint.  But you have to PRE-PAY them anyway, so it's not even interest--- it's basically a debit card they are charging you for).

Do you have any idea what your FICO score (or any of the individual ones) actually are?  You might want to check that out (and play with some scenarios) to figure out what would be best.

[beansmama]

I think a gas card might be doable, but a target card is a no-go. Come on...I can't be the only person here that goes into Target with good intentions and ALWAYS comes out with something I just "had to have" lol! Besides, I actually used to have a target card - it was for $500, then, after having that for a couple of months they upgraded me to a Target visa - which could be used anywhere - with a credit limit of $10,000!!! Crazy, right?

I pay the ING line of credit off in full each payday. I use it on various things - sometimes necessities, sometimes not. Mostly, it's for eating out and junk that's not needed. I wish I could opt-out of the LOC, but I don't think you can, and that card is an easy access to our emergency fund, so I view it as crucial.

I see the ING LOC as an issue because essentially, it's preventing me from savings. If I'm blowing that $165 each pay period on stuff I don't need, and I pay it off with the next check, that's money that should have been going into our savings. That's exactly why I don't want a "real" CC. We make enough money to be comfortable and then some, but just having that extra cushion there is tempting, so I fritter the money away on non-needs. Thankfully, it's only $165 and not $1,000 ;)

About the medical bill - it was from over 5 years ago and Dh wasn't even aware of it until about a month ago when I checked our credit. His FICO is in the mid 600's. I'm not sure what mine is? Last time I checked it was in the upper 700s...but that was years ago, back in my "I have 3 credit cards" days.

I get what you're saying about the fee's being ridiculous when you consider what you're getting - but I'm exclusively looking to build our credit, I'm not actually looking for a loan. I don't even WANT a LOC, but I kind of think it's my only option if I want to build our credit to eventually get a mortgage. The secured thing is just to protect us from debt...does that make sense? I guess (I think) I'm willing to pay someone to keep me "in line" as far as credit card spending goes...kwim?

Although...I'm really going to look into getting a gas card, assuming it's an actual credit card and not just a debit card. I think the gas station we use offers one, so I'll look into that. I do prefer the idea of NOT having to pay for a card...while being kept "in check"...I really don't think I'll find myself going on a "gas-shopping binge" heheeh!

Thanks :)

[TiredX2]

I think I understand your concern, now.  Basically, you will spend on a credit card up to the limit?

I would consider, in your case, finding out what cards your local utilities (garbage, electricity, gas, phone, cable, internet... whatever) accept.  Then get that type of "real" card but never actually carry it.  Instead, start having some of your bill go *on that card.*  So, you would be building a credit history without actually spending ANY additional money.  Or, you could put something like car insurance on it.  Point being, something that you can just have automatically charged (which you can then automatically pay off) on a consistent basis.

Do you have any major purchases, like furniture, coming up?  You could also buy on a 0% for x months thing and then pay that off consistentlyl.  Never put *anything* else on the card.

If you really do spend up to any credit limit compulsively, though, I think you might want to address that issue as well.  It seems like most people who compulsively spend on cards don't really know what they are getting themselves into wheras the situation you are descibing seems more like you just *can't* stop yourself from doing so. 

Good luck!

[lookatreestar]

my credit union has great deals with secured cards. we got my dh one about 8 months ago, and we pay his phone bill with it (got a $20 gc for doing autopay!) and then we pay off the cc every month. i feel bad we didn't do it sooner, i have great credit (from dh paying my bills LOL) and he has no credit at all. (before we met he was an all cash guy).

i really dislike the whole idea of credit scores but honestly having good credit is a luxury.

[BathrobeGoddess]

I agree with above and wanted to let you know you CAN oft out of ING LOC...I did...They gave like $500...um no thanks...just call them and they will do it for you...

[beansmama]

Originally Posted by BathrobeGoddess 

I agree with above and wanted to let you know you CAN oft out of ING LOC...I did...They gave like $500...um no thanks...just call them and they will do it for you...

SERIOUSLY?!

That is..awesome. Thanks for the tip! We just embarked on a 6 month plan to finish our emergency fund, and it's gonna be hard - this'll help :)

Oh - and I'll look into a local credit union. I'm considering transferring our emergency fund to a local CU anyway, just so it's less tempting to use for non-emergencies! Okay, now I"m getting off topic!

Thanks everyone for the info/advice :D

[applecider]

Why don't you just get one card and give it to your dh for gas or something? Then you don't even HAVE a card with you so you can't use it. I guess that only works if your DH is a non-spender.

[crazyms]

For what you're wanting I would check with the gas card first. My thinking on this is come on you can't really go on a gas spending spree LOL and if you look into the cards first some offer additional rewards or savings for having them so you could save on your gas budget each month while still building your credit. That might be the best option because: you build credit, can't go on a unnecessary spree with it, and save money each month on gas so you're cutting a little out of your budget too.

If not I'd definitely go with the secured card. It does have fees and the interest rates are insane if you don't pay each month BUT... it's a low limit so you can't really get bad into debt from it and if you pay it off every month then the interest rate isn't an issue. I think the fee is worth the peace of mind for what you want.

[beansmama]

I guess I should also add that since the secured cards are almost always used to build/repair credit, it's easy to tell if the cards report to all *three* of the CB's. They usually state right on the advertisement whether or not they do that - and I think it's a little tougher to tell as far as regular cards are concerned. I want to cover all my bases.

I think I'm just going to research our local credit unions and possibly open up an account - savings and a credit card? Thanks again, everyone, for the advice :)