How long does it take to build your credit after getting your first credit card?

You could probably go to your bank.

There is a difference between a "credit report" and a "credit score."

Don't pay for the credit report - you get a free one once a year.

https://www.annualcreditreport.com/cra/index.jsp

Here is a link to the Federal Trade Commission (FTC) site talking about the free credit report:

The Federal Trade Commission's Information on Free Annual Credit Reports

This is the site set up by the three credit bureaus as required by law. Just as an FYI, freecreditreport.com, the one that wants you to pay $15 for a monitoring service, is owned, I believe, by one of the very credit bureaus that is required to provide the free report (Experian, I think).

The credit score, on the other hand, is a completely different beast. The credit score is the result of some top secret mathematical calculation performed on the information in your credit report. The most common one is called the FICO.

You get a FICO score for each of the three bureaus' reports. So, you potentially have three different FICO scores. In order to get a FICO score, you must have an account open for 6 months and an account that has been updated in the past six months. And, since there are three bureaus, all three must have this same information for you to have an accurate credit score (for whatever that is worth).

While the FICO score methodology is proprietary, there are some general guidelines that determine how it is calculated. FICO scores are calculated based on your rating in five general categories:

Payment history – 35%
Amounts owed – 30%
Length of credit history – 15%
New credit – 10%
Types of credit used – 10%

Here are some links that relate to the above:

The Simple Dollar How to Safely Build Your Credit History

Credit Score Information: About FICO Scores - myFICO.com

Now, in concluding, I am going to echo something a couple of others have said but in a slightly different manner:

Ask yourself "Do I really need credit to buy a used car?"

Hmmmmmm...

Credit exists for two purposes: to make the banks money and to make the banks more money. Just something to keep in mind. Of course, you are going to have to "pay to play" the game of keeping up with the Jones, but make sure that you fully understand exactly what those costs are before you decide to play.

Suppose you decide to buy a car for $10,000. You have $1,000 to put down and your trade nets you another $1,000. So, you want to borrow $8,000 to get your new used car. Suppose further you get an 8% loan (slightly higher than what some will get, but also significantly lower than what others will - I have seen used vehicle loans with an APR of over 20% - just depends on what your score is).

So, you will pay slightly more than $210 a month for your loan over 48 months. You will pay over $4,000 in interest. So, your $8,000 loan has an actual cost that is 50% higher than its value. As an analogy, this is like paying $3.00 for a one liter Mountain Dew. Would you buy a Mountain Dew for $3.00 when everyone else was paying $1.89????


As an alternative:

Put the $210 a month into the bank. You can find a fairly dependable beater that gets upward of 20 mpg for the $1,000 you were going to put down on the new car. I am thinking (shudder) S10 with a 4 banger and a stick. Poke around, though, and you can find perhaps an older Buick LeSabre or Park Avenue that has a V6. Toyota something or other with a 4 banger. Sure, it ain't gonna be a head turner, but it will drive, get decent mileage, and the like.

Anyhow, your $210 a month quickly builds up. Put it in there for a year and you have $2,500 give or take. Now, if you made the Bronco hobble along, you really have $3,500 in cash (the $1,000 you did not spend plus the $210 a month you've been saving), plus whatever you can sell the Bronco for. So, you have what, $4,000 cash? Now, You can buy a pretty nice used whooper for $4,000 cash, after only a single year. Look for a late 90's Cadillac SLS or STS. I had one of these. I think it was owned by some guy who was half blind. I paid $3,000 for it and put 80,000 miles on it in a year, with no repairs whatsoever. Leather, Bose, heated power seats, etc. Much nicer than the beater. After a year. And its free and clear. You own it. No payment. No interest. No bank leech sucking your life away. And it is prolly gonna take you longer than a year to be able to get a decent rate on a used vehicle loan anyhow.

Or, suppose you never touch the $210 a month you are putting in the bank. You save for 4 years. You drive a beater the whole time. You have over $10,000 at the end of 4 years. So, by not getting the loan, rather than paying out $12,000 plus, you have $10,000. That's a $22,000 dollar choice right there. Not to mention, what if you get a raise over those four years? Suppose you can put in $300 a month after a while? What if you could do $350??

Pay yourself before you pay a bank. Keep in mind tough that for this to work, you have to pay yourself. It is exactly the same as making a car payment. You still have all the other things to pay for, just the payment is going to you, not the bank.

Is getting that shiny car really worth it, especially considering that by the time you are done paying the bank it will be neither shiny nor trendy? You will have exactly the same vehicle, but with the added privilege of having had to pay for the clunker.

please listen to reddy351. there is no such thing as "good debt". debt is debt, no matter how you spin it, and it means that other people are getting rich by taking your money.

so many people are in the cycle of either leasing or buying a new car every few years and have car payments for most of their lives that people think it is normal.

think about this for a minute ...

if you start at age 25 and put what most people pay every month for their car (for grins, let's say $250) into a mutual fund that averages 10% growth per year, by the time you are 60, you will have about $950,000. over its history, the market has averaged 12% per year, so i am being conservative with the 10% growth rate. if it averages the 12%, the your total is closer to 1.5 million.

i hope you really like the car.

now think about this: if you have a $1,000 mortgage for 30 years (assume a 6% interest rate), which is fairly typical, you end up paying $360,000 for a $170,000 loan. so the bank gets $190,000 of YOUR money.

so you would be better off pretending like you have a mortgage for 10 years. put $1,000 every month into a mutual fund for 10 years and you will have $200,000. then you don't need to borrow $170,000 for the house any more.

then if you can keep doing the $1,000 per month thing for 20 more years, you will have $750,000 dollars. at the average of 12% per year, it is closer to $990,000.

compound interest is an amazing thing.

now for my situation ... i have a $400,000 mortgage at 4.5%. my mortgage payment is $2,026 per month. had i taken that and invested it for 10 years, i would have had $415,000. then i would have been able to pay cash for the house and could be investing it now. in 20 years (the same time as a 30 year mortgage), i would have 1.5 million by now.

believe me, i'd much rather be sitting on a couple million dollars now. had i done what i am talking about, even just the $250 per month thing, i would be so much better off than i am that it's not even funny.

live below your means, don't carry debt, don't finance a car, and pay cash for everything. stash a few thousand away for life's emergencies, and invest what you can as early as possible.

BlackVert said:

please listen to reddy351. there is no such thing as "good debt". debt is debt, no matter how you spin it, and it means that other people are getting rich by taking your money.

so many people are in the cycle of either leasing or buying a new car every few years and have car payments for most of their lives that people think it is normal.

think about this for a minute ...

if you start at age 25 and put what most people pay every month for their car (for grins, let's say $250) into a mutual fund that averages 10% growth per year, by the time you are 60, you will have about $950,000. over its history, the market has averaged 12% per year, so i am being conservative with the 10% growth rate. if it averages the 12%, the your total is closer to 1.5 million.

i hope you really like the car.

now think about this: if you have a $1,000 mortgage for 30 years (assume a 6% interest rate), which is fairly typical, you end up paying $360,000 for a $170,000 loan. so the bank gets $190,000 of YOUR money.

so you would be better off pretending like you have a mortgage for 10 years. put $1,000 every month into a mutual fund for 10 years and you will have $200,000. then you don't need to borrow $170,000 for the house any more.

then if you can keep doing the $1,000 per month thing for 20 more years, you will have $750,000 dollars. at the average of 12% per year, it is closer to $990,000.

compound interest is an amazing thing.

now for my situation ... i have a $400,000 mortgage at 4.5%. my mortgage payment is $2,026 per month. had i taken that and invested it for 10 years, i would have had $415,000. then i would have been able to pay cash for the house and could be investing it now. in 20 years (the same time as a 30 year mortgage), i would have 1.5 million by now.

believe me, i'd much rather be sitting on a couple million dollars now. had i done what i am talking about, even just the $250 per month thing, i would be so much better off than i am that it's not even funny.

live below your means, don't carry debt, don't finance a car, and pay cash for everything. stash a few thousand away for life's emergencies, and invest what you can as early as possible.

Click to expand...

:OT:
I don't know Chris, I agree in theory... but where do you live while you pile all this cash away? In mom's basement? I finished school in 2005, was living on my own by 2006, then living with my girl till 2009, when we bought a house in January at the age of 25. All while paying down school loans and financing my F150 (paid it off in 13 months though). I definitely want to start a family while I'm in my prime, not when I'm 40. Some people don't mind being a new dad at that age but its not for me. I don't know how you assign a dollar value to that.

Adam

i hear ya 100%. when you are young and on your own, being able to squirrel away $1000 a month may very well not be possible. if you are married and both are working, then you have 2 incomes to put into the mix. depending on your lifestyle, you can probably put more away than you might imagine.

when we were young, my wife and i lived in ignorance and did not realize this stuff. we ate out alot and blew our money on lots of useless things.

the main thing i am trying to say is that, to the extent you can, living debt free and saving/investing what you can will pay off BIG TIME in the long run.