Tuesday, November 2, 2010

In Appreciation of Beginners Credit Cards and Good IDTheft Protection

The other day, I found a post by a young knitter over on Ravelry trying to figure out how to get credit. Being the nosy busy-body that I am, I posted this:

OK. I’m formerly from credit repair industry and before that I worked with credit card applications. So, my I would like to voice my opinion and my experience.

There is a lot of information out there given by financial experts. Heads up on most of them: They do not like credit cards. That’s OK for them if they have money. They will tell you not to get any cards, or if you get them, not to use them, if you use them pay them off every month. If you are hoping to build your credit, none of that will help. You need to look at it from the view point of those who would be offering you credit. They need to see that you are responsible enough to make regular monthly payments and not over extending your financial self.

My advice before applying for credit is to build your savings. Make sure your rainy day fund (which is money you can access at any time for any reason) is enough to cover you for several months. It used to be three to six months of your current income is the goal, but I think in the last couple of years it would be smart to go even further. This is solely to cover your butt when life changes, like losing your job. Life is change, be prepared.

When you are ready for credit cards, you probably won’t qualilfy right off the bat with low interest rates or high credit limits. The Orchard Bank card suggestion is a good one. If you can’t find them, they are also known as First Premier Bank. A lot of people speak negatively about this bank, but here’s the deal: You do get a high rate, like higher than 20% and you do get a low credit limit. Don’t do the joint card method because that builds only the primary cardholders credit. Those kinds of suggestions are great for immediate help, but won’t help you in the long-run.

When you get the card, do not use it beyond 50% of the limit. This shows lenders that you are in control. Pay the bills on time (that’s true of all your bills) without fail. Pay more than the minimum payment required, again proves that you are financially responsible. Don’t pay it off. Lenders need to see that you can carry a balance over time.

With the Orchard Bank/First Premier cards, the initial fees will put you over the 50% I just suggested so you probably won’t be using it immediately. The minimum payment will always be at least $20, plan on at least $30. You can contact them every 6 months to request a review to have your limit increased but it won’t ever be more than $750. Also know that they are each month reporting to all the credit bureaus what you are doing with your account and that more than anything else will help your credit profile. It is a good card for a new consumer, but if that new consumer is not yet responsible, it can also be the worst thing you can do. It is great for the emergency half tank of gas the day before payday, but you’ll probably not ever be able to buy a set of tires with it.

Hope that’s helpful. If I can think of anything else, I will add it later.

The feedback on my post was varied. Most people believe that responsible use of credit cards means paying it off every month. That would be advice given by a financial expert like Susie Orman. These financial experts do not like seeing you spending your money without having something to show for it, such as the interest on balances carried from month-to-month. However, you do get something out of it: you build your credit. Besides these financial experts are making big money compared with the rest of us, so of course, they can pay the cards off every month and don't need to build their credit.

One very smart young lady wrote asking me how to fix fraud and told me what she'd already done. What she had already done was exactly what she needed to do but now she knows how important a Identity Monitoring service is, how much time and money is consumed trying to fix it herself. I told her about the IDTheft protection I market with PrePaid Legal. It is different from other identity theft products out there, I know because I used to sell them when I was taking credit card applications ~ they only cover the one person, not the husband and wife, and are only there to tell you how to fix it yourself. This service monitors your personal information (and your spouse) FOR YOU and watches your all your personal information, contacts you each month, or as something appears, to let you know either nothing has happened or 'Something has shown up ~ please confirm this was you'.

It made my day to be able to send her information about this. My sense of being someone able to help someone else was very gratified.

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