My Path to Credit

Where it all begins...

Freshman year someone came to my dorm door, offering a cute t-shirt in exchange for filling out a credit card application. Being naive and frankly dumb, I filled out the application and got the shirt. After being turned down for the card, I tried to figure out why and realized that while my whopping $2500 salary during senior year may have paid for prom and some cute clothes, it probably wasn't enough  to convince Discover of my credit-worthiness. I put that credit rejection out of my head, not realizing it was something more. 

A year and a half went by, and eventually I needed a new car to keep at school. I tried getting a car loan, but after being quoted an interest rate of 12.75%, which I considered usury and told the credit union as much, I decided that a car loan was not in the cards for me. Solution...a cheaper car, paid for in full at the time of purchase. While much more convenient, this didn't help me solve the root cause of the problem, which I discovered to be identity theft. It was too late, and the path too convoluted for me to try and solve the problem, so I paid the outstanding bill, swallowed my pride, and accepted my credit score in the mid 500s. 

I plugged away at school, working hard, taking on campus jobs, and working hard to save money. After another year went by, I decided to try applying for a credit card, hoping that the negatives from my credit report would be erased after being paid in full. This brings me to part II of my path to credit...

Credit Cards

I love credit cards. After a spate of identity theft that went undiscovered until it had ruined my credit, it took me a long time to get to a point where I could finally get a real credit card, rather than one of those ones where you front the bank the money and get a 'credit card'. That first card, a Capitalone Mastercard with a $500 limit, 20.99% APR, and Starry, Starry Night cardface, was my first foray into what I considered grown-up finances. My first statement balance was approximately $11, and having set up online payments, I paid it in full. The feeling of power I got from that simple procedure was intoxicating. Capitalone had LOANED me, interest free, $11 for almost an entire month. I wanted more.

I stuck with CapitalOne for a long time, watching as my credit limit was eventually increased to $1250. CapitalOne, incidentally, is my card of choice for going abroad-it's the only card I've found that doesn't charge currency conversion fees. I travel abroad a fair amount, so this is  really important to me.'

However, I grew frustrated with it for a while-the limit wasn't high enough, and I wasn't earning any rewards. So I started applying for more. Hello Visa Platinum, with your shiny silver surface and significantly higher limit. Hello Amazon Student Visa, with your cash back and rewards certificates. J. Crew wants me to have 10% off my first purchase and free alterations? Thanks! 

Eventually I have to come to where I am now: 5 credit cards in my name and 1 on which I'm an authorized user. It's easy for me to be a statistic-how many college grads graduate with student loan debt and 4-figure credit card debt. Luckily, I've managed to keep my spending in check. The steps I take to make this happen are not novel or remarkable, but I've managed to escape the plague of cc debt. 

What do I do to eliminate credit card debt?

1) Never buy anything on credit I couldn't pay for in cash. (This includes my $1600 plane ticket abroad)

2) Pay off the statement balance in full the day it comes due.

3) Track spending religiously, and choose card purchases judiciously. Capitalone is used abroad, my rewards cards get all my day to day purchases, and my store cards are paid off in full every month.

I now have a credit score in the mid-high 700s. Having had one in the 500s only 2.5 years ago, I count myself very fortunate. How I've managed to do this while only working on-campus, going abroad numerous times, and not coming from family money will be detailed in later posts. 

Tomorrow I'll go over the steps I take to manage my money, and what I hope to do with it.