New to this credit card thing...

[TheMonarch]

I'm a college student, and I got my first credit card about 6 months ago, and need some advice about how to go about this particular situation.

Back-story:
First, all of my credit card payments have been on time, I think I've been fairly responsible so far. But for some stupid reason, I forgot to pay my satellite TV bill. My mistake, I'm stupid for that, and it won't happen again.

So I call them and ask for my password to be reset (I forgot it, and needed it to pay online). Turns out that I owed $540+, I said that it must be a mistake, and that I knew that I had a past due bill that I was ready to pay. Upon asking more questions, they said I being being charged 2 non-return fees of $200.

I told them I had returned the broken DVR to them long ago, they asked for a tracking number. Now, this was about 2 months ago, I didn't know where It was, so I would call them later. But there was no way I was going to pay a $540+ bill, even If I had a past due one.

Then I started getting unknown calls in the middle of class. After researching the number, it turns out its a collections agency. I was starting to get extremely frustrated. I found the tracking number, called them, and managed to get one of those $200 charges removed. I was told the other one had to be escalated somewhere, and that I'd be 7-10 days before its gone. I also payed my past due month, and the current month.

But according to them, I still owe then $200. I guess I could wait until the charge is credited back, but the thing that struck me is... Through this whole ordeal, I got sent to a collections agency...

Did my credit rating just go to hell? What should I do now?
I hate Direct TV.

 

[Coolerking]

The good news is you're just starting. You're doing the right thing by getting this squared away. Keep making your payments and you'll be fine. Just don't let anything like that happen again (especially shortly after this is being resolved). THAT is where you get in trouble.

 

[beatsme]

I'm a college student, and I got my first credit card about 6 months ago, and need some advice about how to go about this particular situation.

Back-story:
First, all of my credit card payments have been on time, I think I've been fairly responsible so far. But for some stupid reason, I forgot to pay my satellite TV bill. My mistake, I'm stupid for that, and it won't happen again.

So I call them and ask for my password to be reset (I forgot it, and needed it to pay online). Turns out that I owed $540+, I said that it must be a mistake, and that I knew that I had a past due bill that I was ready to pay. Upon asking more questions, they said I being being charged 2 non-return fees of $200.

I told them I had returned the broken DVR to them long ago, they asked for a tracking number. Now, this was about 2 months ago, I didn't know where It was, so I would call them later. But there was no way I was going to pay a $540+ bill, even If I had a past due one.

Then I started getting unknown calls in the middle of class. After researching the number, it turns out its a collections agency. I was starting to get extremely frustrated. I found the tracking number, called them, and managed to get one of those $200 charges removed. I was told the other one had to be escalated somewhere, and that I'd be 7-10 days before its gone. I also payed my past due month, and the current month.

But according to them, I still owe then $200. I guess I could wait until the charge is credited back, but the thing that struck me is... Through this whole ordeal, I got sent to a collections agency...

Did my credit rating just go to hell? What should I do now?
I hate Direct TV.

don't sweat it. Nobody has perfect credit. Everyone I know has bounced a check or paid a bill late at one point or another. It happens. Now, if it happens all the time, then you've got problems.

Truthfully, your ability to get a loan has more to do with your debt ratio than anything else. According to me mum, the former loan officer, what the banks are looking at is:

1) have you generally paid your stuff on time before, and
2) are you able to pay now

as long as the first one's ok, you're generally alright. Most places, by the way, have a 5-day grace period, so as long as you get it in the zone you're fine. It's that second one that'll hold you back, which is a good thing in a way; it'll keep you from buying stuff you really can't afford.

The one thing you don't ever want to do: pay a credit card bill late. Those will get reported. Always pay it on time, even if it's only the minimum.

 

[CEAbiscuit]

One trick is to put these monthly subs on auto pay to a credit card. That way:

1. You always pay on time.
2. You can dispute eronious charges through your credit card company.

Similar thing happened to me with the cable company regarding equipment being charged to my card autmatically. As soon as I disputed it, the credit card company was all over the the cable company. Got cleared up within a week.

You really haven't established credit yet either way, so this should not be a big deal. However, once you open a credit card, do not cancel it...ever. Wait at least 7 years. What does hurt your credit rating is opening and closing cards over and over again.

 

[crazycat]

don't sweat it. Nobody has perfect credit. Everyone I know has bounced a check or paid a bill late at one point or another. It happens. Now, if it happens all the time, then you've got problems.

Truthfully, your ability to get a loan has more to do with your debt ratio than anything else. According to me mum, the former loan officer, what the banks are looking at is:

1) have you generally paid your stuff on time before, and
2) are you able to pay now

as long as the first one's ok, you're generally alright. Most places, by the way, have a 5-day grace period, so as long as you get it in the zone you're fine. It's that second one that'll hold you back, which is a good thing in a way; it'll keep you from buying stuff you really can't afford.

The one thing you don't ever want to do: pay a credit card bill late. Those will get reported. Always pay it on time, even if it's only the minimum.

Very good advice, i was going to write something but i think beatsme did a very good job at it.

 

[strider42]

When you get it all squared away, wait a little while and then get your credit reports. You are entitled to one free a year from each of the major agencies. Go to annualcreditreport.com

If there is any kind of note on there about it going to collections, you should challenge it with each of the credit reporting agencies. They are obligated to make corrections for improper information on your report.

 

[SkyBell]

The first Credit Card I Get, I'm cutting up and throwing away. I don't want debt and credit problems like my parents have.

 

[strider42]

The first Credit Card I Get, I'm cutting up and throwing away. I don't want debt and credit problems like my parents have.

credit cards are not the problem, peoples behavior is. When you get your first card, use it. it helps your credit rating and will help you later down the road. But, use it only for things you have the money to pay for outright. Buy gas with it or something.

And don't use debit cards. They don't help your credit rating at all, though they do have the advantage of just taking the money directly from your account, so no late fees or anything. But if you are responsible and live within your means, you should never have a problem.

 

[iGary]

Throw them away. Period.

Use a VISA or MC card that takes money from your checking or savings.

Seriously, if you can't afford something, find another way, there always is one.

Please.

I spent my middle twenties clawing myself out of a pile of credit card debt.

Don't do it.

AND

Make sure you get EVERYTHING in writing from the collection agency and the satellite company that everything is taken care of and you took care of your part - they very well may put "Collections - Settlement by Customer."

Demand that they remove all that crap, as they agreed to take care of it.

Then get credit reports from all 3 bureaus.

Don't stop until its all gone off your reports, or it will haunt you forever.

PM me if I can help.

 

[DavidLeblond]

I buy E V E R Y T H I N G on my credit card. If I could pay for my mortgage on my credit card I would. I get Marriott hotel points for the money I spend on it.

The trick is, always pay your bill off in full when its due. If I ever made a big purchase (say, an iMac) that I wanted to pay off using credit, I get a lower interest loan from my bank. Its ok to have to pay monthly for big purchases from time to time, hell its not like I could pay for my house in full!

You just have to have a plan to pay it off, thats all.

 

[TheMonarch]

Thank you all for this very informative advice. I will definitely be more careful from now on.

So, how long does it take to build up one's credit score? Also, some say I'll be fine because I don't have an established credit line and as long as this doesn't happen again, while some say it'll haunt me forever.


I'm a little scared now. I mean, I did get a past due bill, and It only got worse when they tried to rip me $400. Do I argue with the collections agency and tell them that I was late due to a dispute, and that I've since paid my past due balance, and demand my record be cleared? Or do I call my bank?


Thanks for all the help

 

[beatsme]

I'm a little scared now. I mean, I did get a past due bill, and It only got worse when they tried to rip me $400. Do I argue with the collections agency and tell them that I was late due to a dispute, and that I've since paid my past due balance, and demand my record be cleared? Or do I call my bank?

don't waste your time with the collection agency. Tell the DirecTV people to call them off, and raise hell if they don't. You're probably going to have to step on some toes and go over some heads to do this. A collection agency pretty much isn't going to stop until they've gotten money out of you. They could give a sh*t if you're working it out with DirecTV, they just want their cut. Bash some heads at DirecTV.

you are entitled to dispute negative entries on your credit report. Here's how: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.htm

 

[beatsme]

Don't stop until its all gone off your reports, or it will haunt you forever.

a late payment can only stay on your credit report for 7 years (from the original date of the delinquency), after which it is expunged.

http://www.ftc.gov/os/statutes/fcrajump.htm

 

[Dr.Gargoyle]

I buy E V E R Y T H I N G on my credit card. If I could pay for my mortgage on my credit card I would. I get Marriott hotel points for the money I spend on it.

The trick is, always pay your bill off in full when its due. If I ever made a big purchase (say, an iMac) that I wanted to pay off using credit, I get a lower interest loan from my bank. Its ok to have to pay monthly for big purchases from time to time, hell its not like I could pay for my house in full!

You just have to have a plan to pay it off, thats all.

Brilliant advice.
I pay everything with my creditcard. When I get my monthly bill I make sure I have enough money on my bank account to pay the bill in full. Since I have set up all my AMEX bills through auto pay my worries then on is over.
As long as you act responsible you wont have any problems.
In fact, I have already recieved a round ticket Europe-Los Angeles for free just because I used AMEX instead of a debit card. I also get a free comprehensive insurance when I pay my airline tickets with AMEX.

However, as iGary pointed out. If you have any doubts whether you can handle a credit card, just cut them up and throw them away. The reason creditcard companies like AMEX can give me all these fringes are all the people that don't pay there creditcard bill in time. The interest rate is damn close to racketeering and your debt will just build up over time... So think carefully.

 

[miniConvert]

Did my credit rating just go to hell? What should I do now?
I hate Direct TV.

I'm in the UK and the rules are no doubt a little different here. Firstly, I wouldn't wait around for the x number of days they say it'll take to figure out these charges you've been hit with. Get back on the phone and talk to a supervisor/manager/whatever who has the power to make changes to your account immediately.

Being passed to debt collection would normally mean, here in the UK, that your account already reflects a couple of months missed/incomplete payments or a default. Those results will show up on your credit history. Get the matter resolved ASAP and then, if you can do this where you are, request a copy of your credit file from one of the credit agencies about a month later. This will show you what actually got recorded so you know just how bad the damage is, and whether it's worth fighting to have the record amended.

For the future: In the UK we have 'Direct Debit'. It's a mechanism whereby a company has the authority to debit regular fees automatically from your current account. All my credit cards are set up to have their minimum amount due covered by Direct Debit every month, so even if I forget to pay the worst I'll be hit with is some interest on my next statement. As has been mentioned, it's also a good idea to put other services that can automatically bill on your credit card.

A quick word advocating the use of credit cards. Unlike when money is debited directly from your current account, a credit card balance is much more 'negotiable'. If some fraudster uses a card linked to your current bank account you can literally be left with nothing to live on until the matter is resolved. With a credit card, however, there's every chance that you'll get the matter resolved before the credit card company issues a statement - and even if there are complications you can just pay the minimum amount due to protect your credit history until the matter is resolved. Credit cards are an excellent way to manage spending, especially when buying online, but you do need to be very, very careful.

Edit: Oh, someone commented that nobody has a perfect credit rating... I do

 

[macquariumguy]

I love using credit cards and put almost everything on one that pays rewards of some kind or the other. It's the closest thing to something for nothing that you can get these days.

But you have to pay the balance, in full, every month. That's the key. If you can't make yourself do that, stick with debit cards.

As for your credit rating, the late payment will stick but it's not the end of the world.

 

[rdowns]

I disagree with Gary's advice about not having credit cards. Having credit is important if and when you need to obtain a mortgage or finance/lease a car. The rates you pay will, in large part, be dependent on your credit worthiness. Renting a car without a credit card is very difficult and impossible at many places.

Of course, all the advice about using credit responsibly is invaluable.

I use my debit and credit card for virtually every purchase I make. I earn points on my debit card and get gifts or airline miles from it. One credit card I use gives me Amazon gift certificates based on purchases. The other provides a cash back rebate based on purchases. Buying with a credit card offers me longer warranties on products purchased as well. If used responsibly, these are nice perks. Also very easy for me to say as I can afford to pay my balance in full each month.

 

[miniConvert]

Having credit is important if and when you need to obtain a mortgage or finance/lease a car.

You're spot on there. It's important to build up a good credit history if you want to have maximum financial flexibility in the future. Having a credit card and using it responsibly for the things one would buy anyway is an excellent way to do this.

 

[dops7107]

As it happens, I got my credit file (UK) this morning. I was concerned that someone was impersonating me, because somehow (I really don't know how) they managed to take over one of my credit card accounts. Here's a little story.

I had a Sainsbury's Visa card with 12 months 0% on purchases. I used it to buy everything for almost a complete year, and spent nigh-on £3000 on it. At the end of the year, about December 2005, I transferred the balance to another card with 9 months 0% interest. Yippee-do, more free money (which I now have to pay off because the days of free balance transfers are more or less over).

As a result, my Sainsbury's card had a zero balance for months, lying unused in my drawer. Then, in August, I received a phone call from the credit card company (a whole 2 weeks after they left a message on my answer machine, which I didn't get because I live in a shared house and no one told me for those 2 weeks... but nevermind). Turns out someone had change the address on my card, got a new one sent out to them along with a PIN, and started spending on it. The company was suspicious because the fraudster didn't know all the answers to the security questions, but they still allowed him to change the account address eek: ). However, they put a block on high-value purchases, so he was limited to whatever the individual store limit was (up to £50 per transaction).

The little bastard, somehow, got my details. I am unsure what details, and I don't know how. I am completely careful about throwing away sensitive information. I can only assume he was given my details by a devious insider for a company I have done transactions with, or hacked into a computer somewhere. I know it could be my fault, but I really don't know what I could have done. Especially since I had not used the card for 8 months... almost as if someone knew it was an idle account and suggested he use it...

SO. My advice is to use credit cards, use them frequently and keep a very careful eye on your statements and receipts. Be very careful how you give out your credit card details. And, contrary to someone else's advice above, once you've used your card and paid off the balance (either by transfer or with cash) and found a better card to use, cancel it. It does no harm whatsoever to your credit record. What they are interested in is defaulted payments. I wouldn't open a card and cancel it straight away - make use of it, but do not forget that you have it.

Having said all that, I think if you are careful most fraud is largely avoidable, and shouldn't be anything to worry about. In my case, it looks like my credit record is still OK - there's no evidence of false credit applications in my name. So probably my issues were limited to the credit card account takeover. But I will be keeping a careful eye out from now on.

 

[iGary]

a late payment can only stay on your credit report for 7 years (from the original date of the delinquency), after which it is expunged.

http://www.ftc.gov/os/statutes/fcrajump.htm

Wrong.

They can re-report it after that seven years if it is not resolved - remember he still has a $200 issue.

don't waste your time with the collection agency

More bad advice. DirecTV doesn't give a **** about you anymore, so they have turned it over to someone who does this for a living. Make sure you deal with the collection agency and DirecTV.

I used to do title closings and mortgages. I think I know. I have a friend who has been cleaning up his horrible credit for 10 years - and USAA is still reporting a 3X90 from 9 years ago. Perfectly legal.

And as far as rdowns advice, yes, credit cards are fine to buy things when you have money, or you can budget money to pay them back. I'm not saying don't have on. I'm saying don't use it for the reason you are considering.

You're young and you want to use yours to pull yourself out of a situation you don't have the money to pay for, and that, in MANY cases leads you right down the wrong road. Next thing you know, you'll be buying groceries, meals at the Chinese takeout, your insurance. Then you get another card with a higher limit and use it to buy a computer, you just have to have. It's a bad path.

Having a credit card and credit is important, but the OP is considering using it for the wrong reasons - major red flags.

Offer to make payments until the $200 is paid, then deal with cleaning up the credit reports.

If you were saying you needed to pay for a prescription or something life-threatening I'd say fine. Otherwise there is always another way.

 

[notjustjay]

As others have said, credit cards are a great thing and very beneficial, as long as you pay off your full balance each month. Generally this means that you spend within your means. I know it sounds obvious, but you might be surprised how slippery a slope that is.

Where you need to be paying attention is any sudden change in your income level. For example, when I was in my final year of university, studying software engineering, my income came from an R.A. position with a prof and an undergrad T.A. job, totalling roughly $500 a month. (My credit card spending was roughly the same, so money in = money out, but toward the end of the term I got cocky and allowed myself to spend "just a little bit more" since I knew that soon a better job was coming... my first mistake.)

Then I graduated and got a job as a software engineer at a telecom firm, and suddenly I was making many multiples of that. Woohoo, I was in the money! It only took a paycheck or two to pay off any balances I had accumulated prior. But then my spending habits started to change, too. There were lots of new gadgets coming out at the time, new PDAs, handheld computers, laptops, projectors, camcorders. I wanted it all, I had it all, and I could easily afford it all. Not to worry -- that and I was saving away $1,000 a month too.

Ah, but then the layoff came in October 2001, after everything tanked in the wake of 9/11. Suddenly I was back to no income again, and I ultimately went back to school for a Master's. My income was once again reduced to a fraction of what I had been making before. Worse, the school's payroll system was pretty bureaucratic -- it was not uncommon for me to miss a paycheck every so often because the school hadn't processed it properly -- "you'll get it next month, don't worry!" they would say.

That, and my lifestyle forgot that my income had changed. Those fun gadgets kept coming. New laptops to replace the old. New camcorders. My PowerBook. The large LCD monitor it's attached to. A color laser printer. Home theatre equipment. I don't know what the hell I was thinking!?

Bottom line: At first it was manageable. Then it was manageable "but I'll just pull a few hundred from my savings to cover this". Then when the school forgot a payment I would say "Well that's still OK, I can still afford this because NEXT month when I get the money, I'll pay it all off..." Then that got rationalized to "Well, it will take 2 months, but I can still do this..."

The irony is, all this time at the beginning I HAD THE CASH sitting in my savings account. I could have nipped this in the bud, but somehow it seemed logical just to "wait until the next paycheck, it will all be resolved by then". I guess I figured letting that money stay in savings and earn interest was better than taking it out because "it will only be a few weeks", not enough time for the credit card interest to do much damage.

... two years later all that cash in my savings was gone, and my month-to-month debt had hit $5000. That's what I considered "rock bottom" for me. The sad thing is I know families, with kids, for whom this kind of financial situation is perfectly typical.

I have been working full time in software engineering again for about 9 months, and that credit card debt is now down to about $2000, and falling. I have learned my lesson (I hope). Though that didn't seem to stop me from buying a 12-string guitar and new GPS this year

I've become much more cynical, of myself, and of the technology world.

So, bottom line:
1. Always make your payments on time.
2. NEVER overspend what you are capable of paying, even if you're SURE that it will all be resolved "in just a few weeks". If you are saving up for a big purchase, SAVE IT UP IN CASH first, then pay off the credit card bill.
3. If you have a balance, and you have the money, PAY IT OFF.
4. That really cool thing you just HAVE to own - you can live without it. Really you can.

 

[takao]

I disagree with Gary's advice about not having credit cards. Having credit is important if and when you need to obtain a mortgage or finance/lease a car. The rates you pay will, in large part, be dependent on your credit worthiness. Renting a car without a credit card is very difficult and impossible at many places.

well that only depends where you live ... if i wanted i could get 200k €*with 1,25 interest rate from my bank when i wanted to finance a flat or house etc. and i only had two savings- and a normal giro account (locked that it can't go into minus) and that's it... and i'm a 23 year old student ...
my parents never owned credit cards either and i don't see any advantage of owning one either except that the chances of getting you in trouble are bigger (costs aside)

 

[Warbrain]

Now considering that you just got a credit card and you're not 25 yet, you don't have a credit rating but you do have a credit report. But you're doing the right thing by working it out.

I wouldn't be able to live without my two credit cards. They're saving me right now. I know that I get paid in October, but that's a long time, and for those very essential things that I know I can pay off later, I'm charging it. And I'm most likely going to make the minimum payment this month and wait till next month to pay off

 

[beatsme]

Wrong.
They can re-report it after that seven years if it is not resolved - remember he still has a $200 issue.

If it has been resolved then the issue goes away after 7 years.

More bad advice. DirecTV doesn't give a **** about you anymore, so they have turned it over to someone who does this for a living. Make sure you deal with the collection agency and DirecTV.

I have in fact done this (told company to call off collection agency) with spectacular results.

I'm just trying to give the benefit of my experience. Lighten up

 

[iGary]

If it has been resolved then the issue goes away after 7 years.

If the creditor wants to continue reporting the information till the end of time, they can. Now if an item remains stale for two years, you can request its removal. Doesn't mean they will, but you can request it.

Not common, but they can. After a certain time, it does not effect your score much ayway, and it costs the creditor money to report it... Anyway, point being things don't HAVE to be removed (like a late payment 10 years ago) if the creditor chooses to continue paying to report it.

Not trying to be an ass (sorry if I'm sounding like one), and sorry if I came off wrong.