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Starting Your Credit History: College Edition

What is credit good for anyway? Were college students! We have more important things to do like preparing for midterms, typing essays, and going out to parties to drink until we puke our guts out. We dont have time to think about building a good credit history.

Unfortunately, by not establishing credit before leaving college is one of the biggest mistakes students make. We live in a world where credit is the key to buying a car, a house, or even landing a high profile job. Without your own established credit you will have to depend on others to cosign for you on major credit transactions. Nothing says independence more like Hey bro, you think you can cosign for me?

So how do you start establishing credit? The best way to start building your credit is by applying for a personal credit card from your bank. You can also establish credit by paying your own cell phone plan and even getting student loans, but they wont have as high of an impact as a credit card. Banks such as Chase, Wells Fargo, and Bank of America offer credit cards to their customers. If you have a checking and savings account with your bank, chances are you are more than likely to be approved for a credit card. Meeting the basic criteria for getting a credit card at your bank is very easy so long as you have a job and regularly deposit money into your account. If that doesnt work you can always have your parents cosign for you to help you get that credit approval. Once you receive your first credit card all you have to do is use it.

Use your card for small purchases like groceries, clothing, basic school supplies, and emergencies. You wont be getting a high credit limit (about $500 or less) and interest rates are high. You want to be able to use only what you can pay back without struggling. Dont overdo it by buying that limited edition Michael Kors purse that will only match with one outfit or that killer sound system for your 92 Honda Civic. The point is to use your credit card to build good credit history, not bury yourself in debt.

A few simple rules to follow once you get your credit card are to pay on time, pay above the minimum amount due (ie if $25 is your minimum payment pay $50, $75, or $100 if possible), and the golden rule: NEVER PAY LATE. By the time you graduate you will have established credit and applying for other forms of credit will be a lot easier.



Help! I Was Rejected for a Secured Credit Card

First, take a deep breath. This is not the end of the world; its not even your last chance at establishing credit, though your choices are narrowing. Be sure you understand why your application was rejected. (It could be something as simple as not demonstrating income -- a card issuer generally refrains from issuing a card to someone who does not have the means of paying the bills.) Thanks to stipulations in the Fair Credit Reporting Act, lenders must provide an explanation as to why you didnt get the card. This paperwork can help you figure out whats holding you back and what your next move should be before you apply for a new credit card.

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Secured cards, like unsecured ones, come with different terms and interest rates, and the most desirable ones -- those with the lowest fees and interest rates -- may be slightly more difficult to obtain. So, one option is to look for a second- (or third-) tier card you can qualify for, possibly one that does not require a credit check. You may want to use this lower-tier card to demonstrate your creditworthiness, then ask to upgrade to a card with better terms and conditions down the line.

Another option is a credit-builder loan. These loans are typically offered by community banks or credit unions, and youll often need to secure the loan with an account at that financial institution equal to the amount of the loan. Interest is relatively low on these loans, and on-time payments are reported to the credit bureaus. At the end of the loan term, your cash is returned to you. Similarly, you may be able to get a share-secured loan by borrowing against a deposit in the financial institution. (These loans arent credit cards, but if your goal was to improve your credit, they can help -- and better credit will help you to qualify for a credit card.)

If the problem is you cant get a bank or credit union account because youve mishandled one in the past, you may need to apply for a joint account with someone who has better credit than you do. In this case, you could also see if having a co-signer could get you approved for a secured credit card or loan. (You could alternately see if a friend or family member will add you as an authorized user to their existing credit card account, though there are instance where issuers dont report authorized users to the credit bureaus, since theyre not liable for making payments on the account.)

Remember, a co-signer is doing you a huge favor; its a risk for him or her, and it offers essentially no benefit. You may want to offer to automate loan payments or to have statements sent to the co-signer so he or she can see that you are paying as agreed. Hopefully, after youve had an opportunity to improve your credit standing, those accounts can be reopened in your name only.

A Better Card in Your Future? 

No matter how you try to address the situation, its important to be sure that the creditor reports to the major credit bureaus so you do get credit for good payment behavior and can readily qualify for financing (with better terms) down the road.

Its smart to monitor your scores (you can get your credit scores for free on Credit.com) and to check your free annual credit reports at AnnualCreditReport.com. You may be able to dispute any inaccurate or time-barred information that could be hurting your credit standing. At the same time, its crucial to make your payments on time and to keep your credit utilization (if you have a credit card) low -- less than 30% of your credit limit, though the lower, the better. Attending to those things should put you on a path toward better credit and easier approval for an unsecured credit card.

More on Credit Cards:
  • Credit.com's Expert Credit Card Shopping Tips
  • How to Get a Credit Card With Bad Credit
  • How Secured Cards Can Help Build Credit

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Are you qualified for a car loan?

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  • You have made the decision. You are ready to get a new car. You can already smell that new car smell. The only problem is you dont have enough money to pay for the car in cash. You need a car loan.

    So, what do you need to be qualified for an auto loan?

    There are lots of factors that go into it:

    • The type of vehicle you are looking to purchase.
    • Whether you have a trade-in.
    • The length of your loan term.

    We talked to Michael Guilbault of Detroit Trading Co. about what you need to know before shopping for a car loan.

    Debt-to-income ratio

    The debt-to-income ratio, or DTI, is the key to determining the terms of your auto loan for you and the lender. This ratio is calculated by adding all of your existing monthly debt and dividing it by your monthly income.

    Your debt takes into account many things -- credit card balances, mortgages, student loans and other debts. A good rule of thumb is to keep your DTI below 30%, especially since you are adding another monthly payment to your debt load with a car loan.

    You can use our calculator to help figure this out.

    Credit history

    It is important to look at your credit history before deciding on a vehicle. Having past negatives can impact your credit score, resulting in a higher interest rate on the loan.

    It can be a deal breaker to have a negative auto loan, but there are some lenders who will still offer financing at a higher rate or if you have a trade-in. It definitely helps to shop around, Guilbault says.

    If youre thinking of shopping for a car, first check your credit score for free at myBankrate.

    Do you have a thin credit file?

    If this is your first car or you havent had a car loan in a while, you may not have much on your credit report.

    This is not a deal breaker, but you may want to look into having a co-signer to keep your interest rates low. If you havent started building credit, consider establishing credit for at least 6 months before applying for an auto loan.

    Guilbault suggests looking for first-time, auto-buyer programs. Many lenders offer these programs, and they can be a great way to get into that new car.

    Guilbault says its important to browse for a new car with an open mind. Dealers and lenders are willing to try different options and deals, but if you are set on a specific car or a certain loan type, that can make the process more difficult.

    Shop with an open mind and your research in hand, and youll put yourself in the drivers seat of your new car loan.



    Bank of America announces grants

    Bank of America has awarded $62,500 in Basic Human Services Grants to Syracuse and Utica organizations to help address immediate needs vital to the health of Central New York residents.
    Basic Human Services Grants have been awarded to:
    * Food Bank of Central New York This grant will support the Food Acquisition and Distribution Program delivering 15.2 Million pounds of food (or 12.6 million meals) through 365 partner agencies in Cayuga, Chenango, Cortland, Herkimer, Jefferson, Lewis, Madison, Oneida, Onondaga, Oswego, and St. Lawrence counties.
    * Rescue Mission Alliance of Syracuse New York The organization will use its grant to continue funding a program serving three meals a day, every day of the year to low-to-moderate income men, women and children in Syracuse.
    * United Way of Central NY, Inc. Eight programs that receive United Way funding for Emergency Shelter/Supportive Short Term Housing throughout Onondaga County will benefit from the grant. These programs are operated through Catholic Charities of Onondaga County, The Salvation Army, Syracuse Area Services, Vera House and the YWCA of Syracuse amp; Onondaga County, and they help homeless youth, men, women, families, HIV/AIDS and victims of domestic violence.
    * United Way of the Valley and Greater Utica Area. Inc. The grant will aid the Community Safety Net program that serves more than 32,000 people and provides approximately 350,000 meals through five direct service providers in Herkimer and Oneida counties.
    * YMCA of Mohawk Valley -- The grant will enable the YWCA to provide ongoing transitional housing and other services to 46 low-income domestic abuse clients who otherwise would be homeless or forced to return to their abusers. The service will allow victims to remain in safe, secure housing for up to 24 months to improve life skills such as transitioning to the workforce, obtaining health benefits, establishing credit history and securing permanent housing and financial independence.


    Are the days of bridge providers numbered and how will it impact Forex brokers ...

    The following commentary comes from Michael Markarian, Managing Partner at Core Liquidity Markets PTY LTD.

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    One of the unique facets of the Forex market is the fact that it is decentralized and the need for liquidity providers. This means that Forex brokers need to connect trading platforms to these liquidity providers which is not as simple as it may sound. The need for bridge providers came about when many Forex brokers were looking to implement MetaTrader 4. When MetaTrader 4 was designed it was done so as a stand-alone broker platform with the popular front end and a risk management component. It was not however designed to interface with banks or liquidity providers as it is not FIX compliant. Bridge providers like One Zero and Boston Technologies created an interface that allowed the world's most popular trading platform to connect to the interbank.

    More and more questions are being asked if the need for these bridge providers is still there. Most recently a series of outages by one of the largest bridge providers One Zero has been most noted as they were considered to be one of the most reliable. Downtime and outages occur, but with this type of frequency this can lead to exodus on the part of Forex brokers. Another issue that Forex brokers are now looking at is the added cost of the bridge provider. Most of these bridge providers charge a transaction fee which eliminates the competitive advantage of MetaTrader 4 in the first place. For Forex brokers that are in an ever increasing competitive environment this gives another reason to take a look at the need for a bridge provider.

    One of the biggest challenges that face Forex brokers are establishing credit lines and the ability to get a Prime Brokerage relationship. Banks have been increasing requirements for Forex brokers in a move to mitigate risk and this is yet another reason why the need for a liquidity bridge is lessened. The biggest question is will it be a technology solution that replaces the need for a bridge providers or will this drive more brokers to using a prime of prime solution to piggy back off of their existing infrastructure.