So this will probably be a long winded post but TLDR is:

OP is a 21yo male that wants to build his credit and eventually get a mortgage. Already have a vehicle loan that my dad cosigned and I will pay it off before the minimum 1yr of payment history to refinance so that won't really help. Better to get a credit card or 2-3k loan for ATV/log splitter/etc?



Detailed version:

I owe 6k on the truck and will have it paid off in about 4 months. No sense waiting and refinancing in a year for a worse interest rate. I already have 2 trucks, so no need for another vehicle loan either


Was going to finance a 2024 Polaris Ranger and pay it off in a year but would need a cosigner for that as well, so no dice.


So what about a 1-3k loan for say a log splitter or ATV and paying it off in a few months?

Or just get a credit card (ideally one with rewards for fuel since that's pretty much all I use my debit card for)

Also open to specific credit card suggestions

I'm not a believer in buying shit just to build credit.

Save a bunch of money, get a good paying job, and buy a house.

Maybe things have changed, but I had one credit card with small purchases on it when I bought a house.  I had a lot in savings, zero debt, and a good paying job, and had zero problems getting a mortgage.  

But, maybe things are different now.

I job hopped during and before college, now have a good paying (for the area) job that I like

From what I'm seeing with coworkers and friends, it doesn't matter if you have a 10% or a 40% down payment: low credit = no approval

Get a COUPLE credit cards.  DiscoverIT is a great secured card if you dont qualify for one on your own, and convert automatically after 7 months to unsecured and will offer great limits too.  Capital One also offers secured cards, but they suck for converting into a reasonable limit.  It is hard to get GOOD cash back cards unless you have good credit scores.  But there are several 1.5% cash back cards you can likely get quickly.

Sign up at credit karma and Experian and get your credit scores, and monitor them.

You need LONG credit history, and the best way to build that is to get a couple cards and keep them for a long time.  

Getting a short-term installment loan is good too, but it won't help you establish years of credit history over time, it only helps credit diversity which is relatively low part of scoring.

2nd this ^^^^  

Find a bank that does manual under writing and speak with the loan officer about a mortgage. They still exist.

Put me in the open two credit cards camp.

Tap them both occasionally and then reimburse yourself the next day paying the balance to zero.

Never miss a payment and it’ll show historical data of being a “good debtor”.  

Meanwhile, I would gun hard at having a 20% down payment in hand when the time comes.

You need two things
Big block of cash.
Stability in credit over time.

Get a loan to buy something you don’t need because you think it will increase your credit score?  That’s the dumbest thing I’ve read here in a long time.   If I were a loan officer at a bank and heard you say that I would reduce your loan eligibility.    

Be responsible, pay your bills on time, and you’ll have a decent enough credit score.  Credit score is historical, so if you’re 21 you likely don’t have a long enough history for a really high score.  An unnecessary loan will not make your credit history longer.  

If you don’t have a credit card you’re leaving cash back on the table.  But a credit card takes discipline because you can spend more than you have, it sounds like that could be an issue for you.  If you get one select the one with the best cash back based on what you spend money on.  Ie If you spend most of your money on groceries then get one that has best cash back for groceries.  Whatever you do pay it off immediately and make sure you never pay interest/late fees.  

My Daughter bought he first home when she was 19. She had a good secure
job and she was qualified for first time home buyer programs.

OP Speak to a realtor about your options.

I had to have a credit score to buy a house and kept getting turned down for every credit card I applied for.  I ended up going to the bank and doing a secured credit card with a $1000 limit, and I put a $1000 in a savings account as insurance for the account.  Buy gas on that card, pay off every time the bill comes, and you've established a credit history.

For a second credit account, I also took a $1000 loan from the bank, stuck it in a CD account, and made payments on it for a year and got the money when the CD matured.

Don't pay off loans too early . They want to see on time , over minimum payment amount . If you get a loan and pay it off too soon it does not help you .

@Morgan321
I need an atv/SxS and a log splitter within the next year or so, the difference is financing it vs paying up front.

My biggest expense is diesel fuel, in fact I think the only charges on my debit card for the past few months have been for diesel

Also have 6 months expenses in my emergency fund

OP, I think its funny, no matter what you ask about A, B C or D,  You get Try F, thats my way and way better than any of the things you asked about, even though you asked to limit it to those.

To attempt to answer your question.
I went though this with my now wife when we 1st got together.  She was wanting to rebuild her credit after a bad divorce/Bankruptcy.

I told her to get a hold of US Bank, tell them you want a secured Credit Card. With a 300.00 Limit, you basically, give them 300.00 as a deposit or collateral for them giving you a CC with a 300.00 limit.  Use that card, put maybe 50-70 dollrs in charges on it, make 3-4 payments on it, pay it off.   Put another 50 bucks are so on it, DO NOT max it out.  Keep doing this.  After 608 months go to another Bank BOA, whoever you like, do the same thing.   After say 8 months there, go back to the 1st one, give them another 300-400 bucks and ask that they raise the limit on your card.  Now put say 150-200 on it, keep paying it on time.  Do the second card.

After maybe 2 years or so, IF you have not went over limit, been late or had any screw ups, your credit should be coming up.

When she 1st started, she had a low, 4 or 520,  after like 2 years, she had built up her credit enough to get a 120K house loan.
I told my daughter to do this and it worked the same for her.

I got the idea from one of my friends who was into finance and he'd recommended it to several folks.

I'm sure there are others.  Nothing is Quick, Easy or free...  If it says it is, its likely a scam.

It still helps your credit score for credit diversity.  It just does not help your long-term credit file with average age of credit being impacted, and will have a (very) short term score penalty once the payoff happens, but it will recover quickly.

The game is stupid - it is not a really anything to do with what you do...

but rather a "I love Credit Score".

They will f'en ding you for opening up a new card...

Sounds like you buy a lot of gas - play the game and go get a Costco card and their CC - you at least get 4 percent back on gas...I use my rebate to buy my Christmas Present each year.

Red

Don't have a costco anywhere close, maybe 2hrs away. Sam's Club is close, already have a membership but I refuse to buy their watered down trash diesel

I think my credit union offers a secured card, will look into that this weekend. Only card I have is my debit card for my checking acct so not sure why they'd ding me for opening one

I was once in a position similar to OP.  I had no credit score at all, and no clue about different sorts of loans and cards.
I went to my credit union and did basically a loan of your own money.  Its a loan that is guaranteed with your own money that you already had in your account.  Its zero risk to them.  They report it to the credit bureaus.  It costed like $50 over whatever the loan amount was and ran for a couple years racking up "paid on time" entries on the credit report.

Whether or not that was a good idea, I cant say.  It did help when I went to get a house.  I didn't have any bad experiences with it.  My only regret is I think I was doing perfectly fine with no credit score.  It felt stupid to have to pay the $50 to get one.

Otherwise, with no credit score, I would have had to go through manual underwriting and would have been more limited in who would have given me a mortgage.

As to the questions about financing an ATV or a log splitter, I think in general, financing random bullshit is a bad habit to get into.  Would not recommend.  Especially if they are gonna bend you over backwards for some 30% interest rate.  My advice to a young person is dont finance anything.

Whenever you open a new line of credit - your score takes a temporary ding.  One, for the new inquiry (hard pull).  These will impact your score because it shows someone is applying for new credit.  Two, opening a new line of credit impacts your average age of credit.  This will recover quickly.  It will also be offset by a boost, if you have a VERY thin credit file (like you do).  I always recommend opening TWO credit cards (two is one, and one is none) and allowing these to age will get your average age of credit growing, and improve your score dramatically over time.

I got my first credit card when I was 17 years old and left for college.  I still have it, over 35 years later.  I don't use it much as it is not a good rewards card, so I check my netflix to it and it auto-pays in full every month, to keep it active.  This one account helps ensure a very high credit score, because the older your open lines of credit are, your score improves.  You are young and need to start somewhere.

There is nothing wrong with that approach, but it is not necessary.  Getting a couple secured credit cards then letting them convert to unsecured will have the same positive effect.  Using the CU loan as an installment loan gets you a little boost for credit diversity, but there is no need at all to pay thing to achieve a good credit score.  You can stay debt free, never pay a dime in interest, and maintain an 800+ FICO score.

All I had was a Discover card for 5ish years, and they were ready to loan me a ton of money for a house. I took about half what they'd loan.

Don't finance ANYTHING. At least that's my advice.

Authorized users on credit cards will report.

If your parents have good credit/payment history they can add you as an authorized user. They don’t actually have to give you the card. That way it doesn’t show as an inquiry either.

That’s what I’ve done for my kids. By the time they hit 18, they each had an 800 score. I never gave them a card to use, but my spending/payment history is actually reported on my kids credit report.

How's that work if I want to screw with somebody?  Can I add Hilary Clinton as an authorized user on my cards, then run up a bill and never pay it and tank her credit?

Something to consider: every time you use your debit card increases the likelihood of it getting hacked and money taken from your checking account for fraudulent charges.  Sure, eventually the bank will return the funds but it can take a few days and in the meantime there may not be enough in your checking account to cover your current bills.

When a credit card gets hacked all you lose is a little credit, not your own cash.  The thieves have stolen the bank's money not yours.  No big deal, you switch to a backup card because you have two not one.

Ton of info about starter credit cards: https://wallethub.com/credit-cards/starter/

I think this advice is a decade old.  My debit card is forever getting popped from hacked/skimmed gas pumps.  The bank/credit union locks the card, issues a credit to my account, and gives me a new card on the spot.  You are not out a single penny while they do their little investigation.

Because this hack was quite popular, FICO has changed scoring models, and this does not benefit the user near as much as it once did. I have used it recently, and it is still only slightly beneficial to FICO 8 but I hear FICO 9 will discount it even more

You have to have their SSN at a min. I’m sure here credit usage is monitored.

It also screws up everyone else who is on the account. Probably not the brightest idea.