credit problems

[Yank McCobb]

I agree and edited my post to clarify. Yes I did incur some debt, and yes, I currently do so on a monthly basis...although I prefer to think of it as using the credit card companies' free money. Either way, I think we are saying the same thing. Be responsible. And the best way to do that is through education.

 

[Crizz]

I love happy endings

Now, about G 0 J 3 T 5....

 

[dash8driver]

whats important is having a favorable history with debt management and low current debt obligations. that is, your history reflects that other companies have extended you some credit, you used it and paid everything on time.

at the time that you're trying to get more credit, having debt works against you. some of the yard sticks used is your debt to income ratio and also a debt to credit ratio. so at this point, the less debt you have, the better score you're going to have.

my credit score has gone up recently because of my debt to credit ratio has improved. the only things that have changed are my income and debt to credit ratio. my pay has gone down to help pay for executive bonuses. i have gotten more credit cards and/or my current cards raised my limits. i keep my balanaces low to nil, making my debt to credit ratio more favorable.

 

[huncowboy]

Tell me Crizz why are you so eager to build credit? To borrow more money and go deeper into debt?

There is nothing wrong with debt if the money was well spent and you were able to calculate your budget. Debt can get you an education or it can get you a cruise to Europe.

In your opinion who is ahead of the two? One who takes an education loan of $100,000 at the age of 18 so he might have a professional career at 24, or the other how works wherever for years to save up the same amount then gets the same degree at the age of 28?

Debt is not the problem. The problem is people who don't know how much to borrow or how to spend it. If you have a plan, and a plan B, debt will let you move faster in life. I you have no plan than don't touch it.

 

[psycho]

Um...yeah. Don't sweat it. Ruin your credit. Don't pay your bills - all of the responsible ones in the world will pay them for you. Heck, we pay 18%, what's 20% to cover folks who don't pay their bills. Oh yeah - good luck getting decent (or any) financing on anything with lates and closed accounts on your report. Join the ranks of financiall illiterate Americans who need it now, are clueless about money, suck off of responsible America, and cannot think or plan long term financially. (you will want to buy a house one day, right?) But what does that matter - you're flying a jet! It's what you always wanted to do!!!

AZT

PS: Been in the IP, Regional FO and CPT ranks - you can do it without killing your credit.

Don't forget to send mommy and daddy a thannk you note.

 

[Dangerkitty]

Yep. I am debt free, yet still have an extremely high credit score. I charge every little thing (as well as all the big things) on my credit cards, but pay in full every month. For years and years, my credit history shows me as "paid or paying as agreed". Yet, I have no debt. The cars are paid, the boat is paid, the toys are paid and the mortgage is paid. Yes, you must take on "obligations" in order to build your credit score, but you most certainly do NOT have to take on debt. In fact, that is how most people ruin their credit and often, their entire lives.

Like mentioned above, someone (as most Americans do) could accumulate massive debt while paying the bare minimum requred, and still be given additional credit to accumulate additional debt, simply because they have shown a history of paying. Yet their debt load continues to increase, they pay incredible finance charges, and creditors line up to extend more credit.

I, on the other hand, seek out the best reward cards that carry no annual fees, and pay in full every month. I get to use their money free of charge each month to purchase what I would purchase anyway...then get additional cash back for doing so. All the while, my credit score remains excellent and my debt load zero.

Like was also mentioned above, young people in their 20s, who have yet to develop good financial sense and experience, are the targets of these creditors. They will make tons of money off this demographic and by the time these 20-somethings are 30-somethings, they will be scrambling to remain above water.

So go ahead, take on debt. After all...how else are you going to "build your credit"?

BTW, Crizz...you are most certainly the exception, and I applaud you for being educated and responsible at your age. I know there are many like you, but unfortunately, I think you would agree that you are probably in a minority when you consider most Americans...and especially most younger people who have yet to acquire this education and skill of being financially responsible. Heck, many people NEVER acquire this responsibility, so perhaps I am being overly critical of younger people. But again, you are to be congratulated for being driven enough to succeed in this area.

One last edit....while I might have been overly simplistic in saying you don't have to take on debt to get a good credit score...obviously you have to take on some type of debt in order to repay it...even if it is only the credit card you pay in full every month. It is the accumulating debt that continues to increase due to finance charges and additional debt load that buries most people. And many of these people continue to "pay as agreed". So yes, you have to have an obligation to pay in order to do so, but you do not have to accumulate loads of debt.

With all due respect Yank you are still being duped. Studies have shown that people with Credit Cards spend on average 10-25% more than those that don't. Why? Becuase when you take out cash or you take out a debit card you feel the "pain" of giving that money away for a good or service. When you pay with a Credit Card you are just passing the pain on to another day and time.

You state that you have cards with the best rewards programs. Why do you think that these Credit Card companies have these reward programs? They don't do it out of the kindness of their hearts. Rewards programs are there for a reason. What you get for these "Rewards" you make up in increased spending.

Just my opinion. But I think you would be better off not using the cards and spending the cash instead.

 

[Dangerkitty]

I am still curious, however. How does one build a credit score with the absense of any debt repayment? If I never once had a loan. Never a credit card. What would my score be?

You addressed a specific flaw you saw in our commentary. The fact that you cannot improve a credit score by incuring debt.

I hold the exact oposite. You CANNOT increase a credit score with an absense of debt.

I think you have been talking to too many bankers who state you need to incur debt or get credit cards to "build" your credit score.

Like I said before history of payments is only a part of your credit score.

The bigger question is. Why are you so interested in having such a great credit score? To get a loan or are you worried about not getting that job or higher insurance rates becuase of a bad credit score. (Which you will NOT have from having no history of debt repayment or credit cards.)

Answer that and I will expound further.

 

[Dangerkitty]

There is nothing wrong with debt if the money was well spent and you were able to calculate your budget. Debt can get you an education or it can get you a cruise to Europe.

Here is a novel concept. How about not taking that trip to Europe until you can afford it. Credit might get you a trip to Europe but do you really want to have that vacation following you for the next couple of years becuase you could not afford it in the first place. How about saving up for the trip and paying for it in CASH!

In your opinion who is ahead of the two? One who takes an education loan of $100,000 at the age of 18 so he might have a professional career at 24, or the other how works wherever for years to save up the same amount then gets the same degree at the age of 28?

Minus going to to med school can you tell me why you need $100,000 for an education. If you can tell me what you need that $100,000 for in regards to an education and I can give you some dang good alternatives.

Debt is not the problem. The problem is people who don't know how much to borrow or how to spend it. If you have a plan, and a plan B, debt will let you move faster in life. I you have no plan than don't touch it.

Tell me then, what is your plan? And can you tell me why debt is not the problem? Do you have any debt?

 

[Dangerkitty]

Thank you for your reply. We can actually have a discussion if we treat one another with respect.

You make some excellent points. And I agree with almost all of them. You're right. Debt is a cancer. Money is too easily acessible for the masses.

My point was simply that without any positive credit history, you will have problems applying for any kind of other long term debt. Im sorry, but its unfeasable to pay cash for a house. And if you dont want to be raked over the coals on your huge investment, then you better have a good credit score. I have $50k in school loans and a $180k mortgage. At the age of 22 my score is 745. It has only gone up with the addition of long term debt. I qualified for the best rate possible when consolidating my school loans, as well as when applying for my first mortgage. I have debt. The majority of it has been unavoidable.

Given the choice of paying monthly rent or owning a house with a mortgage, I think the choice is clear. That debt is unavoidable and only solidifies your ability to be efficient with the money you borrow and ensures a low interest rate.

Many people pay for college as they go. Believe me, I worked my tail end off while in college and paid every cent I could to contribute to the cause. However, if given the choice of taking 5 6 or 7 years to complete the college/ratings/flight instructing hurdle like so many people do, I chose to take on some debt to help grease the wheel into a career many years before I would have had I not incured any debt. And as a result, my earning potential and net worth over that same time period will be vastly improved.

The term leverage comes to mind. Thats all I have to say about that.

Crizz,

I should have been more clear. I do have a mortgage. That besides one car payment that I will have paid off in less than six months is my only debt. However, I only favor a 15 year fixed rate mortgage. No ARMS, No interest only loans. Fixed rate 15 year loan of less if you can handle it.

 

[AZ Typed]

Don't forget to send mommy and daddy a thannk you note.

um...I don't get it?