credit problems

[tuna pimp]

That is by far the most uneducated statement I have ever seen written on these boards.

DEBT IS NOT A WAY TO BUILD A CREDIT SCORE!!!

But it sure is a way to destroy it.

No, actually you're incorrect. You need to take on debt (car payment, credit card) RESPONSIBLY in order to build a credit history. You need to show creditors that you can repay a debt obligation on time before they will consider you for a larger (mortgage) or more risky (business) loan. One of the metrics in which credit worthiness is measured is by how long your credit history is.

I'm not saying charge everything you can to a credit card, but showing that you can repay within terms of agreement is crutial to build up a credit rating in your late teens and early 20's.

 

[WWEfan]

That is by far the most uneducated statement I have ever seen written on these boards.

You must be new here. Welcome aboard!

 

[Crizz]

That is by far the most uneducated statement I have ever seen written on these boards.

DEBT IS NOT A WAY TO BUILD A CREDIT SCORE!!!

But it sure is a way to destroy it.

Tell me, how DOES one build credit on the Dangerkitty self wealth enhancement plan?

 

[Dangerkitty]

I beg to differ. How many millionaire silver spoons have horrible credit? Why? They have always paid cash. If you have never had any debt to show positive payment history with, then how will you ever have "credit"

This forum is the most bipolar bunch of chaps I've ever seen - everyone is always ready to jump down everyone else's throat.

FWIW I have a good amount of debt from college, and have what is considered to be "top box" credit. Just pay your bills on time and good things happen.

You guys are so clueless about debt you dont even know you are clueless. But hey what do I know I am only a financial counsler in addition to being a pilot.

Millionaires ARE millionaires becuase they pay cash. Millionaires ARE millionaires because the don't get into debt.

Debt is a cancer that is spreading across America. The average American's household debt has increased 173% since 1992. The average American's unsecured Credit Card debt has increased over $10,000.

Having a good credit rating is nice but paying your bills on time is only a portion of what goes into a credit score. Having debt only hurts your credit score, it does not help it. And just so you know there are Banks and Companies that WILL lend you money without a beakon score. They are few and far between but there are some that will do it.

Debt and credit are so out of control in America that Sears now makes more money in its financing division than it does selling product. That is the reason every shop and Department store are tripping all over themselves to get you to sign up for one of their credit cards. (Oh yeah but you do get that 10% off the first purchase )

I am not "jumping down your throat" Crizz. I just see people all the time that think they know about Credit and Debt when they have no clue. I am not saying you are one of them but I do think your advice earlier is really misguided.

Debt is something to always be avoided at all costs. BTW, I got 802 Credit Score rating 6 months ago and I only have a house payment. No other debts. I guarentee that it wouldn't be that high if I had had any more debt piled on.

If you are truly interested in learning about Debt and Credit read "The Millionaire Next Door" or go to www.daveramsey.com and buy Dave's book "The Total Money Makeover" It will change the way you view money and debt.

 

[Dangerkitty]

Tell me, how DOES one build credit on the Dangerkitty self wealth enhancement plan?

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

 

[Dangerkitty]

I'm not saying charge everything you can to a credit card, but showing that you can repay within terms of agreement is crutial to build up a credit rating in your late teens and early 20's.

Giving a credit card to someone in their late teen's or early 20's is the same as giving a child alcohol to teach them about drinking.

College kids are the #1 target of Credit Card companies. WHY? Because they are the most likely to go deep into debt and owe massive finance charges to the Credit Card holder. These companies don't target college aged kids out of the goodness of their heart. They do it becuase they see massive dollar signs.

 

[Crizz]

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.

 

[Yank McCobb]

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.

 

[Crizz]

That is by far the most uneducated statement I have ever seen written on these boards.

DEBT IS NOT A WAY TO BUILD A CREDIT SCORE!!!

But it sure is a way to destroy it.

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.

 

[Crizz]

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.

Granted, you are debt free. You cant tell me you paid for your first house with cash or that you never had any long term debt. You have presumably a large chunk of a career worth of earning under your belt. Also, you have a large chunk of repayment history on any debt you did incur. The fact that you currently have no debt but your score is high is completely meaningless unless you account for how your score got to where it is. Call it obligation or debt, you are still using someone else's money to make purchases and repaying it at a later date.

You are currently incuring debt on a monthly basis, and paying before your credit card company has agreed to charge you. This is simply a gamble by the credit card company that usually pays off in their favor when people pay interest and hold revolving balances. A minority carry no balance and credit card companies most certainly do not make a profit on individuals like yourself. This doesnt erase the fact you have shown a positive borrow and repayment of debt each and every month.

I certainly hope no one is under the impression that incuring a ton of credit card debt, and then carrying it for extended periods, is the surefire way to good credit. I am simply saying that the lack of any borrow and repayment history most certainly dooms you to bad credit.

Thank you for your kind words, Yank.