Credit iis Overrated (vol. Focus on your bank account)

crcballer55

crcballer55

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There have been many posts lately about buildingcredit and how to build your credit score. To all the young guys, this isthe wrong question to ask yourself. Hereare several reasons I’ve collected to avoid debt and eventually pay for thethings you want in cash. It will takesome sacrifice of convenience and image, but doing these things will allow youto multiply your money exponentially over the long run.

1) 1) You spend 12% more on average when you useplastic vs. cash.

http://www.getrichslowly.org/blog/2008/09/23/research-reveals-credit-cards-encourage-spending/

2) 2) The average household carried a balance ofalmost $16K on their credit cards with an APR of 14.89% which would bring thefinance charge to over $2300/yr.

http://www.creditcards.com/credit-c...ustry-facts-personal-debt-statistics-1276.php

3) 3) You could be driving free cars for what yourpayments are costing you. Your carpayment is likely keeping you from being a multimillionaire later on.

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1) 4) You can pay for college with scholarships and byworking.  This guy has a great story thatI highly recommend. Amazon product ASIN 1591842980
2)5) It is possible to get a mortgage, but you willneed to find a company that will manually underwrite your loan. This means that the large banks won’t be ableto give you a mortgage, but I would be fine with that after dealing withseveral of them during multiple modification attempts for people.
 
"on some real !***, mutha %!$% a credit score...cause when you got the cake, what you need the credit for"
 
i somewhat agree.

the thing is, most people dont have the patience and willpower to live cash and carry or go the extra mile to find non-credit alternatives (like going with a lender who manually underwrites loans).

One thing I have learned from NT is the whole NEVER buy a new car thing. While its nice to drive a brand new car off the lot, that benefit is greatly outweighed by the cash savings of buying pre-owned.

While I am very vigilant about maintaining excellent credit (800+ on all 3 bureaus woohoo!) in case I need future credit, I have tried to make more of an effort not to rely on debt. I still use my AMEX for just about everything, but it gets paid off at the end of each billing cycle (if not before). I just like the added consumer protection AMEX offers, the ease in tracking my spending, and the bonus points they offer. Thankfully I am student loan free and we are more than halfway there with the wife's student loans (which my in laws actually help to pay). The last payment on my wifes car was made in July (and of course the car starts to have transmission problems the month after its paid off... FML), and we have $0 outstanding revolving debt. The only debt we do have is the mortgage which is being refi'd this week. To be honest, buying a house (actually a condo) is a decision I kinda regret now, but its too late for regrets. Hopefully the damn market turns around and I dont end up underwater like so many other Americans.

I work in sub-prime lending myself so I see on a daily basis the problems that can come with having bad credit. Heck... I dont just see it, I am actively contributing to the cash flow hardships of people who are trying to apply for money at the rates I charge.
 
Originally Posted by Mojodmonky1

 The only debt we do have is the mortgage which is being refi'd this week. To be honest, buying a house (actually a condo) is a decision I kinda regret now, but its too late for regrets. Hopefully the damn market turns around and I dont end up underwater like so many other Americans.
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Just out of curiosity, when/why did you by then? I'm honestly terrified of owning any property that is mortgaged just because of this situation but I know with my hefty loans I don't think I'll ever be able to outright own.

I don't see myself making any big purchases (car, house) until I absolutely need to hopefully well into my 30's and I hope I can just outright buy.
 
What's the best way to purchase a home without borrowing?  SRS

In Southern California, even though home prices dropped, they are still over priced.
 
I use my CC's strictly. From McDonalds to online shopping, I only use my CC if possible. I do however pay off my CC balances in full monthly. The other credit card debt I have are are at zero pct APR which were from balance transfers. Checking my Quicken program, I have deposited $575 in cash back bonuses this year just by using my Credit cards so I am actually PROFITING from using my CCs. My vehicle is paid off and the only other outstanding debt I have is my mortgage.

If your CC APR is 15% then your credit rating is horrid or you don't know about the concept of transferring your balances to a lower APR by paying a small fee.  

I love Credit Cards... you can buy anything you want anytime you want!  All in all it's about being responsible with your credit.
 
Originally Posted by ryair max 1

Originally Posted by Mojodmonky1

 The only debt we do have is the mortgage which is being refi'd this week. To be honest, buying a house (actually a condo) is a decision I kinda regret now, but its too late for regrets. Hopefully the damn market turns around and I dont end up underwater like so many other Americans.
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Just out of curiosity, when/why did you by then? I'm honestly terrified of owning any property that is mortgaged just because of this situation but I know with my hefty loans I don't think I'll ever be able to outright own.

I don't see myself making any big purchases (car, house) until I absolutely need to hopefully well into my 30's and I hope I can just outright buy.
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i bought late 2009 early 2010.  it was an REO property with a buncha title defects and pending litigation between the evicted former owner and the bank that needed to be cleared up, so my escrow went for 8 months.  Offer was put in and accepted in late Aug/early Sep.  Didnt close til early April 2010.

if im being 100% real, the biggest reason why we bought is because we bought into the whole BS of "thats just what you do... American dream... blah blah blah".  My wedding was right around that time (Feb 2010) so we just thought that was the natural progression of get married - > buy a house -> have kids, same old same old you know?  admitedly i was enamored by the whole idea of getting married and starting "fresh" in our first house (condo) together, not the same old apt we had been renting for years (wife and I had been living together for almost 4 years prior to getting married).

another reason i bought was becusae I foolishly thought that the bottom of the real estate bubble was close.  I wasnt buying for an investment persay, but moreso for some stability and to have and raise a kid here.  The prospect of the r/e values rebounding was an added bonus.  guess I was wrong there.  I guess I was somewhat lucky though and values havent dropped too crazy in my specific part of Los Angeles.  I bought at 488 and it appraised at 475 last week when I had it appraised for the re-fi.  -2.7% reduction in value over the course of 15-16 months is not the end of the world (although it still sucks).

i was also motivated to buy because of the 1st time buyers credit they were offering in 2009/2010.  Granted, I just gave that money right back in terms of lost property value, but again... at the time it was enticing and seemed like a good idea.

lastly, it kinda was a "keeping up with the jones's" kinda thing.  A lot of my friends who were already married (even some that werent) were buying.  Prior to 2009, maybe only 1 or 2 of my friends owned their home.  In 2009/2010, 4 of my close friends all bought a place, and it sounds foolish to say now, but it kinda was like YEAH! WE ALL DOIN IT! TOGETHER!  so dumb...

in terms of regrets about buying... to be honest, its not just the money.  its also the convenience factor (yes, i am lazy).  when i rented, if something broke, i called the landlord and he took care of it.  now, if something breaks, i bust out my checkbook and curse the day i decided to buy.  home upkeep and repair is a friggin pain in the butt, and its not like my place is even that old (built in 2005).

  
 
if you pay off your total credit card balance every time you get your bill you still have to pay the apr?
 
If you have cash, credit becomes less relevent.

I know people who have bought nice cars....all cash. Most NTers will never have that level of income though, so credit is eesential.
 
Originally Posted by lilpro4u

Quit spewing this anti-credit BS bruh.. Not everyone goes into debt. 
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True
But paying off a good @#%*+ of your mortgage/car payment>>>loans
 
Originally Posted by lilpro4u

Quit spewing this anti-credit BS bruh.. Not everyone goes into debt. 
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I got to agree. It becomes annoying after a while. 
Like sometimes people ask for advice on what car to buy and then someone chimes in at how bad it is to buy a car and have a loan and that only buy a car cash, blah, blah, blah... Dude just asked for a car suggestion and all of a sudden the thread is bombarded with ridiculous and unnecessary financial advice. 
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I can agree that it is a good advice especially to the younger NTers around here but it's also not adaptable or best for everyone's situation. 
 
If you're using credit to live outside of your means then you have a problem. If you use CC's to gain bonus points/cash back and for protection of major purposes (including extended warranties), then you're on point. Also, when you lose cash it's gone, period. When you lose a card you can get it back in 24 hours and have fraudulent charges disputed. There's also travel perks and flat-fee car rental insurance in some cases, amongs other things.

Credit is a tool, not a a toy. The game sucks but you still need to know the rules and take advantage when and where you can.
 
Good credit is great. I love using the bank's money instead of mine at interest rates of 4% or lower.
 
Originally Posted by cguy610

Good credit is great. I love using the bank's money instead of mine at interest rates of 4% or lower.
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I love using Best Buys no interest for 3 years promotions on home theater/appliance purchases. I could put that $3k-$4k on a savings account, CD or some investment and make a few bucks on it instead of paying it all off with cash. 
 
laugh.gif
 at thinking "Cash is King"...
Please don't suggest that people entering the "credit-world" cease before they even start. You'd be setting them up for an assortment of hardships later on in life...
 
Originally Posted by SunDOOBIE

Checking my Quicken program, I have deposited $575 in cash back bonuses this year just by using my Credit cards 
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And which card would this be? All the offers i'm aware of make me think you're spending more than 10K to achieve that?
 
I take advantage of No Interest offers, you just have to be disciplined and pay it off before you get slapped with interest.

No one has answered my question though?

I've purchased cars straight cash, it takes time but it's not difficult. A home though, that's out of reach unless you have the means.
 
buying a house in cash is stupid because you still have to pay property tax and insurance so you're not really out of debt. Im 3 almost 4 years into a 30 yr but will be done in 12-15 if I keep sending more. I usually send my tax return right to the principal.

Credit>Cash. My highest interest rate on any of my cards is 11% but if I have a balance they're on 0% cards.

Buying in bulk on credit>Buying in cash
 
Yeah keep thinking it's overrated as companies put your information in and it spits out a score which can be a big factor in whether you get hired or not.
 
Originally Posted by BrotherForReal

buying a house in cash is stupid because you still have to pay property tax and insurance so you're not really out of debt. Im 3 almost 4 years into a 30 yr but will be done in 12-15 if I keep sending more. I usually send my tax return right to the principal.

Credit>Cash. My highest interest rate on any of my cards is 11% but if I have a balance they're on 0% cards.

Buying in bulk on credit>Buying in cash
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I know, it was aimed at the "credit is overrated" crowd.  Hard to get a mortgage with no credit.

Have a friend who just got his first credit card, he turns 27 in April.  A lifetime "cash" guy.  Good luck building that credit.

I had rough patches with credit in college, but once I got a stable job I turned the tables.  800+ across the board for me,
glasses.gif
 
I just read Dave Ramsay's book on this. Highly recommended.
Total Money Makeover.
 
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