Caution . . . Credit

[David M]

When you think about it credit is your proven ability to pay back a loan. It has little to nothing to do with ability to pay back a loan, it has to do with having a proven track record that you have paid back a loan.

If you not have made payments on a loan in a long time then what do they have to go on?

I am just looking at it like lenders see it, it's not that I agree with them.

[sailorboy1]

Originally Posted by MarkSF

The true nature of the credit rating system is that you get the best one for having lots of debts that you make payments on. Those who do not get into debt and pay for things up front are penalised.

Not really true. You get the best rating for having had open accounts a long time, having a high credit limit but low balance, have had big loans and paid them off.

I use credit all the time. In fact I buy almost everything with my credit cards every month (probably 80-90% of the money I spend each month). But I pay it off each month from the same checking account I used to use to buy the stuff to start with. Less paperwork for me and I make $200/mo on the card rewards (they pay me to use the cards). Aren't paid any credit card interest in years!

You guys without credit history are cutting your noses off to spite your face. Just because you have good credit doesn't mean you have a lot of debt. Learn to play the credit game to your benefit. If you have the cash, buy it with your credit card and then pay it off!

PS - note to self, buy something this month with the cards don't normally use so they stay current

[perchance]

What a strange world we live in where the more indebted you are the better your credit rating. My wife and I took great pride in being debt free and always believed that "cash was king". That is until we went to apply for a loan.
We were told to go open an account at any retailer and make some purchases on credit just to get a rating.
It seems that if you are not someones radar you don't exist which would suit me just fine if I didn't need to borrow from time to time. If you pay cash for everything you are automatically suspected of doing something illegal to obtain your money.

[jcapo]

Originally Posted by Don Lucas

I use credit all the time. In fact I buy almost everything with my credit cards every month (probably 80% of the money I spend each month). But I pay it off each month for the checking account I used to use to buy the stuff. Less paperwork for me and I make $200/mo on the card rewards.

+1

Credit cards simplify our cruising life considerably. Having/using a credit card does not mean you are in debt slaved to those evil corporations.

[Charlie]

While I agree that overextending yourself with debt is a bad thing I find it more satisfying to use the corporate rules as a double edged sword. I pay for everything with my credit card. It has a 28% interest rate. You know how much I paid interest last year? $0.00. I pay it off monthly. I don't use it as credit. I keep the money available and then pay it off. As of last year I had around 1,000,000 frequent flyer miles. When business was booming and I was building houses I paid for all of my building supplies with a credit card. Then when the credit card payment was due I paid that. If there was a discount for paying in cash as opposed to a credit card I paid cash. Last year our trip to Italy to sail on The Italian Job airfare for a family of four (from Kalifornia) cost all of $527. Total -- for all four -- not per person. So while I like the idea of being a ghost in principal -- My mortgage is lower then rent would cost for an apartment, I don't have trouble renting a car, and I can fly for cheap. If the house is winning off of me they aren't winning enough to bother me. Thanks for the post Randy and thanks for the insurance info Cheekao

[sailorboy1]

Credit card companies and banks don't put people into debt, people do it to themselves!

[SteveT]

Have to say I agree with those who pay in full each month. I travel around the world a lot so without a credit card I'd be forever carrying large amounts of foreign currency etc. Instead I have a credit card which I pay in full at the end of each month. I have not paid a penny in credit card interest for years. I have no mortgage and no debt at all. If as occasionally happens there is a surcharge for paying by credit card then I just pay cash, but usually there is not. Also a credit card with a decent limit is almost a guarantee of being able to get home in an emergency from just about anywhere in the world should I need to - or at least from anywhere I am likely to find myself. Credit cards in themselves are not evil - having a credit card does not mean you must buy something which you can't afford - there is a thing called self-determination?

[Palarran]

The basis of credit is proven long term income and/or liquid assets. While you may have been able to get a $50k signature loan, it was probably because you had attached the equity value of your home to it. And, you had a job.

Is this actually a complaint or just an unfortunate observation? Why do you need the loan after cruising for 10 years? I personally am happy the banks are tough on lending standards. It would be nice to forget about the past but hopefully we will learn something from it.

We also pay about 90% of our bills with credit cards. Heck, I buy my Micky D's with one. Frequent flier miles get me to where I want to go. My 18 year old son has one. There is absolutely nothing wrong with using credit cards as long as you actually pay them off in full every month.

[Charlie]

Originally Posted by Palarran

While you may have been able to get a $50k signature loan, it was probably because you had attached the equity value of your home to it. And, you had a job.

A signature loan by definition is not attached to the equity of anything. It is just that I sign a document that says I am willing to pay you back.

[CarlF]

At least for US customers, Fidelity Investments offers an American Express card that pays a 2% cash rebate on every purchase. So I use the credit card as a discount card.

You don't have to do a thing, the 2% is swept into the Fidelity account of your choice at the end of the month (Fidelity ain't stupid they hope you leave it there ). No fees. No minimums. You need a Fidelity account but this could be an IRA or anything. I don't know what the interest rate is because I pay if off every month (Actually I overpay. I don't get any interest in my checking account so I might as well leave some extra cash with American Express).

Carl

[ahnutts!]

Originally Posted by Don Lucas

Not really true. You get the best rating for having had open accounts a long time, having a high credit limit but low balance, have had big loans and paid them off.

I use credit all the time. In fact I buy almost everything with my credit cards every month (probably 80-90% of the money I spend each month). But I pay it off each month from the same checking account I used to use to buy the stuff to start with. Less paperwork for me and I make $200/mo on the card rewards (they pay me to use the cards). Aren't paid any credit card interest in years!

You guys without credit history are cutting your noses off to spite your face. Just because you have good credit doesn't mean you have a lot of debt. Learn to play the credit game to your benefit. If you have the cash, buy it with your credit card and then pay it off!

PS - note to self, buy something this month with the cards don't normally use so they stay current

Absolutely right! The trick is to not become the guy paying for other's card benefits. The other concern is the extra fees some cards charge to the merchants. Its one thing to use them at the giant corporate box stores but I wouldn't do that to my favorite restaurant.

[Palarran]

Originally Posted by Charlie

A signature loan by definition is not attached to the equity of anything. It is just that I sign a document that says I am willing to pay you back.

I guess maybe your right. I'm almost 50. I've owned a fairly large business for 25 of them. I have a lot of assets and very few liablilities. My company has been with the same bank for almost 50 years. And I've never had an opertunity to just sign a piece of paper saying give me $10 and I'll pay it back (maybe). Read the fine print and I guarantee that you guaranteed that signature loan with pretty much everything you have.

[Mike OReilly]

I agree that the wise use of credit cards can be individually useful (much like the wise use of technology). However, nearly 50% of card owners DO carry a balance. And last I saw, credit card balances were at an all-time high in Canada and the US.

Merchants all pay additional fees for every card used, and they pay even higher fees when people use these premium points cards. This added cost gets paid by everyone in the form of higher prices.

Most of the points cards also come with annual fees.

Credit cards produce large profits for the banks. Just like casinos, they've figured out how to win. And just like casinos, smart players can beat the house for a while.

There's nothing wrong with choosing not to play their game.

[zeehag]

i have played ghostie for decades....couldnt get credit thanks to hubby not paying child support and raising a kid is not easy with out assistance---always pay cash and i walk or ride the payment to the person to accept it--i donot mail payment. i can buy online with paypal---and i do have a bank account to receive my(not) "entitlement" LOL..income,which i remove when received and use cash to buy things.

[Cheechako]

Originally Posted by Don Lucas

Not really true. You get the best rating for having had open accounts a long time, having a high credit limit but low balance, have had big loans and paid them off.

I use credit all the time. In fact I buy almost everything with my credit cards every month (probably 80-90% of the money I spend each month). But I pay it off each month from the same checking account I used to use to buy the stuff to start with. Less paperwork for me and I make $200/mo on the card rewards (they pay me to use the cards). Aren't paid any credit card interest in years!

You guys without credit history are cutting your noses off to spite your face. Just because you have good credit doesn't mean you have a lot of debt. Learn to play the credit game to your benefit. If you have the cash, buy it with your credit card and then pay it off!

PS - note to self, buy something this month with the cards don't normally use so they stay current

Much like you I buy almost everything... especially big ticket items.... with a CC. I pay in full each month and have a couple hundred thousand in frequent flyer miles by doing so. Even my insurance companies take CC's. It's a lot easier than writing checks and all those trips to the bank to keep cash in my pocket. I have a great Credit Rating, but have high balance.. each month.