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Old 03-06-2011, 12:44 AM
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DavidBibby DavidBibby is offline
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Join Date: Jun 2010
Location: Palm Bay, FL
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Default Re: First credit card- good for credit rating??

Originally Posted by KatherineLee88 View Post
I disagree with davidbibby's advice.

I think you should get a credit card. I got my first card at 19. I currently have three cards at age 22. I have YET to carry a balance into another month... meaning I never gave the credit card companies a cent! In fact, my first credit card was through US Bank - and I've actually received $100 over the course of three years in Cash Rewards back - so in a way, I've made $100 from my card through using it properly.

Also, now of my credit cards carry an annual fee. So, I get to use my cards for free, make cash rewards, and build a credit history. You can do this too if you use a card responsibly.

As others have eluded to, having a credit card is a "necessary evil" but it's only an evil if you allow it to be. If you're weary after hearing the advice of others suggesting you don't get a card, you can get a secured credit card. These cards can be thought of like a debit card. You load a certain amount of cash onto them and only can spend what you load onto the card. The disadvantage is that most secured credit cards charge a fee - and they're meant more for people rebuilding their credit.

I think you'd be able to qualify for an unsecured credit card (a regular type of credit card) with a low credit limit on it. Just never spend what you won't be able to pay off by the end of the month.

Also, the idea of having 50% down for a house seems extensive to me. Although it'll be about 5-8 years from now before I plan on getting a home, I don't plan on having more than 30% down. I'd be looking at 150-200,000 house. Is having 100,000 in cash saved up really realistic to me? No. Is 30-50,000 possible? Sure.

Proper use of credit can be VERY beneficial. I say you test the waters and try to get a card with a low limit until you build up your confidence in using cards. I wouldn't allow the failures of other people to handle their credit scare you from taking control of YOUR credit.

Thank you for presenting an alternative point of view and for disagreeing with me. I think I must have been REALLY fired up that day.

The truth's EASY for me to say "cut up the credit cards" or "forget about the FICO score" because I'm already a home owner and my only financial concern is paying my house off early.

I know that I'm not moving again anytime soon, I don't intend to buy another home until my kids are grown up and I want to DOWNSIZE to a smaller place. When that happens, I'll sell the house I own 100% and buy the new home CASH. So I don't have a use for the FICO score period.

That being said.. I have to make the concession that you're going to need to have good credit in order to obtain a mortgage. I'm not going to fault anyone for wanting a house and putting down 30% to 50% (at least 20% is preferred so that you avoid the PMI payment)

While my point of view of "no credit cards" may seem extreme. I still stand by it for three reasons.

1) Studies have shown that people who use credit-cards (even the ones who pay them off every month) spend 12-18% more than people who use debit cards or cash exclusively.

Visa and Mastercard know this... that's why they now offer DEBIT cards with "cash back" rewards. They know that "swiping" will cause people to spend more than using cash (and they get a percentage of that sale too!)

2) Rather than focusing on the FICO score... I choose to focus on a different NET WORTH. Young people especially SHOULD be stuffing money into their 401(k) or a ROTH IRA right now. I'm catching up on a whole decade of not saving for retirement.

3) Only a small percentage of people actually pay off their credit cards each and every month. The rest get caught in the trap of using credit to buy something on impulse. Then they get stuck in a life-draining and financial-draining system that will keep them in bondage for a good long time.

So for the credit card company... it's a small price for them to pay a reward to one person who doesn't make them any order to catch about 95 people who owe them interest. The credit card company still wins. I personally avoid doing business with these companies.

If you take a look at all the self made millionaires (those who started with nothing and ended up with a net worth of over 1-million) you'll find that at some point in their life they decided that borrowing money was a bad idea.

It's a rare person who win's playing the credit card game. Even if you do it right... there's still a better game to play. Play the Millionaire by age 45 game.

Do what ever you need to do to get into the house you want. Once you have it... then seriously look at the role the FICO score has in your life.

I wish you the best of luck.
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