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  #16  
Old 02-15-2011, 10:46 PM
GrowConnect GrowConnect is offline
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Default Re: First credit card- good for credit rating??

Just be wise in using your credit card if you get one, because it is necessary esp at times of emergency. Don't spend more than what you are earning as long as it's not an emergency. A lot of people are mired in debt because they tend to buy things out of their plan and budget thinking they can pay it through installment by using their credit card. If it can wait till you have the cash, why not wait rather than using your credit card. You have to think twice when you use your credit card.
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  #17  
Old 03-05-2011, 08:31 PM
KatherineLee88 KatherineLee88 is offline
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Default Re: First credit card- good for credit rating??

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.
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  #18  
Old 03-06-2011, 01:44 AM
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DavidBibby DavidBibby is offline
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Default Re: First credit card- good for credit rating??

Quote:
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.
KatherineLee88,

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 is...it'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 indicator...my 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 money...in 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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Old 03-06-2011, 11:11 AM
KatherineLee88 KatherineLee88 is offline
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Default Re: First credit card- good for credit rating??

Quote:
Originally Posted by DavidBibby View Post
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.
......

2) Rather than focusing on the FICO score... I choose to focus on a different indicator...my 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 money...in 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.
DavidBibby,

Yes, I agree with you on a few of those points. I have also heard that the use of plastic like a debit or credit increases a person's chance of spending more money than they needed to. This is why it's important to keep a budget in perspective when using cards. Keep all receipts, and add things up at the end of the week. I add up everything on my slips that I deemed "unnecessary" and boy, yes, I am at times a "victim" of the use of plastic. However, I have never been a victim to the extent that I couldn't pay the bill in full each month. That's where self-control comes in. Even a person with a wad of cash in their wallets can burn up unnecessary money if they lack self control. Avoiding credit because of a fear that you will fail to use it properly is irrational. People need to try - and start small - to master the use of credit.

Use of credit properly can be extremely beneficial. Avoiding it can be extremely detrimental.

So in terms of advice to a 22 year old with no credit history, I don't think we should be advising him to avoid credit cards (for reasons of qualifying for a good mortgage down the road). We should be advising him to get ONE credit card with a low credit limit and test the waters. When he feels comfortable with it, increase the limit or get another card and continue on the path of mastering your credit - not fearing the use of credit because thousands of people have abused it - because thousands have also NOT abused it and used it to benefit themselves and the age of 22 is a good time to start using it for his benefit.

You said self-made millionaires at some point found themselves not needing to use credit. Great. Good for them. I understand this... because they may have used it in their earlier years to get ahead. If we were advising a 40 year old with a house already, or other assets, then cutting up credit cards for life makes sense.

Once again, for a 22 year old who sounds like he doesn't have a lot of financial assets, I don't think this is good advice.
I personally will use credit for life. My grandfather was a self-made millionaire through proper use of credit and investing properly, and I know another that is in his seventies STILL using credit and has net worth of 3+ million that they earned through proper credit use and investing wisely. The reasoning for him to still use credit is VERY simple and VERY smart - and obviously has worked very well for him! But that's a topic for a different thread.

All in all, yes... a FICO score is essentially worthless after obtaining a house and paying if off. It's the process of getting TO that point that a FICO score has a huge influence over a person. Therefore, since I'm 22 (23 tomorrow) I'm going to baby that three digit score as much as possible so 5-10 years down the road I get the most favorable mortgage terms available. Also... FICO scores can have an effect at obtaining jobs... so I wouldn't write it all off as a credit thing. Employers have used FICO scores as a base to determine eligibility for employment or who of two candidates to hire therefore credit is an important component to a person's life.

I agree with the net worth thing. Right now I'm primarily concentrating on "net worth" because I have been dividing my paycheck (after expenses) to a Roth IRA and my student loans. It's exciting to see my net worth change every month as I climb myself out of student loan debt and start building my nest egg. However, I am focused on net worth AND FICO score. To me, both are very important. I refuse to be afraid of using credit because others have failed to use it in the past. And I think advising a 22-year-old to not use credit is not good advice.

There have been many people on financial forums that have found themselves unable to qualify for a car loan, or RENT AN APARTMENT because they have NO credit history! Basically we're setting this guy up to not only not qualify for a good mortgage due to little to no credit history, but potentially setting him up to get turned down from renting an apartment as well. I'm not really aware of what options exist when you can't buy a home or rent an apartment. And yes, I know not all apartments need a credit history - but SOME do and I care to not limit my choice of an apartment to the roach-infested place in ghettotown because I was afraid to use credit cards.

Last edited by DavidBibby; 03-06-2011 at 11:16 AM.
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  #20  
Old 03-06-2011, 02:04 PM
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DavidBibby DavidBibby is offline
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Default Re: First credit card- good for credit rating??

Quote:
Originally Posted by KatherineLee88 View Post
DavidBibby,
Yes, I agree with you on a few of those points. I have also heard that the use of plastic like a debit or credit increases a person's chance of spending more money than they needed to. This is why it's important to keep a budget in perspective when using cards. Keep all receipts, and add things up at the end of the week. I add up everything on my slips that I deemed "unnecessary" and boy, yes, I am at times a "victim" of the use of plastic. However, I have never been a victim to the extent that I couldn't pay the bill in full each month. That's where self-control comes in. Even a person with a wad of cash in their wallets can burn up unnecessary money if they lack self control. Avoiding credit because of a fear that you will fail to use it properly is irrational. People need to try - and start small - to master the use of credit.
I agree with you completely. People can misuse both cash and credit cards. I think were you and I differ is in our initial assumptions about a person's sense of responsibility and maturity.

For example... I assume that most 22 year-olds are irresponsible with money because 1) I was once irresponsible and misused both cash and credit 2) Handling money responsibly is simply not "taught" in schools and 3) Most people reach retirement age will less than a $400 net worth, which means that they misused money their entire life. People don't usually start out responsible then end up swinging the other way to financial immaturity.

Still it IS wrong of me to assume that our young friend would be irresponsible with cash and/or credit.

Would you suggest then..as a test of responsibility..that he first open up a savings account of about $500 - $1000 cash... then get an secured credit card with the same amount?

Following that he would start charging a little bit here and there and paying the balance off in full each month to build his credit.

If he determines that he can't pay it off every month because he charged too much, or he had an emergency and used the card to pay for it. What should he do then?
Pay it off over time and then start over?

At least... if someone is irresponsible with cash..and they spend all their cash... they can't lose any more. But with credit...they stand to lose even more.

So if a person is known to be financially immature? Would you suggest they get ANY type of credit card?

How does one know when they're ready for one?

Quote:
Originally Posted by KatherineLee88 View Post
Use of credit properly can be extremely beneficial. Avoiding it can be extremely detrimental.

So in terms of advice to a 22 year old with no credit history, I don't think we should be advising him to avoid credit cards (for reasons of qualifying for a good mortgage down the road). We should be advising him to get ONE credit card with a low credit limit and test the waters. When he feels comfortable with it, increase the limit or get another card and continue on the path of mastering your credit - not fearing the use of credit because thousands of people have abused it - because thousands have also NOT abused it and used it to benefit themselves and the age of 22 is a good time to start using it for his benefit.
I agree with you here as well. You also answered a couple of my above questions here as well. He should indeed test the waters.

I would contend that most people don't to that. They just dive into the deep end but applying for whatever they can get. Credit card companies frequently raise credit limits without even being asked as a way of "Rewarding" those customers that make them money.

Credit card companies target young people, especially on the college campuses. They give away a lot of free hats and t-shirts for their efforts.

You are right though... that we should advise people to make their own decisions to use or not use credit based on their own level of maturity and understanding.

Quote:
Originally Posted by KatherineLee88 View Post
You said self-made millionaires at some point found themselves not needing to use credit. Great. Good for them. I understand this... because they may have used it in their earlier years to get ahead. If we were advising a 40 year old with a house already, or other assets, then cutting up credit cards for life makes sense.
It IS possible to get a mortgage without a credit history. There ARE mortgage companies that will do their own underwriting.

So someone with a decent size emergency fund, good income, and enough to put down will easily be able obtain a mortgage with the right company.

That being said... a MOST mortgage companies can't make a decision without seeing your FICO score... so I honestly can't fault someone for building their score and getting a mortgage.

Quote:
Originally Posted by KatherineLee88 View Post
Once again, for a 22 year old who sounds like he doesn't have a lot of financial assets, I don't think this is good advice.
You may be right about that. On the other hand, if he's able to live with his parents awhile longer... he could have ample time to build the assets upon which he wouldn't need to use credit for these things. We just don't know enough about this particular 22 year old to say which way is the right way.

Quote:
Originally Posted by KatherineLee88 View Post
I personally will use credit for life. My grandfather was a self-made millionaire through proper use of credit and investing properly, and I know another that is in his seventies STILL using credit and has net worth of 3+ million that they earned through proper credit use and investing wisely. The reasoning for him to still use credit is VERY simple and VERY smart - and obviously has worked very well for him! But that's a topic for a different thread.
Will you still need credit after you have obtained a mortgage and paid your house off? What would you need it for then? Investment Real Estate?


Quote:
Originally Posted by KatherineLee88 View Post
All in all, yes... a FICO score is essentially worthless after obtaining a house and paying if off. It's the process of getting TO that point that a FICO score has a huge influence over a person. Therefore, since I'm 22 (23 tomorrow) I'm going to baby that three digit score as much as possible so 5-10 years down the road I get the most favorable mortgage terms available. Also... FICO scores can have an effect at obtaining jobs... so I wouldn't write it all off as a credit thing. Employers have used FICO scores as a base to determine eligibility for employment or who of two candidates to hire therefore credit is an important component to a person's life.
I agree with this...the FICO score, for better or worse, is your electronic reputation. Even though I don't agree with borrowing money as a form to get ahead in life, I don't want someone to damage their FICO score deliberately.

You CAN build your FICO score without credit cards... but I will concede the fact that the best and easiest way to build, raise, and maintain your score is to get a credit card, pay it off in full every month, and don't charge more than 10% of the maximum limit.

It's a RARE person who can do that. It's even more RARE for a 22 young person such as yourself to do that.

As far as using the FICO for employment.. the only time I've ever heard of it being a factor is if you're doing into the FINANCE industry. Even then.. I've never heard of anyone being turned down for a job solely on the FICO score.

Quote:
Originally Posted by KatherineLee88 View Post
I agree with the net worth thing. Right now I'm primarily concentrating on "net worth" because I have been dividing my paycheck (after expenses) to a Roth IRA and my student loans. It's exciting to see my net worth change every month as I climb myself out of student loan debt and start building my nest egg. However, I am focused on net worth AND FICO score. To me, both are very important. I refuse to be afraid of using credit because others have failed to use it in the past. And I think advising a 22-year-old to not use credit is not good advice.

There have been many people on financial forums that have found themselves unable to qualify for a car loan, or RENT AN APARTMENT because they have NO credit history! Basically we're setting this guy up to not only not qualify for a good mortgage due to little to no credit history, but potentially setting him up to get turned down from renting an apartment as well. I'm not really aware of what options exist when you can't buy a home or rent an apartment. And yes, I know not all apartments need a credit history - but SOME do and I care to not limit my choice of an apartment to the roach-infested place in ghettotown because I was afraid to use credit cards.
There IS life without credit, for both the young person and the guy in his 40's

You don't have to live in the roach apartments to do it either.

I don't do car loans either.

Considering the fact that 96% of people DO NOT reach financial independence in their lifetime and that they paid over 1/3 of their lifetime income in finance charges and interest, I choose not to use credit ever again, for ANYTHING.

So if someone can get a good FICO score without paying a PENNY in interest... then THAT is exactly what they should do. But in my experience (and that of those I help everyday) the temptation to misuse credit is too great so I err on the side of caution and advise total avoidance.

While what you're doing may be easy for you... I don't think it's as easy for your average 22 year old.

Thank you for this discussion... I think a lot of people are going to benefit from hearing both sides of this debate.
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Old 03-06-2011, 02:58 PM
KatherineLee88 KatherineLee88 is offline
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Default Re: First credit card- good for credit rating??

Quote:
Originally Posted by DavidBibby View Post
For example... I assume that most 22 year-olds are irresponsible with money because 1) I was once irresponsible and misused both cash and credit 2) Handling money responsibly is simply not "taught" in schools and 3) Most people reach retirement age will less than a $400 net worth, which means that they misused money their entire life. People don't usually start out responsible then end up swinging the other way to financial immaturity.
I think the fact that this individual has come to this board looking for advise shows that he is more inclined to be a responsible user of credit.
Yes, unfortunately this is NOT taught in schools. That is something that as a general public we should be enraged about and DO something about. But... different topic.
Also, unfortunately, the days of counting on a government run "pension program" aka social security are at their last days. People need to make their own plans to secure their financial security at an old age, so the sooner they start dealing with credit and personal finances the better.

Quote:
Originally Posted by DavidBibby View Post
Would you suggest then..as a test of responsibility..that he first open up a savings account of about $500 - $1000 cash... then get an secured credit card with the same amount?

Following that he would start charging a little bit here and there and paying the balance off in full each month to build his credit.
Sure. Sounds like a good idea... however, technically with a secured card he wouldn't be spending more than was already deposited into the account, therefore he would actually be paying in full already. It's just a glorified debt card - but unlike a bank debit card, secured credit cards report to the credit bureaus, therefore helping credit history.

Quote:
Originally Posted by DavidBibby View Post
If he determines that he can't pay it off every month because he charged too much, or he had an emergency and used the card to pay for it. What should he do then?
Pay it off over time and then start over?
Once again, technically if it's a secured card, this wouldn't an issue. He wouldn't actually be able to spend more than was deposited into the account.
If he had an unsecured card (which most credit cards are), then yes... this could be an issue. However, this is also assuming that just because a person has a credit card they no longer are saving money for a rainy day emergency, which I think is a bad assumption. You think I'm not saving for a rainy day? I am. But I also have $9,000 in credit available to me, too... but at 17%+ APR I would be stupid to resort to credit before using emergency funds. Credit cards, if you want to USE the system, are not MEANT to be "emergency funds" - they are the SUPER emergency funds when your 6-8 month supply of emergency funds are gone.

Quote:
Originally Posted by DavidBibby View Post
So if a person is known to be financially immature? Would you suggest they get ANY type of credit card?

How does one know when they're ready for one?
Yes. Preferably a secured one, but unsecured is okay, too - with a low credit limit. You'll never know if you're ready for one if you never give it a go. How did you know you were "ready" to ride a bike? Drive a car? You know from experiencing it first hand and trying. Obviously when you start riding a bike you don't plan to bike miles - when you're first driving a car you have a parent or friend with you to guide you and you don't plan on driving on an interstate in rush hour traffic. There's smart moves, and their stupidity. The person seeking advice on here is trying to do the smart thing by getting advice. Stupidity is the consumer that opens retail store credit cards to get 15% off a $50 purchase (they can afford) but decides, "Ohhh 15%.... lets look some more" and grabs a couple hundred dollars more of clothing.

Quote:
Originally Posted by DavidBibby View Post
Credit card companies frequently raise credit limits without even being asked as a way of "Rewarding" those customers that make them money.
This doesn't happen as frequently as you're implying it does. This happens to long-time customers that pay in full every month that are NOT using their full balances - the card companies bump the balances up more to encourage the person to spend more. Yes, they're "rewarding" in a somewhat predatory way but the responsible card user will think, "Great... so instead of $1,000, I have $1,500 limit, so I can charge about $50-100 more a month, if necessary and I can pay it back on time.

Quote:
Originally Posted by DavidBibby View Post
Credit card companies target young people, especially on the college campuses. They give away a lot of free hats and t-shirts for their efforts.
Thanks to the market meltdown and subsequent credit law reforms (Truth in Lending Acts, Credit Card Accountability Responsibility and Disclosure Act of 2009), this doesn't happen anymore. In fact, it's much harder for college students to get cards now and card companies are basically banned from campuses.


Quote:
Originally Posted by DavidBibby View Post
It IS possible to get a mortgage without a credit history. There ARE mortgage companies that will do their own underwriting.

So someone with a decent size emergency fund, good income, and enough to put down will easily be able obtain a mortgage with the right company.

That being said... a MOST mortgage companies can't make a decision without seeing your FICO score... so I honestly can't fault someone for building their score and getting a mortgage.
Yes, if I thought it was wise in my best interest to save $50,000-100,000 for a 100-200,000 house, then it's likely possible. Although, I don't think this is wise use of money. $30,000 is sufficient... waiting to get to 50-100,000 is just wasting time in my opinion.
Revolving credit, such as credit cards, are a BIG part of the calculation of a FICO score. Avoiding revolving credit entirely will severely impact your score. Fact of life.


Quote:
Originally Posted by DavidBibby View Post
You may be right about that. On the other hand, if he's able to live with his parents awhile longer... he could have ample time to build the assets upon which he wouldn't need to use credit for these things. We just don't know enough about this particular 22 year old to say which way is the right way.
Not everyone has the option to continue living with his/her parents until they've built up a 50% down payment on a house. Don't parents deserve to have an empty nest? As soon as a child finishes college, it's time to stop being sheltered and enter into the real world. There is a HUGE growth in maturity, emotionally, and financially that occurs when a child moves out of home.

Quote:
Originally Posted by DavidBibby View Post
Will you still need credit after you have obtained a mortgage and paid your house off? What would you need it for then? Investment Real Estate?
On a brief note, sure. And car loans. This individual believes that low interest loans below 8% on real estate and cars can be maintained for the duration of the loan. Sure you lose money in the meantime on interest, but the money you would be using to pay down the debts earlier could be better used investing in the SP500 index (and other similar indexes) which average 10%+ each year.

Examples explain it very well. I can share some if you're interested. But basically, why prepay a 3.8% loan when the money could be making 8-12%/year instead?

Of course, he's only able to get ridiculously low loan interest rates because of an amazing FICO score. For the record.

Quote:
Originally Posted by DavidBibby View Post
You CAN build your FICO score without credit cards... but I will concede the fact that the best and easiest way to build, raise, and maintain your score is to get a credit card, pay it off in full every month, and don't charge more than 10% of the maximum limit.
True. Hence why I wouldn't advise this person who is seeking advice to avoid revolving credit. It's a big part of a FICO score.

Quote:
Originally Posted by DavidBibby View Post
It's a RARE person who can do that. It's even more RARE for a 22 young person such as yourself to do that.
People reading this have already proven themselves to CARE about their personal finances. They're already making a big step in the right direction. I'm willing to place some trust in the person that is taking steps to educate themselves on credit and use credit correctly.

Quote:
Originally Posted by DavidBibby View Post
As far as using the FICO for employment.. the only time I've ever heard of it being a factor is if you're doing into the FINANCE industry. Even then.. I've never heard of anyone being turned down for a job solely on the FICO score.
Incorrect. I know an example of a lawyer and a doctor that had their scores evaluated.


Quote:
Originally Posted by DavidBibby View Post
There IS life without credit, for both the young person and the guy in his 40's
Yes. I just don't want that life. I think I can, and others can, use credit to his/her advantage.

Quote:
Originally Posted by DavidBibby View Post
Considering the fact that 96% of people DO NOT reach financial independence in their lifetime and that they paid over 1/3 of their lifetime income in finance charges and interest, I choose not to use credit ever again, for ANYTHING.
Where are those statistics from? I'm interested in how that is actually determined.
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  #22  
Old 03-06-2011, 03:00 PM
KatherineLee88 KatherineLee88 is offline
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Default Re: First credit card- good for credit rating??

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Originally Posted by DavidBibby View Post
So if someone can get a good FICO score without paying a PENNY in interest... then THAT is exactly what they should do. But in my experience (and that of those I help everyday) the temptation to misuse credit is too great so I err on the side of caution and advise total avoidance.

While what you're doing may be easy for you... I don't think it's as easy for your average 22 year old.

Thank you for this discussion... I think a lot of people are going to benefit from hearing both sides of this debate.
I think it's too cautious of a stance to take. It's a decision that I think could hinder your ability to accumulate even greater net worth. I'm sure the person I talked about earlier in this post wouldn't be netting around 3 mil if he NEVER used credit. Actually, I know for a fact he wouldn't be able to. Because a large portion of people make mistakes financially, it doesn't mean they will NEVER understand credit. It's really not that difficult to figure out. It's the self-control that's an issue-but I don't think I should assume everyone lacks self-control.
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Old 03-06-2011, 03:02 PM
KatherineLee88 KatherineLee88 is offline
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Default Re: First credit card- good for credit rating??

Sorry to get a little off topic... but...DavidBiddy, how are you suggesting people finance their college educations without taking out loans?

I wish I could say I have never paid a penny in interest... and I can for credit cards. But I pay $40/mo in interest on a student loan. I wouldn't have been able to go to college without it. I wouldn't be able to get my current job without my bachelors. I wouldn't be able to be in graduate school working towards a PhD without these loans.

Not everyone has the bank of Mom and Dad saving for their college educations with 529 plans. My parents didn't give me a penny.
Avoiding credit is impossible for most college students. College degrees are becoming a necessity in this society. What's the no-credit solution to this dilemma?

If a student has to take student loans, they've already enter into the credit-usage world. Bankruptcy eliminates credit card debt, but doesn't eliminate student loans (they cannot be discharged in bankruptcy, they follow you for LIFE). It seems that just trying to get a job in this world requires credit and college students already start out their credit debut into society with a loan that follows them for life.



I suggest we assume everyone can be taught personal finances and credit usage - and how to use self-control to maintain them. This is a better solution then the assumption that all should avoid credit because they lack self-control.
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Old 03-07-2011, 01:08 PM
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DavidBibby DavidBibby is offline
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Default Re: First credit card- good for credit rating??

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Originally Posted by KatherineLee88 View Post
I think it's too cautious of a stance to take. It's a decision that I think could hinder your ability to accumulate even greater net worth. I'm sure the person I talked about earlier in this post wouldn't be netting around 3 mil if he NEVER used credit. Actually, I know for a fact he wouldn't be able to. Because a large portion of people make mistakes financially, it doesn't mean they will NEVER understand credit. It's really not that difficult to figure out. It's the self-control that's an issue-but I don't think I should assume everyone lacks self-control.
I wouldn't say that I'm overly cautious. I would say that I'm very aggressive about eliminating debt.

I WON'T say that my way is the "right way" or that your way is the "right way" either. You have your strategy and I have mine.

The important thing is for a person to "HAVE" a strategy in the first place. It's important to have an emergency fund. Most of the people I deal with don't have a strategy or an emergency fund.

I don't see how I could use credit to "get ahead" or accumulate an even greater net worth than with what I'm doing in my life right now.

I agree that self-control is of the utmost importance.
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Old 03-07-2011, 03:27 PM
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Default Re: First credit card- good for credit rating??

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Originally Posted by KatherineLee88 View Post
Sorry to get a little off topic... but...DavidBiddy, how are you suggesting people finance their college educations without taking out loans?

I wish I could say I have never paid a penny in interest... and I can for credit cards. But I pay $40/mo in interest on a student loan. I wouldn't have been able to go to college without it. I wouldn't be able to get my current job without my bachelors. I wouldn't be able to be in graduate school working towards a PhD without these loans.

Not everyone has the bank of Mom and Dad saving for their college educations with 529 plans. My parents didn't give me a penny.
Avoiding credit is impossible for most college students. College degrees are becoming a necessity in this society. What's the no-credit solution to this dilemma?

If a student has to take student loans, they've already enter into the credit-usage world. Bankruptcy eliminates credit card debt, but doesn't eliminate student loans (they cannot be discharged in bankruptcy, they follow you for LIFE). It seems that just trying to get a job in this world requires credit and college students already start out their credit debut into society with a loan that follows them for life.



I suggest we assume everyone can be taught personal finances and credit usage - and how to use self-control to maintain them. This is a better solution then the assumption that all should avoid credit because they lack self-control.
Please check the spelling of my name. It's David Bibby, not Biddy.

Without the help of parents college should be paid for by grants, scholarships, and WORK.

I'm not going to fault someone for getting a student loan, but I know of far too many people who are in TROUBLE with student loans.

The thinking that student loans will get you ahead is very naive. Students assume that when they get their degree, that they'll make more than enough money to start paying back their student loans.

That's not the real world. The reality is.. even after they get a degree.. they will start work with a new company (depending on the field) at or near the bottom. Many of these students will go BACK to school and pursue a higher degree, not for educations sake, but to hold off on paying back the student loans because they don't make enough.

Student loans, just like any other type of loans, can get people in trouble if misused. The thing about student loans though.. is that even though you get them for the right reasons, there is NO guarantee that you will get your desired salary when you leave school.

In the company I work for.. I work with people who have their degrees, certifications, and student loan debt too. They all make less than I do and I actually burned out of college. It seems bit unfair. The thing is.. experience and specialized knowledge is what companies are looking for, not a newbie with a degree.

So for me... I'd prefer to work my way through school and have NO debt while I build and add to my marketable skills (work experience), rather than have no work experience and a degree.

There are people I work with, making less than I do, but have $100k in student loan debt. I can't help but wonder... "how is THIS winning?"

My kids are 10 and 8 right now. I plan to fully pay for their college expenses. If for some reason I am unable to, they will find a way to pay for it. Between Grants, Scholarships, and good old fashioned work, I don't see the need for them to get student loans.
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Old 03-07-2011, 05:20 PM
KatherineLee88 KatherineLee88 is offline
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Default Re: First credit card- good for credit rating??

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Please check the spelling of my name. It's David Bibby, not Biddy.

Without the help of parents college should be paid for by grants, scholarships, and WORK.

......

So for me... I'd prefer to work my way through school and have NO debt while I build and add to my marketable skills (work experience), rather than have no work experience and a degree.

There are people I work with, making less than I do, but have $100k in student loan debt. I can't help but wonder... "how is THIS winning?"
Firstly, sorry about misspelling your name. That was a lack of attentiveness on my part.

I definitely understand how for some students working during college will work well for them and be a good strategy. For some students, it's a horrible strategy. I graduated with 37k in debt from a public university and I don't regret a penny of it, but then that's because I'm also fortunate enough to now have income as a Graduate Research Assistant for the next five years while my university also pays for my PhD - obviously this is not the case for most students that go on for higher degrees. I know I would be whistling a different tune if I didn't have income of at least 22,000/year.

However, for students that are not fortunate enough to have parents pay for their school or are still short on funds after grants and scholarships, student loans are still a great option for many. The reasoning? Because the types of jobs college students during their education are typically entry-level service industry jobs that do nothing to advance his/her career. I'll give you a real example of how a friend of mine hurt herself by trying to graduate without debt.

Amanda is one of a few friends and aquaintances I know that tried to finance their education as they wre IN school. She stressed so much about taking out loans. She worked 30+ hours a week on top of a full-time student schedule, got sub par grades, and graduated with a degree that she found hard to use because while she was working her butt off at the bakery down the street while getting Bs and Cs in her class, her classmates that were paying for college with loans were focusing on their studies and getting As and other awards/achievements.

How do you compete with that? Great... you have much less debt than them, but you find yourself as a less competitive applicant for a job after graduation.
This strategy is not conducive to actually LEARNING something in college and making the most out of your education.

Student loans can help pay for the tuition and cost-of-living. I do not regret financing my ENTIRE four year bachelor degree on student loans. I have $37,000 in debt, but I also went to school to FOCUS ON SCHOOL and what it would do for me in the end.

As for my particular close friend that tried to finance herself through college... she flipped through 3 community/state colleges in the process (since she was picking a school because of the price tag instead of actually WANTING to go there and hated all three). She ended up taking 6 years to graduate with a 4-year degree, but was a FULL-TIME STUDENT for 11 semesters (5.5 years).
She now has a major in Communications (which to me, shouldn't have taken almost 6 years). She has found herself unemployable in her field because she didn't get amazing grades compared to her overachieving classmates. She didn't take the time to do internships during college like some of her classmates to get her foot in the door since she was so busy with working - and when she did try, she didn't get any of the six internships she applied for... but at least she got her foot into the door of Breadsmith Bakery 6 years ago. She's an assistant manager there and is making $12/hour. But... at least she graduated with no debt! I guess she was successful, except for the whole unemployable in her field thing... hmmmm.

Meanwhile, people like me who worked internships/jobs in the summer for 20hrs a week or worked 5-10/hours a week in a research laboratory/internship during the year for experience only seemed to have figured out the system well. I was not worried about a paycheck, and that worked out wonderful for me. In fact, I could list several of my classmates that worked at the most 10/hrs a week for experience in a job rather than a paycheck, financed his/her education through loans/grants/scholarships, and now they're doing fine either in med school, grad school, or an entry-level position.


There. That's my cautionary tale. I do not regret ANYTHING I did financially during my four years at college. I didn't stress about money constantly - just focused on what I was there for. Was the best four years of my life (thus far ).

If a student wants to finance there way through without taking loans - power to them. If they find that it's a constant source of stress, their job isn't related to their field in any way - they're just setting themselves up for failure. It's great to have no student loan debt when you graduate but if it leaves you unemployable after, such as my friend Amanda, then they may as well just never got a degree in the first place and work 40 hours a week at Breadsmith.
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  #27  
Old 03-07-2011, 06:10 PM
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DavidBibby DavidBibby is offline
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Default Re: First credit card- good for credit rating??

I guess we both have our horror stories to share.

You have renewed my faith in young people KatherineLee88! You are a breath of fresh air. I'm glad that you are focused in your studies and I have no doubt that you will succeed in life and financially as well (whether I agree with your methods or not).

I have no doubt that your salary after school will more than make up the difference for you.

Again, thank you for this conversation. I look forward seeing more of your point of view in some of the other threads here.

As for our friend, grantd, the one who started it all, you are correct in that I should have asked for more information about where he was before taking my hard-stance.

I wish you the best of luck!
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