would love to be able to buy everything with cash lol. too bad that wont happen lol. i just applied for a credit card to build up some credit as well as going to take out a small personal loan from the bank to build some up there as well.
Can someone fill me in on credit cards?
- Thread starter knightxrider1
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credit is not everything. i'm not that much older then you and i've already learned that. that's something you've been taught/trained, but have you ever thought about it? Who is it that spreads this wisdom? the banks? They're the ones making the money off of this. Now you say if you don't borrow money you'll never get anything unless its with a high interest rate? If you never borrow money you'll never pay interest.
My advise for something you feel like you need "RIGHT AWAY" is to save money. Ever heard of an emergency fund? most places will tell you to save 3-6 months expenses, but i've even heard as much as 8 months income! That's a bit too much in my opinion. i feel like my job is more secure then that.
my point is that if you save money you won't need to borrow money to pay for emergencies. that "RIGHT NOW" attitude is why more then 3/4 of young people like you and I finish school in debt. Now you went through school to make money right?
If you've never heard of underwriting, All it is is the research a loan officer does before they give you the loan. most of them just look at your fico score. But there are ones out there that will look at the big picture if you have no credit and if you have enough down payment and have paid your bills on time for long enough they will give you the same interest rate your aunt has.
I want you to understand that the info you've been given is the general consensus, but not the best plan. How many millionaires gave you this information? I've seen studies and proof that the majority of self made millionaires NEVER borrow money. I can't pull that up right now though.
Think about it. Your number 1 wealth building tool is your income. And when you give that away in the form of monthly payments, you're missing out on a lot more then you notice.
yes i am serious.
that's explained in the underwriting thing i just mentioned.
I completely understand credit scores. I'm telling you that if you don't borrow money, and don't pay interest, then your credit score does not matter at all.*
And your comparison about buying from someone with one post vs 4000 post is a good one to explain credit score. But if that person with one post has a ton of vouches on another forum (i.e. paying their verizon bill and landlord on time or early for 7+ years, never owed anyone money) and you took the time to contact them and talk to them, then you would consider them just as much as the donk with 4000 posts on this site.
* now with a poor score (like bankruptcy) that can affect you from getting a job or in other aspects of life. But a ZERO score will never hurt you if you pay for everything with your own money.
That's a shame. I'd bet you that i don't make much and that i live pretty damn well. Its great that you've lived on cash rather then credit, but have you saved any money? I've never had a car that costs more then $5000. But i live pretty good. look at this...
You borrow $10000 to buy a car. You pay 6.36% (national averagefor 48 month loan) interest. you'll pay about $237/month for that car. In 4 years that car will be worth $7000 tops. So you spent $11376 for a car thats worth $7000. all because you WANTED IT NOW!!!!
Now lets say you bought a beater like mine and saved $237/month for 48 months into a ultra conservative mutual fund (gaining ~6% interest -- thats pretty low) you'll have $12,800 to buy a car with CASH. NO PAYMENTS. Lets say i'm half wrong (~3% interest) you'll have $12,100.
So would you rather pay $11376 for a car worth $10,000 when you got it and $7000 when you paid it off, or save a little, live within your means and then treat yourself to a $13,000 car that you only paid $13000 for without a single payment?
car loans are the WORST payments you can make btw.
I'm really passionate about this, if you wanna discuss it more i can PM you and give you details of my life and how i'm able to make it work. I know we're the same age, but i started with the questions you're asking 3 years ago. and i made some minor mistakes and learned a LOT. I have a lot still to learn but i'm promising you if you take this advise and do some good hard research it could change your life.
can you tell me why you say it won't happen? what are the loans for? you can PM me too if you want.
Kyle10182: I can relate to what you say about car payments. So far, I've never owed anybody anything for any of the cars I have/had. Just like you, I've saved all my money and payed for everything I own in cash. However, I don't own property yet. One day, I'd like to. Hopefully, one day I'll have a decent sized house and maybe, if I'm fortunate enough, my 911 turbo (dream car lol). I'm currently a mechanical engineering major. In one year, my salary won't be enough to cover even half of what an average middle class house is worth. Essentially, I would NEED credit to be approved for a loan for a house. One of the biggest reasons I believe the housing market went down is because the banks were issuing loans to just about everybody, regardless of credit score. In turn, loans were issued to people who couldn't afford to pay them back and, thus, the houses purchased with those loans were foreclosed. Had credit been considered, maybe this catastrophe could've been avoided. That's just my opinion, but credit is worth more than just being able to buy a nice TV or getting approved for a car loan. Many other things in life are based off credit score. According to you, I won't be able to afford a house until i'm about 50. No thanx, I'd rather make payments on a 30 yr mortgage than wait until I'm 50. just my two cents.....
joe7987
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Meh, i think, like all things in life, there's a proper balance.
Kyle is right in some regards. Buying things outright is a good strategy for most objects. Not owing money is a beautiful feeling. However, life is too short to save up for things like a house for your wife and 3 kids... and to never own a new car.
On the flip side.. some people go WAY too far with borrowing and throw themselves way in debt. You probably shouldn't throw a diamond ring on a credit card because it looked good on you. Putting non-essential objects onto a card just because you want it now, won't lead you in the right direction.
I slightly suspect that Kyle is a conspiracy theorist against the banks. I've met a few people like this. Yes, the banks conduct business, and their #1 priority is making money off of us. No s**t, that's 99% of businesses. However they're not out there trying their best to spread misinformation and screw us over. This is called paranoia.
Kyle is right in some regards. Buying things outright is a good strategy for most objects. Not owing money is a beautiful feeling. However, life is too short to save up for things like a house for your wife and 3 kids... and to never own a new car.
On the flip side.. some people go WAY too far with borrowing and throw themselves way in debt. You probably shouldn't throw a diamond ring on a credit card because it looked good on you. Putting non-essential objects onto a card just because you want it now, won't lead you in the right direction.
I slightly suspect that Kyle is a conspiracy theorist against the banks. I've met a few people like this. Yes, the banks conduct business, and their #1 priority is making money off of us. No s**t, that's 99% of businesses. However they're not out there trying their best to spread misinformation and screw us over. This is called paranoia.
i agree with everything you say. and you make a good point in why you would definitely NEED credit in your last sentence. and good luck on school man. the engineering courses suck ass.
thanks for your input in the thread. i appreciate it. its nice to hear credit from both the good and bad.
like i said in the beginning. im not in debt, im not looking to buy a $10000 car, or anything i cant afford, i just wanted to get started. and just wanted some info on the "lingo" and the fine print stuff that isnt on the pretty credit card pamphlets.
kyle - i appreciate the lecture you been pm'd
any thing else im willing to listen and learn. thanks.
well, if its not too much, do you mind me asking how come? did you buy stuff you couldnt afford and couldnt catch up because of the interest? im sorry for your debt but maybe i could learn from your mistakes.
im total credit rookie, thats why i havent opened one.
joe7987
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^^This can happen. You need to have self control if you're going to get a credit card. If you can't control yourself, you don't need to be having a credit card... I'm pretty sure John has learned his lesson, but it sucks that he had to go through with it. Don't make this mistake.
I think if you have a little more patience and live a little more within your means you won't NEED credit. I completely disagree with the suggestion that you NEED credit. I completely understand the idea that most people are not willing to wait until their late 30's/early 40's to buy their first house with cash. It also takes an awful lot of discipline and strength to start saving for that when your in your early 20's late teens.
But i said it before a mortgage can be had at a good interest rate, IF YOU CAN"T WAIT, without having made any interest payments before in life. A credit history can be established by paying a cell phone bill on time forever and if you have utilities in your name.
Your analysis of the economic collapse is pretty dead on. But you are misinterpreting your own words. The lenders didn't not consider credit. They gave Adjustable Rate Mortgages to people with BAD credit, no assets, and low income. People who have had credit cards and paid them late or not at all. Then the interest rates went up, their incomes went down, and the people couldn't afford their mortgages anymore.
What i am suggesting is that you just never sign up for the cards to begin with. that won't give you BAD credit, just no credit. And that's where a responsible mortgage lender comes in. They can give out loans to buy a house when you have no credit if you find someone who is willing to do research and figure out whether you have been saving or spending responsibly, and whether your bills are on time.
Think about this: you have never borrowed money in your life. You are 26 years old. You pay $600/month in rent and pay all your utilities. Never been late on a payment for any bills (utilities, cell phone, car insurance, etc.). You've also saved $900/month plus any extra cash you got for bonuses, overtime, etc. into a savings account since you were 22 and you got a good paying job.* Now you have ~$44000 in the bank. If a lender looks at everything i just said they will gladly lend you $200,000 at 5% interest so that you can buy a $220,000 house and make a $1400/month mortgage payment.
i know some of these numbers might be impractical but i just made them up in my head.
* most people when they get the good paying job they find ways to spend/waste their money right away, but you in this scenario saved the money (what a crazy idea!!)
I never said i'd never own a new car. What is it about owning a new car makes you immediately think of a car payment? You've been trained by the culture in this country to think about borrowing money and paying it back before saving your own. What kinda car do you want? how much do you think a new car costs? I thought i explained earlier how to buy a $13,000 car without borrowing money, but maybe $13,000 isn't nice enough for you? maybe you deserve more... That's all fine if you can afford it. This would be my suggestion in that case Go pick out your new car. how about a new $25,000 accord? Go to the finance office for honda, and find out what the interest rate is, how long it'll take to pay it off, and what the monthly payments will be. Then setup a high interest savings account online and make a transfer for that amount into your account every month.
And about the house for your 3 kids. i never said not to buy a house. thats something that i'm personally alright with borrowing for if you really feel like you need it. But you don't need to lease a car, or keep a balance on a credit card to do that.
I'm a little confused when you say these two sentences in the same post: " life is too short to save up for things like a house for your wife and 3 kids... and to never own a new car." ... "Putting non-essential objects onto a card just because you want it now, won't lead you in the right direction."
I consider a new car a non-essential.
I don't think their's a conspiracy. I think they are brilliant and are making a killing because of how they've marketed their brands. Listen to the people in this thread suggesting that its the way of life to borrow money, and pay interest on it. That's not a conspiracy.
I don't think they're spreading misinformation either, but you never hear pizza hut tell you about DiGiorno. Visa isn't going to suggest that most millionaires have never had an account with them. They aren't going to tell you that having a monthly payment with them is retarding your financial progress. But instead, they lead you to believe that having a monthly payment with them will only help you in the game of life. And they have most people convinced that it's essential to their financial prosperity, when that couldn't be more from the truth.