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#27 Aug 27 2013 at 7:32 AM Rating: Good
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Nah, plenty of people struggle with a high income, especially if they're used to a higher one.

Having no history of being in arrears should really be good enough, you'd think, but it isn't.
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#28 Aug 27 2013 at 7:34 AM Rating: Excellent
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No, because plenty of people make lots of money and still show zero aptitude at managing it. Which is why lottery winners go bankrupt so often.

Worse yet, if someone shows their $100,000 pay stub they're probably looking for a larger loan than someone with a $100 pay stub. Which, all other things being equal, means more risk to the lender.
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#29 Aug 27 2013 at 7:37 AM Rating: Good
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What does the Bible say about money lending, Jophiel?
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#30 Aug 27 2013 at 7:40 AM Rating: Excellent
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Kavekk wrote:
What does the Bible say about money lending, Jophiel?

Various remarks about charity and usury. I don't think Bank of America is run out of the Vatican though.
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#31 Aug 27 2013 at 7:48 AM Rating: Good
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My first charge card was a Target card. I was 16. It had a $200 limit.

It helped get me some credit. Enough so that I bought my first new car on a loan at 18 (the car was all of ~$5k - and a Pinto to boot).
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#32 Aug 27 2013 at 7:52 AM Rating: Good
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Jophiel wrote:
Kavekk wrote:
What does the Bible say about money lending, Jophiel?

Various remarks about charity and usury. I don't think Bank of America is run out of the Vatican though.
Didn't the Vatican bank just go through a corruption scandal?


As for the whole credit thing, people here hate having to loan money, the government can't even get students to take out a student loan to compliment their student financing (and there were a lot of protests when they tried to change parts of the financing to loans). So most people here have very little to no history when it comes to loans before they buy a house, rent a apartment, buy a car etc. I can see how a credit check became the default when almost everyone has a credit history, it's just a somewhat alien concept to me.
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#33 Aug 27 2013 at 7:55 AM Rating: Excellent
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His Excellency Aethien wrote:
Didn't the Vatican bank just go through a corruption scandal?

I've no idea. It was really more of a polite way of saying I had no idea what Kavekk was trying to get at.

Quote:
I can see how a credit check became the default when almost everyone has a credit history, it's just a somewhat alien concept to me.

America #1!!!!

Edited, Aug 27th 2013 8:55am by Jophiel
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#34 Aug 27 2013 at 10:17 AM Rating: Excellent
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You can find a credit card with a nice rewards or points package attached to it, and if you pay off before the interest compounds, you don't lose out on anything. And you get money/merchandise.

And then you don't have to keep large sums of money in your checking account (for the debit card use) where it's not earning any interest (or even less than the very little you get in savings), you can keep it somewhere else.

More or less this exactly.

I also travel a lot and credit cards have way better international policies than debit cards.
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#35 Aug 27 2013 at 12:25 PM Rating: Good
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His Excellency Aethien wrote:
Sir Xsarus wrote:
His Excellency Aethien wrote:
How does this credit thing work anyway? Credit card or loans in general are more of a last resort kind of thing over here so it's strange to see you say you should use it more.

Credit cards are a last resort? That's odd. I use my credit card for most of my purchases. I've never rung up more then I can pay off at the end of the month though.
Why not just use your debit card instead then?


Incentive schemes, short term interest free loan, ease of access/management.

Buying liquidity at a ~ -2% rate is a bargain.
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#36 Aug 27 2013 at 2:17 PM Rating: Good
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Jophiel wrote:
His Excellency Aethien wrote:
So basically a guilty until proven innocent kind of thing, people/companies assume you can't pay off debts unless you've done so before.

While "true", we're not talking a court of law, we're talking places who make their business lending money. They don't make any money if the other guy fails to pay them back. Wanting some form of evidence that you'll do so isn't all that unseemly. Creditors pull a lot of crap I wouldn't defend but I don't think credit checks are something that's innately bad.

Some people use their credit cards because they offer rewards for usage: airline miles, cash back, reward points usable for gifts, etc. The banks do this to promote usage in the hopes that you'll keep a balance and pay interest but you can just as easily game the system and collect free airline miles by using your card and paying it off promptly. Last wedding anniversary, my wife and I enjoyed a $750 one-night stay at the Chicago Trump Hotel and paid nothing since we used points accumulated on the card.


My biggest issue with the system is that having a credit history, and good credit, isn't really optional in the US. But getting started on building credit is nearly impossible if you don't have a cosigner.

Since the lenders are the ones who ultimately win out in a credit-based system, I think it's reasonable to expect young adults to have access to at least really limited lines of credit, with which to establish a credit history. Say, allowing a maximum of one card with a 20% APR and a $200 limit to someone without a credit history.
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#37 Aug 27 2013 at 2:34 PM Rating: Excellent
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idiggory, King of Bards wrote:
My biggest issue with the system is that having a credit history, and good credit, isn't really optional in the US. But getting started on building credit is nearly impossible if you don't have a cosigner.

That's not really true -- lots of people start new credit histories every year. Besides getting co-signers, you can get limited credit lines from places such as department/box stores, get a secured credit line (i.e. you keep $500 in their account to hold against a $500 credit limit), you build credit from a history of on-time utility payments, apartment rentals can still be had albeit with a larger required deposit, etc. Or just accept the fact that whatever credit card/loan you get will have usurious rates and keep your balance paid down -- and credit built up -- until you can qualify for a better offer.
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#38 Aug 27 2013 at 3:29 PM Rating: Good
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Jophiel wrote:
idiggory, King of Bards wrote:
My biggest issue with the system is that having a credit history, and good credit, isn't really optional in the US. But getting started on building credit is nearly impossible if you don't have a cosigner.

That's not really true -- lots of people start new credit histories every year. Besides getting co-signers, you can get limited credit lines from places such as department/box stores, get a secured credit line (i.e. you keep $500 in their account to hold against a $500 credit limit), you build credit from a history of on-time utility payments, apartment rentals can still be had albeit with a larger required deposit, etc. Or just accept the fact that whatever credit card/loan you get will have usurious rates and keep your balance paid down -- and credit built up -- until you can qualify for a better offer.


In general, utility payments will not build credit unless your account is delinquent. To the best of my knowledge, credit lines at department stores are still subject to the new laws restricting access to young adults.

Secured credit lines are available, true. But $500 down is really steep for nearly all young adults just starting out on building credit. That would be difficult for me to wing. I'm still not financially at a place where I could comfortably put that down. And for the majority of young adults, that could easily constitute a month of wages. And I've never seen secured cards in amounts less than $500.
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#39 Aug 27 2013 at 3:36 PM Rating: Decent
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As Joph said, it's not that hard really. You can always get a secured card to start off. The key is paying stuff off. If you're going to do this you have to be diligent, but it's quite doable.

Of course, the starting point is having a job. Remember that a credit score is only part of the equation that lenders will use. It's not a disaster to not have a great score if you have a decent income. As part of the "cash and carry" crowd myself, you don't really need credit cards. You can always use a debit card, but of course you have to actually have the cash on hand.

And laughing statements to the contrary aside, if you have sufficient income and funds, you can get a loan even with bad or no credit. When I got my first mortgage, I had more or less zero credit of any kind. The loan guy referred to me as "a ghost" credit wise. But when you put $60k down (which was about 20% of the loan IIRC), they don't have any problems at all giving you a loan.
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#40 Aug 27 2013 at 3:38 PM Rating: Decent
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idiggory, King of Bards wrote:
Secured credit lines are available, true. But $500 down is really steep for nearly all young adults just starting out on building credit. That would be difficult for me to wing. I'm still not financially at a place where I could comfortably put that down. And for the majority of young adults, that could easily constitute a month of wages. And I've never seen secured cards in amounts less than $500.


If you can't save up $500 for a secured card, how can you pay off $500 on a card? Perhaps it's better to *not* have a credit card if your finances are that tight.
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#41 Aug 27 2013 at 3:56 PM Rating: Excellent
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idiggory, King of Bards wrote:
In general, utility payments will not build credit unless your account is delinquent.

They show as a positive on my credit reports.
Quote:
Secured credit lines are available, true. But $500 down is really steep for nearly all young adults just starting out on building credit

If someone is unable to collect $500 for a secured credit line, I'd be extremely hesitant to offer them an unsecured credit line. Just sayin'.

To repeat Gbaji, who was repeating me, you can get loans without credit anyway. You'll just have to accept that you'll get extremely unattractive interest rates because they're using that extra income to offset all the other no-credit people who they lent money to and who skipped out on their bills.

Edited, Aug 27th 2013 4:59pm by Jophiel
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#42 Aug 27 2013 at 4:02 PM Rating: Good
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Except that the reality of the situation is very different now than it was 10 or 15 years ago, because of legislation pushed through 5 or so years ago to stop predatory lending on young adults.

And while you don't need a credit card, you will need a credit history. And having huge obstacles in the way of establishing one before you are 23 or 24, and realistically need one already, is really problematic.

Quote:

If you can't save up $500 for a secured card, how can you pay off $500 on a card? Perhaps it's better to *not* have a credit card if your finances are that tight.


You shouldn't be going anywhere near your limit on your card anyway, since it's bad for your credit history if you do. And it's far, far easier to pay off $650 over time than it is to put $500 down.

Plus, the point isn't to have a credit card for the sake of having a credit card, the point is to have a credit card so that you can establish a credit history. When I got my first independent card, I used it for groceries and gas. That was pretty much it. But those small transactions, and small payments, on a $1k limit are easily the bulk of what has contributed to my credit score today. But I could only get that card because my parents were able to support me in establishing a credit history. There was realistically never a point in the past 5 years where saving $500 to put down on a secure line of credit was possible. But not having a credit history now would be a huge obstacle for me.

The other side of things is that there's literally no education, or was not in my school, concerning credit, credit scores, etc. By the time I knew how important having a credit history was, I was already past the point where I should have started establishing one.
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#43 Aug 27 2013 at 4:10 PM Rating: Good
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Jophiel wrote:
idiggory, King of Bards wrote:
In general, utility payments will not build credit unless your account is delinquent.

They show as a positive on my credit reports.
Quote:
Secured credit lines are available, true. But $500 down is really steep for nearly all young adults just starting out on building credit

If someone is unable to collect $500 for a secured credit line, I'd be extremely hesitant to offer them an unsecured credit line. Just sayin'.

To repeat Gbaji, who was repeating me, you can get loans without credit anyway. You'll just have to accept that you'll get extremely unattractive interest rates because they're using that extra income to offset all the other no-credit people who they lent money to and who skipped out on their bills.

Edited, Aug 27th 2013 4:59pm by Jophiel


In most states, utility companies do not have to report to credit bureaus. And, if they do so, they have to follow legal standards for doing so, which adds additional cost, so nearly no companies do it unless required to. The vast majority of Americans won't see utilities payments on their reports.

And if you are under 21, laws stipulate you must meet minimum income requirements, which hover somewhere around 15k a year. That's a lot for a college student to meet.
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#44 Aug 27 2013 at 4:13 PM Rating: Excellent
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idiggory, King of Bards wrote:
And it's far, far easier to pay off $650 over time than it is to put $500 down.

You'd think so but the rate of default on small balance cards would imply that "far, far easier" doesn't mean much if you're the lender on the hook for the unpaid $650

Quote:
The other side of things is that there's literally no education, or was not in my school, concerning credit, credit scores, etc. By the time I knew how important having a credit history was, I was already past the point where I should have started establishing one.

That's a problem and no argument that it should be part of the public education curriculum. Back in my day, we started learning about household financing and credit in the 8th grade but I may have just been blessed with an overly enthusiastic teacher.
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#45 Aug 27 2013 at 4:31 PM Rating: Good
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Yeah, I can't say we got much of it at all. I vaguely remember some kind of budgeting lesson in 8th grade, but literally none of that in high school. And we didn't even have an economics elective, so it's not like interested students could sign up for it.

My only complaint here is that there's a disconnect in the way things work that makes starting out more difficult than it has to be. If credit wasn't so necessary for any kind of realistic living, like getting an apartment that wasn't a month-to-month in a dilapidated building in Camden, then it would be fine for it to be so difficult to start establishing credit. On the other hand, if it was easier to establish credit before you turned 21, that wouldn't be so unrealistic.

But having no grace period sucks. I can't say I know what the answer to that is -- it's a competition between business models and regulations that were put in place for legitimate reasons. But it's harder than it should be right now.
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#46 Aug 27 2013 at 9:59 PM Rating: Excellent
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Your in luck though, a series of recent law changes that I totally just made up now means that your post count contributes to your credit worthyness! (at least when taking loans out in batcoins! )
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#47 Aug 28 2013 at 9:46 AM Rating: Excellent
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idiggory, King of Bards wrote:
Yeah, I can't say we got much of it at all. I vaguely remember some kind of budgeting lesson in 8th grade, but literally none of that in high school. And we didn't even have an economics elective, so it's not like interested students could sign up for it.
I remember taking a class in high school I think. You had to balance some imaginary budget, with random expenses and such. We learned about other stuff too.

I'm not sure it really helped much though. The teacher admitted he was having problems with it as well, something about how it's hard to get people to spend the money in their fake account since there wasn't any reward for doing so. You know you don't actually get a vacation at the beach or something in exchange for the money there's no reason to spend it. Nowadays I bet you could put together some kind of computer game that could help teach that stuff, not so much back then.
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#48 Aug 28 2013 at 9:49 AM Rating: Good
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Jophiel wrote:
Quote:
The other side of things is that there's literally no education, or was not in my school, concerning credit, credit scores, etc. By the time I knew how important having a credit history was, I was already past the point where I should have started establishing one.

That's a problem and no argument that it should be part of the public education curriculum. Back in my day, we started learning about household financing and credit in the 8th grade but I may have just been blessed with an overly enthusiastic teacher.


Back in my day, I learned about household financing and credit from my parents.
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#49 Aug 28 2013 at 9:50 AM Rating: Good
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Iamadam wrote:
Jophiel wrote:
Quote:
The other side of things is that there's literally no education, or was not in my school, concerning credit, credit scores, etc. By the time I knew how important having a credit history was, I was already past the point where I should have started establishing one.

That's a problem and no argument that it should be part of the public education curriculum. Back in my day, we started learning about household financing and credit in the 8th grade but I may have just been blessed with an overly enthusiastic teacher.


Back in my day, I learned about household financing and credit from my parents.


My parents are far from a solid resource on those matters.

Realistically, nearly everything I know about the kinds of investments I should be making I learned from my sister, who learned it from failing at it miserably in her twenties and then clawing her way out of it.
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#50 Aug 28 2013 at 9:54 AM Rating: Good
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idiggory, King of Bards wrote:
My parents are far from a solid resource on those matters.
This.

Unless you count as an example of the perils of racking up 6-figures of credit card debt. Smiley: rolleyes

Edited, Aug 28th 2013 8:54am by someproteinguy
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#51 Aug 28 2013 at 10:14 AM Rating: Excellent
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Iamadam wrote:
Back in my day, I learned about household financing and credit from my parents.

We try to teach this stuff to my son, mainly "on the go" as things come up. When some bubbly thing behind a card table asks me if I want to just "answer a few questions" for a Chase Mastercard travel mug, I explain what the deal is. Or talk about why charging your McDonald's lunch and paying 19.25% interest on a Quarter Pounder is a dumb idea. Or break down why, just because we make [X] many dollars, most of that is earmarked for household expenses and we make a choice between cable television or eating out an extra four times a month because we can't do both. But the hope is that doing it as it comes up makes it more topical and interesting and understandable than a series of lectures.

I think there is also a strong component of parents just not wanting to discuss their own finances with their children. You don't want them to worry when things are tight and don't feel that they're entitled to know how much you're making, etc. I've had multiple conversations with my wife where we're talking about if we can swing going out for breakfast Sunday morning or what the budget is to make sure the sitter gets paid on Monday, when I realize that the older one is listening in. This is usually followed up with a quick discussion about how weighing the practicalities of minor luxuries doesn't mean we're broke or hurting and the reason we have savings and manage to keep the lights on is because we have household finance discussions and limit the discretionary spending rather than saying "Spend, spend, spend and worry about it later".
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