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#102 Aug 29 2013 at 1:02 PM Rating: Good
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I don't know about down there, but up here you're going to have to pay a damage deposit on an apartment, most likely 1st and last month's rent, and that's going to be well over $500. Insurance usually requires first and last month's payment as well.

$500 for a year or two isn't a big deal.
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#103 Aug 29 2013 at 1:04 PM Rating: Excellent
If you've saved it, keep it in the savings account and don't touch it. Don't spend more then you can out of other earnings.
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#104 Aug 29 2013 at 1:17 PM Rating: Good
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Uglysasquatch wrote:
I don't know about down there, but up here you're going to have to pay a damage deposit on an apartment, most likely 1st and last month's rent, and that's going to be well over $500. Insurance usually requires first and last month's payment as well.

$500 for a year or two isn't a big deal.


Yes, but the other side of that is that you don't realistically get anything tangible in return. If you put $700 down on an apartment, you're getting a place to live. If you put $1000 down on a car, you're getting a way to move from point A to point B.

If you're putting $500 down on a secured card, you're not getting something with direct utility to your current situation. It's good for your future, yes. But it still sucks. Particularly when you have a 20% APR on top of it. That's a lot of money invested intangibly in the future.

That's why I approve of the new, lower-down options. They're still wildly profitable for the companies offering them (I mean, guaranteed repayment AND 20% APR?). But they demand less of the adult accessing them.

But because of their high APR on top of the down payment, I still approve of them more for rebounding from bad credit than I do for establishing initial credit. If the same company would be willing to give me a low-limit card with the same lack of credit, but is blocked from doing so from blanket legislation, I think that's a problem for everyone. I agree that young adults shouldn't be unprotected at all, but I do think that an all-or-nothing approach isn't the way to handle this.

And if the lender doesn't want to give that no-credit applicant a card that isn't secured, fine. It's their money.
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#105 Aug 29 2013 at 1:23 PM Rating: Good
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Your damage deposit is no different than secured funds. I'll let you have the others.
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#106 Aug 29 2013 at 1:48 PM Rating: Good
APR is irrelevant if you pay your balance every month.
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#107 Aug 29 2013 at 1:53 PM Rating: Good
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I dunno, I've always seen the security deposit of having plenty of immediate rewards. I mean, it gives you a new place to live. Yeah, I need to pay my rent as well, and not destroy the apartment, but it's still something tangible (which I'll hopefully get back).

And beyond that, I've always had to consider it with more utility. I've only ever been apartment hunting in areas with a lot of competition, so the security deposit was a way to lay claim to a good deal so someone else couldn't steal it out from under you.

It's not something I ever had to do for intangible, future rewards. It's something I did for immediate benefit.

It's kind of how I'm a lot happier spending 5% of my paycheck on gas than I am putting it into my retirement plan (which I have to do, as a state employee). The investment, through investment matching, is way better for my future. And I don't particularly like spending money on gas. But seeing the meter go higher is a much larger bit of satisfaction than seeing that deduction on my paycheck is.

[EDIT]

Quote:
APR is irrelevant if you pay your balance every month.


It also greatly reduces the return on your credit score, as I understand it.

Edited, Aug 29th 2013 3:56pm by idiggory
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#108 Aug 29 2013 at 1:56 PM Rating: Excellent
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It also greatly reduces the return on your credit score, as I understand it.

Paying off your balance reduces your credit score? In bizarro land maybe. Showing you can keep up with your expenses is the definition good credit.

Edited, Aug 29th 2013 2:57pm by Xsarus
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#109 Aug 29 2013 at 2:00 PM Rating: Excellent
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Sir Xsarus wrote:
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It also greatly reduces the return on your credit score, as I understand it.

Paying off your balance reduces your credit score? In bizarro land maybe. Showing you can keep up with your expenses is the definition good credit.
I want to say I under the same impression as diglett. Not that it's not good to pay stuff off, but carrying no balance on anything wasn't as good as having some outstanding balance somewhere.
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#110 Aug 29 2013 at 2:07 PM Rating: Good
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someproteinguy wrote:
Sir Xsarus wrote:
Quote:
It also greatly reduces the return on your credit score, as I understand it.

Paying off your balance reduces your credit score? In bizarro land maybe. Showing you can keep up with your expenses is the definition good credit.
I want to say I under the same impression as diglett. Not that it's not good to pay stuff off, but carrying no balance on anything wasn't as good as having some outstanding balance somewhere.

The idea being that if you borrow 1000 dollars, but pay it off right away, the person loaning you the 1000 dollars didn't make anything on the deal. Of course for credit card companies, they make money on the initial transaction, fees and percentages from the retailer, etc.

I'm not 100% sure if the whole "perfect payback with zero balance is not good for your credit score" thing is true, but even if it's not as good as keeping a small balance and making prompt and on time payments, it cannot be as bad as having poor payment histories or no payment histories at all.
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#111 Aug 29 2013 at 2:08 PM Rating: Excellent
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Then you carry a low balance. If you're going to game the system, you gotta pay to get in the game.

I think part of that might be the debt to credit ratio. Companies get nervous if you have the ability to put $15,000 on credit cards over night. You're ironically better off (from a credit rating standpoint) to have $15,000 in credit and $5,000 of that as debt with regular payments which (A) lowers the amount of money you can grab in the middle of the night and (B) shows an ability to make regular payments.

If you have a card with zero balance, it doesn't really demonstrate an ability to make regular payments. For all they know, your little brother buried it in the back yard.

Edit: I don't mean to imply that $5k is a low balance. Was just grabbing easy round numbers.

Edited, Aug 29th 2013 3:09pm by Jophiel
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#112 Aug 29 2013 at 2:15 PM Rating: Default
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idiggory, King of Bards wrote:
Yes, but the other side of that is that you don't realistically get anything tangible in return. If you put $700 down on an apartment, you're getting a place to live. If you put $1000 down on a car, you're getting a way to move from point A to point B.


Sure you do. You get a card that you can use to make convenient purchases. Which is the kinda the point of having one, right? So you don't have to carry cash around all the time? Unless the utility you want is to be able to buy stuff you can't afford, which again puts us right back into the whole predatory lending thing. They are directly acting to reduce your ability to borrow more money than you can realistically pay back. How did you think that was going to happen?


Quote:
If the same company would be willing to give me a low-limit card with the same lack of credit, but is blocked from doing so from blanket legislation, I think that's a problem for everyone. I agree that young adults shouldn't be unprotected at all, but I do think that an all-or-nothing approach isn't the way to handle this.


/shrug. This is the solution they came up with. How do you propose they protect young adults from their proclivities towards abusing credit cards without heavily placing the kinds of restrictions you're complaining about. It's like you want "those other irresponsible people" to be restricted, but not you. But you're financially in the exact same position. And thus, you're treated just the same as them until you can prove you can be responsible with credit.

I'm not seeing how you think this should work.

Quote:
And if the lender doesn't want to give that no-credit applicant a card that isn't secured, fine. It's their money.


Except when it was just their money, they did give out unsecured cards to no-credit applicants. But because of the higher risk, they had to charge higher fees and interest. And this resulted in too many of those young people racking up huge debts. Part of the credit card reform fixed that by legislatively mandating limits on that sort of thing. So it's no longer about them doing what they want with their money. If it was up to them, they'd give you that card, put a 29% rate on it, and let you sink or swim based on your own decisions with that credit. But it's not.
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#113 Aug 29 2013 at 2:16 PM Rating: Excellent
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Jophiel wrote:
stuff


Yeah, something like that. Have a couple of bills go to one of your cards or something, make regular payments and keep a low balance on it. I suppose having finances that make you the perfect candidate for them doesn't necessarily mean your finances are the best they can be for you.


Edited, Aug 29th 2013 1:17pm by someproteinguy
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#114 Aug 29 2013 at 2:55 PM Rating: Excellent
I asked this question when I was talking to my bank to get a mortgage. If you use your card and pay off the balance every month that will build credit. If you don't use your card at all, it won't build as fast, but keeping a balance on your card has no significant effect. A lot of people think it does, they're wrong.
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#115 Aug 29 2013 at 3:08 PM Rating: Default
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Sir Xsarus wrote:
I asked this question when I was talking to my bank to get a mortgage. If you use your card and pay off the balance every month that will build credit. If you don't use your card at all, it won't build as fast, but keeping a balance on your card has no significant effect. A lot of people think it does, they're wrong.


That's what I'd heard as well. It's about paying off debts that really matters. Although Joph (or whoever it was who pointed this out) does have a valid point that when they look at extending you more credit or giving you a loan, they do take into account current potential credit. So having a whole bunch of cards you don't use can be detrimental. Not to your credit rating I don't think, but to the whole "credit to income" part of the lending equation. Obviously, if you actually carry an outstanding balance though, that's a bigger effect (debt to income), so the solution isn't necessarily "max out your cards and they'll lend you more money". Well, more correctly that does work until you hit a ratio of debt to income at which it doesn't work anymore.

Which is how people with good incomes manage to get themselves into serious debt problems.
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#116 Aug 29 2013 at 5:18 PM Rating: Good
Jophiel wrote:
Get a modestly priced used car and you'll look more attractive.

I hear most of the poors get a used Lexus since they are so cheap and all.
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#117 Aug 29 2013 at 5:30 PM Rating: Good
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I was curious so I asked my dad about his specific dealership's relationship (for lack of a better word) for auto loans. For what it's worth, he said that the bank will not make a loan for under $6K and that it's nearly impossible to get one without a credit history right now. He deals with both used and new cars.

Dunno if that's a regional thing, or a federal norm, though.

[EDIT]

I also realize that "My dad" is not realistically a source of info people are going to put a lot of faith in. I'm just putting it out there.

Edited, Aug 29th 2013 7:32pm by idiggory
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#118 Aug 29 2013 at 5:33 PM Rating: Good
idiggory, King of Bards wrote:
It also greatly reduces the return on your credit score, as I understand it.

It certainly hasn't hampered mine.
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#119 Aug 29 2013 at 5:42 PM Rating: Good
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Huh, might as well just pay my card all the way down on my next cycle, then...
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#120 Aug 30 2013 at 12:43 AM Rating: Good
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It's sort of tangential but my husband and I ran into some trouble when we were buying our current home. We couldn't get a mortgage because neither of us had any credit whatsoever. And here I was thinking that never having been in debt was a good thing. :T

Not having credit sucks. And I imagine it sucks even more if you have no one to help you out.

Edited, Aug 30th 2013 2:46am by Kawohni
#121 Aug 30 2013 at 7:15 AM Rating: Good
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idiggory, King of Bards wrote:
Huh, might as well just pay my card all the way down on my next cycle, then...
I leave around $100 on mine.
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#122 Aug 30 2013 at 7:31 AM Rating: Excellent
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Kawohni wrote:
And here I was thinking that never having been in debt was a good thing.

It is. But, when asking someone to lend you a couple hundred thousand dollars, having a history of taking your debts seriously and paying them on time is a good thing as well.

Xsaurus, I'll take you at your word on the revolving debt/paid debt thing. I had heard otherwise like many others but it wouldn't be the first time conventional wisdom was mistaken. I'm past the point of consciously trying to build credit anyway and maintain and grow my credit rating by just not borrowing a lot of money and promptly paying off the money I do borrow. It's just crazy enough to work!
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#123 Aug 30 2013 at 7:34 AM Rating: Excellent
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#124 Aug 30 2013 at 7:40 AM Rating: Good
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The APR on my card is still high enough that I don't feel like leaving it there just to cost me more. If it's the same return on my score either way, I'll take the lower debt. Smiley: nod
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