Building your Credit?

[suaveflooder]

Originally Posted by serialk11r

Because credit cards have cash rewards. I pay 3.3% less for gas thanks to the generosity of Bank of America. I already got 200 bucks back since last year Planning on opening a Citibank card for bonus points on restaurants.

Lol, I have yet to meet someone well off that told me, "you know I made all my money through cash rewards" .

If you are wealthy, you will be the first.

We all want to build our credit to buy a house, buy a car, buy SOMETHING. Not necessary. Cars tend to be "wants" more than needs and you can get an unconventional loan with no credit score of you are so inclined to take a loan out on a house.

You can get all these things just by being patient. It just takes time. We all want things NOW because that's how we have been trained. We have been marketed to so well that we can no longer wait for something we can't afford at the time (I'm talking buying cash, not making payments. Just because you can make they payment doesn't mean you can afford it). We "owe it to ourselves" to take out loans on things we can't afford to impress people we either don't like, or will never meet

[serialk11r]

Originally Posted by suaveflooder

Lol, I have yet to meet someone well off that told me, "you know I made all my money through cash rewards" .

If you are wealthy, you will be the first.

We all want to build our credit to buy a house, buy a car, buy SOMETHING. Not necessary. Cars tend to be "wants" more than needs and you can get an unconventional loan with no credit score of you are so inclined to take a loan out on a house.

You can get all these things just by being patient. It just takes time. We all want things NOW because that's how we have been trained. We have been marketed to so well that we can no longer wait for something we can't afford at the time (I'm talking buying cash, not making payments. Just because you can make they payment doesn't mean you can afford it). We "owe it to ourselves" to take out loans on things we can't afford to impress people we either don't like, or will never meet

I would never buy anything using credit, and cash rewards are only a few percent deduction, but I'd rather have that extra few hundred bucks a year than not. Totally worth logging into my bank account a few times to pay the credit card bill. Show me another way to make 2-3% of all expenditures in a month in 3 minutes.

[suaveflooder]

Originally Posted by serialk11r

I would never buy anything using credit, and cash rewards are only a few percent deduction, but I'd rather have that extra few hundred bucks a year than not. Totally worth logging into my bank account a few times to pay the credit card bill. Show me another way to make 2-3% of all expenditures in a month in 3 minutes.

Off your expenditures, you can't. Investing in mutual funds you can make around 7 or so %. So there is your 3% and then some just by putting a little money away....and then you won't be tempted to spend that extra money on a TV to get that 3% rewards

I'm not saying it can't be done. But 88% of people failing with credit card tells me to stay away. Temptation of instant gratification is too strong. That's why for the OP, I suggest to stay away. Avoid the temptation all together

[SigmaHyperion]

Originally Posted by suaveflooder

Lol, I have yet to meet someone well off that told me, "you know I made all my money through cash rewards" .

And I've never met a rich person that didn't borrow other people's money when it made sense.

Even the largest companies in the world borrow money rather than using their own every single day.

Yes, you can buy a car with cash. But that's even more stupid than buying it on credit. Why? Because I can borrow Subaru's money for 1.9%, but my own money makes me 8-14% (every year the past 15 years, including '08-'10). Every year I keep that cash in the bank -- I make $3,000. Over the course of a 5 year note, I pocketed $15,000 by keeping my money in my bank, and only had to pay Subaru some $1,500 to borrow theirs. That's easy money right there. My newly-built home is full of appliances and furniture all purchased at 0% interest. I can pay nothing at all, then pay it all in 5 years when my money is inherently worth more due to inflation, plus I made money on my money in that time floating their money for my furniture. That's like getting a 25%+ discount -- a considerable sum of money on a house full of appliances & furniture, I'll you that much.

And saving money to buy cash for a house? That'd take forever. Again, I can borrow that money for <4%. But that "unconventional, no-credit-score" loan -- those interest rates are nowhere near as low as for those (particularly thesedays -- pre-'08 they weren't quite as bad). So, again, your costing yourself MORE money going that route rather than just putting in the modicum of work to get yourself a decent credit score/history so that it's there when you need it. It makes a staggering difference when it comes to home purchasing. A 1% difference in your loan rate, can change the value of the home you can afford to purchase for the same payment by as much as 25%. So putting in the work to save yourself a mere 1% on your interest rate when it comes time to buy a home, can mean the difference between looking at a $200,000 house and a $250,000 house for the same monthly payment.

Smart people know when to use their own money and when to use someone else's. Access to extremely cheap capital is one of the most significant aspects of how the wealthy get and, more importantly, stay wealthy. Likewise, absurd interest rates on used vehicles, payday loans, and retail credit is one of the most significant hindrances to economic mobility in the country today.

The fact that some people can't manage credit correctly doesn't make credit bad. Credit is absolutely awesome if you know how to use it wisely. It allows you access to all sorts of things that you either could not afford, could not afford presently, or would cost you much more money otherwise. Avoiding it because some people can't manage it correctly, is like avoiding alcohol because some people become alcoholics, or good food because some people gorge themselves and get fat.

[serialk11r]

Originally Posted by suaveflooder

Off your expenditures, you can't. Investing in mutual funds you can make around 7 or so %. So there is your 3% and then some just by putting a little money away....and then you won't be tempted to spend that extra money on a TV to get that 3% rewards

Or, you could invest your money, AND buy with a credit card and score both. Durr.

[suaveflooder]

Originally Posted by SigmaHyperion

And I've never met a rich person that didn'tborrow other people's money when it made sense.

Originally Posted by SigmaHyperion

Even the largest companies in the world borrow money rather than using theirown every single day.

Yes, you can buy a car with cash. But that's even more stupid than buying iton credit. Why? Because I can borrow Subaru's money for 1.9%, but my own moneymakes me 8-14% (every year the past 15 years, including '08-'10). Every year Ikeep that cash in the bank -- I make $3,000. Over the course of a 5 year note,I pocketed $15,000 by keeping my money in my bank, and only had to pay Subaru some$1,500 to borrow theirs. That's easy money right there. My newly-built home isfull of appliances and furniture all purchased at 0% interest. I can paynothing at all, then pay it all in 5 years when my money is inherently worthmore due to inflation, plus I made money on my money in that time floatingtheir money for my furniture. That's like getting a 25%+ discount -- aconsiderable sum of money on a house full of appliances & furniture, I'llyou that much.

And saving money to buy cash for a house? That'd take forever. Again, I canborrow that money for <4%. But that "unconventional,no-credit-score" loan -- those interest rates are nowhere near as low asfor those (particularly thesedays -- pre-'08 they weren't quite as bad). So,again, your costing yourself MORE money going that route rather than justputting in the modicum of work to get yourself a decent credit score/history sothat it's there when you need it. It makes a staggering difference whenit comes to home purchasing. A 1% difference in your loan rate, can change thevalue of the home you can afford to purchase for the same payment by as much as25%. So putting in the work to save yourself a mere 1% on your interestrate when it comes time to buy a home, can mean the difference between lookingat a $200,000 house and a $250,000 house for the same monthly payment.

Smart people know when to use their own money and when to use someoneelse's. Access to extremely cheap capital is one of the most significantaspects of how the wealthy get and, more importantly, stay wealthy.Likewise, absurd interest rates on used vehicles, payday loans, and retailcredit is one of the most significant hindrances to economic mobility in thecountry today.

The fact that some people can't manage credit correctly doesn't makecredit bad. Credit is absolutely awesome if you know how to use it wisely. Itallows you access to all sorts of things that you either could not afford,could not afford presently, or would cost you much more money otherwise.Avoiding it because some people can't manage it correctly, is like avoidingalcohol because some people become alcoholics, or good food because some peoplegorge themselves and get fat.

I'm not going to go crazy on this (at least I don't think) as I am still very much a noob when it comes to finances. Myown story is pretty pathetic, but with time, I hope to make it an amazing one.I won't cover everything as I just don'thave the knowledge to do so, but I will cover what I know.

As far as getting a 1.9% interest rate, at 19, I highly doubt the OP is going to get an interest rate that good. Inaddition, if he does, I'm willing to putmoney on the table that he will not be investing the money as you do. There arealways ways to "play the game" so to speak, but given that so few hold the majority of the wealth in thiscounty, tells a tail of few actually succeeding at it. Also, just because you know how to play the game doesn’tmake you “wealthy.” People who make alot of money, are not necessarily the “wealthy”people of the country as is pointed out in “The Millionaire Next Door.” The book refers to them as “under accumulators of wealth” as they tend to live alavish lifestyle, but have very little net worth to show in comparison to theirincome, or money coming in. The authorsthemselves went to the “high class” neighborhoods only to find out that thesepeople weren’t truly wealthy. The truly wealthy,lived a much more modest lifestyleworking normal jobs, living in middle class neighborhoods.

The OP was asking how to build credit, so naturally a credit card is in order. Number two cause of bankruptcy happensto be credit card debt, the number one is medical bills. That should tell you something. Also, 88% of people who sign on to one of those “90 days same as cash” deals or “nointerest for 18 months” tend to defaultand roll over into payments with interest between 21% and 31%, basically 9 outof 10 people. It is great that you personally can do it, butstatistics show that you are in the minority. Odds are not in the favor of the borrow (It’s almost as if the bank/lenderknows this )

As far as the unconventional loan is concerned, it can completely be a win win situation. My wife and I live on 50% of ourincome. We make right around a$100,000/year. 15% of that money goes into investments, so $15,000 (even at 15,000/yearinvested a with a return of 7% over 30years, we would retire with $1,416,911.79 of course with the house paid off wewill dump more into the market) . Thisleaves us $35k a year extra. Now we havea zero based budget, meaning every penny we make goes somewhere. We could save up a 50% down payment for a $250,000 home in a little over3 ½ years. That doesn’t sound likeforever, now does it? Now, even crazieris that from there, I can take out a 15year fixed rate mortgage if I need to using a unconventional loan option (If I had a zero credit score), andsave more money vs the 10% down 30 year loan! That would be paying for a house in18 years and saving hundreds of thousands of dollars, all of which can beturned around and invested.

Example of why I’m choosing a 15 year mortgage

Buy a 225,000 house (high 6% APR)

Payments for a 15-year mortgage is $1899/month

Payments for a 30-year is $1,349/month

After paying for 10 years, the 15 year mortgage balance isat $98,210 while the 30 year is at $188,292!!!! ALMOST DOUBLE!

All said and done, as a looser (meaning that we never get a raise for 30 years), I’ve calculated us out tohave a touch over 3 million in retirementmoney (retiring at 65 years old). Thiswill all be with no credit score in the next couple years. It’s exciting! Most people are planning on the government to take care of them.



There is nothing wrong with playing the game as you are and using the “free money” wisely. The problemis that it’s not “some people” that gorge themselves, it’s the MAJORITY! Saving a 19 year old kid from potentially making a bunch of stupid, costly decisions onhis credit is okay in my book. He mightwin following what you are telling him,but America and “the other 98%” are telling me that it’s a pretty slim chance. We live in a consumer society….THE MOST marketed to society of all time. We arestudied…companies spend millions of dollars doing so, and when we take out that “no interest for 18 months” loan, theyknow just how many will default and rollover into interest payments, and how many will pay it off in time. If it wasn’t going to be a fat profit in their wallet, you honestly believe they wouldoffer it? We (society) can’t wait untilwe can actually afford to pay forsomething, so we buy it on credit. I’vebeen there, I am living with the consequencesright now. In fact, I can’t name a single person I know who hasn’tstruggled with debt because it got out of control…..all starting with a creditcard (and I have multiple multimillionaires in my family).

This is nothing more than a suggestion to the OP, as was my original post. Stay out of debt. You do that,and invest wisely, I just made you a multimillionaire. Also, read Dave Ramsey’s “Total MoneyMakeover” and Tomas J Stanley & William D Danko’s “The Millionaire Next Door.” It will COMPLETELY change your view on money.

[suaveflooder]

edit, to above...computer is acting weird....sorry...some words are running together. Might be a little hard to read. I did the origional in word, and for some reason it REALLY doesn't like formatting correctly on this forum

[suaveflooder]

Originally Posted by serialk11r

Or, you could invest your money, AND buy with a credit card and score both. Durr.

See above. Oddly, I will still end up with more money in the end. Go figure, right?

[nalc]

Originally Posted by suaveflooder

See above. Oddly, I will still end up with more money in the end. Go figure, right?

The fact that a 15 year mortgage is cheaper than a 30 year mortgage and that living well within your means will allow you to save a lot of money for retirement means that you shouldn't get a credit card? I'm not really following the logic.

We're all agreeing that carrying credit card debt is a bad idea, but debt in general isn't bad if you're responsible. I didn't pay for my car in cash. I financed at 2.2%, then put $20K in a mutual fund. Guess what? So far, I've paid ~$120 in interest on my car loan, and I've made ~$500 (last time I checked) on the mutual fund. A few clicks of a mouse just made me $380 in the past 3 months. Cash in your pocket can make 2-8% interest, cash in someone else's pocket doesn't make you anything, and if you've got a loan that is accruing less interest than you're able to get with some easy low-risk investments, you're coming out on top.

[bcj]

Originally Posted by suaveflooder

I did the original in word

Have to turn off "Smart" everything, because it's not.

Use Notebook for forum posts.

[NickFRS]

Chase Freedom credit card is interest free for a year. Jump on it.

[suaveflooder]

Originally Posted by nalc

The fact that a 15 year mortgage is cheaper than a 30 year mortgage and that living well within your means will allow you to save a lot of money for retirement means that you shouldn't get a credit card? I'm not really following the logic.

We're all agreeing that carrying credit card debt is a bad idea, but debt in general isn't bad if you're responsible. I didn't pay for my car in cash. I financed at 2.2%, then put $20K in a mutual fund. Guess what? So far, I've paid ~$120 in interest on my car loan, and I've made ~$500 (last time I checked) on the mutual fund. A few clicks of a mouse just made me $380 in the past 3 months. Cash in your pocket can make 2-8% interest, cash in someone else's pocket doesn't make you anything, and if you've got a loan that is accruing less interest than you're able to get with some easy low-risk investments, you're coming out on top.

Hardly. I'm saying you don't need credit to survive. I said this above. Why do people build their credit? The answer is to buy stuff. You don't "need" that stuff. If your needs are provided for (food, shelter, clothing, basic transportation), then what do you need credit for?

I'm not going to be the popular one here and I am fully aware of that. I'm not trying to win an argument, just offer another option.

[serialk11r]

I'm not saying you need credit, I'm saying the cash rewards are free money for money that you do spend herp derp.

[suaveflooder]

Originally Posted by serialk11r

I'm not saying you need credit, I'm saying the cash rewards are free money for money that you do spend herp derp.

I can get free money by investing. They offer cash rewards so you spend more and use their card. The hope is that you default and go into payments with interest. Once again, I'm not saying everyone will, but the chances are pretty high.

Just out of curiosity, what is the interest rate on that card if you don't pay it every month?