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credit rating - is it really so important?
- Thread starter ian
- Start date
Hi i'm God
TRIBE Member
2-3 cards and a LoC is waaaay to much credit. 1-2 cards is more than fine.
Some lenders if your looking for loans will do your TDS based on what credit is actually available to you. So even if you had 3 cards with only $500 on each those limits allow you to have say 5k on each so you could technically have 15k worth of extra debt after getting a loan and that would put you at serious risk of defaulting.
Yeah if your working on making credit stay away from amex is common sence because generally their rates are much higher than everything else. Even prepaid credit cards will help.
Some lenders if your looking for loans will do your TDS based on what credit is actually available to you. So even if you had 3 cards with only $500 on each those limits allow you to have say 5k on each so you could technically have 15k worth of extra debt after getting a loan and that would put you at serious risk of defaulting.
Yeah if your working on making credit stay away from amex is common sence because generally their rates are much higher than everything else. Even prepaid credit cards will help.
1 more card is waaaay too much credit? I think that is a bit of an exageration.
One way you can build your credit is getting pre-paid visa with a reputable company. Not sure who does this in the USA, but here is an example I found online:
Visa Prepaid Credit Card ? Prepaid Debit MasterCard Cards - AccountNow
it all comes down to access and how much money you have available, not how frequent or regularly you use them. me and my wife have 1 CC each and a LOC, we have a bunch of HD/Bay cards but they came after our home purchase and are never used.
If you really want to help your credit, pay off and close each card one by one. start with the lowest balance with the most available credit and work your way from there.
When I was young I consolidated all my debt into one loan and paid it off, the bank handled the closing of all my credit cards and reporting to the agencies, it's called oddly enough a consolidation loan and you can do this with or without credit issues. this is the best way to get yourself back on the right track
So how to build a credit rating without taking out a loan or getting a credit card?
I pay my bills on time, but I don't need to give visa or whoever 4% of my money just so I can get in and play their game. I don't take credit at my shop and I don't see why anyone should when we already pay taxes to support a perfectly good mint.
I pay my bills on time, but I don't need to give visa or whoever 4% of my money just so I can get in and play their game. I don't take credit at my shop and I don't see why anyone should when we already pay taxes to support a perfectly good mint.
I was just referring to the way he used "waaaay" about one more card. I couldn't care less about the rest of this verbal diarrhea.
Hi i'm God
TRIBE Member
But you didn't read the rest where it's about the availability of your credit. So yes 3 cards AND a LoC can be significantly more detrimental than only two cards and no LoC or even 2 and a LoC.
Especially if we are talking cards with fairly high limits. It's cumulative.
Sure if you want 3 cards with 1k limits go nuts but why even bother.
Stick with one card with great reward programs and an emergency one if needed.
Especially if we are talking cards with fairly high limits. It's cumulative.
Sure if you want 3 cards with 1k limits go nuts but why even bother.
Stick with one card with great reward programs and an emergency one if needed.
I agree with most of of the advice in this thread. (econ background)
However, I can't stress enough - Credit is of the utmost importance!! Just rack it up - you never know when you'll need it. In addition, paying in cash for certain purchases is just laughable. Grow a credit backbone already.
However, I can't stress enough - Credit is of the utmost importance!! Just rack it up - you never know when you'll need it. In addition, paying in cash for certain purchases is just laughable. Grow a credit backbone already.
Like what?
See it's comments like this that make me wonder if the false "status" of having a lot of credit available blinds some people to the fact that most of the time you are paying someone else an extra percentage of your purchase (at at the very least some sort of fee) for almost nothing in return.
Hi i'm God
TRIBE Member
yeah dont rack up credit. Just keep clean on time managable credit.
So many myths about debt.
"I can't get a mortgage without a credit score." This is a myth. If you have worked a steady job for 2 years, have rented and paid on time or early for 2 years, have a sufficient down payment and are taking on a mortgage payment that you can afford any bank WILL give you a mortgage.
"I have a credit card because I get cash back on all my purchases and this means more money in my pocket." This is a myth. People that use credit cards spend more than people that pay cash, negating the 2% cash back they get with every purchase. Not to mention the majority of people with credit cards that carry balances.
"I bought a new car because it was financed at 0%" This is a myth. Most of these 0% deals require amortizing the debt over 30 to 36 months, making the required payment too large for the average person. When the deal is written it is amo'ed at 48 to 84 months at much higher interest rates. Never mind the fact that the average new car loses 30% of it's value in the first year. 2 out of 3 millionaires drive cars that are 3 years or older.
"6 months to pay is like free money". This is a myth. Most of the 6 months to pay scams will be rolled to notes with financial institutions at insane interest rates.
All that a beacon score is, is an indicator of your ability to pay back money you borrow.
What you need to ask yourself is do you want to be able to borrow money? Or do you want to have money?
I am not saying that we should not have any debt. Without debt the world would be a much worse of place. What I am saying is the majority of households that I visit are financially illiterate and these myths run rampant in Canadian society.
"I can't get a mortgage without a credit score." This is a myth. If you have worked a steady job for 2 years, have rented and paid on time or early for 2 years, have a sufficient down payment and are taking on a mortgage payment that you can afford any bank WILL give you a mortgage.
"I have a credit card because I get cash back on all my purchases and this means more money in my pocket." This is a myth. People that use credit cards spend more than people that pay cash, negating the 2% cash back they get with every purchase. Not to mention the majority of people with credit cards that carry balances.
"I bought a new car because it was financed at 0%" This is a myth. Most of these 0% deals require amortizing the debt over 30 to 36 months, making the required payment too large for the average person. When the deal is written it is amo'ed at 48 to 84 months at much higher interest rates. Never mind the fact that the average new car loses 30% of it's value in the first year. 2 out of 3 millionaires drive cars that are 3 years or older.
"6 months to pay is like free money". This is a myth. Most of the 6 months to pay scams will be rolled to notes with financial institutions at insane interest rates.
All that a beacon score is, is an indicator of your ability to pay back money you borrow.
What you need to ask yourself is do you want to be able to borrow money? Or do you want to have money?
I am not saying that we should not have any debt. Without debt the world would be a much worse of place. What I am saying is the majority of households that I visit are financially illiterate and these myths run rampant in Canadian society.
I agree with everything here except the first point, Yes you can still get a mortgage, but having poor credit will subject you to higher rates and less bargaining power so you end up paying more.
Teflon, what if you take that 6 months to pay deal and completely pay it off before they start charging interest? Isn't that a good thing? Leave your money sitting in a financial institution earning some interest and then move the money out to pay for the debt. I did this a few years back when we bought a new A/C and furnace. Home Depot offered us a free year of no payments and no interest so long as it was paid in full at the end of the year. I did this and managed to earn a couple of hundred dollars in interest by keeping it in my ING account for that entire year. That sounds like it was a good deal to me unless I'm missing something. BTW, the price was identical whether I took them up on the 1 year offer or not and I had the money to pay it off in full from day 1.
With regards to the 0% interest for a new car, I don't see the problem there either assuming you can handle the larger monthly payments. Some people just want a new car and don't want a 3 year or older vehicle. If you can negotiate a good price based on paying cash and then tell them that you want the 0% offer, then I still think you're good there. I know that most dealers may not want to go for it but it doesn't hurt to try. I also followed this route for my 2009 Mazda 3. I had 2 dealers battling for the lowest price and I settle on one and got the 0% financing option for 3 years. I had almost enough money to pay in full but decided it was better to just pay monthly and leave the rest in the ING account earning interest. I realize that new cars depreciate fast but I personally wanted some fresh.
Thoughts?
Lobo
Thanks. This is my feeling as well, and one of the reasons I brought up the discussion in the first place as I was curious if I was missing a piece of the puzzle.