Why does everybody love debt?

Question

I recently answered a question about how to build credit. Why do you want it is what I want to know! I have 2 very nice paid for cars (one is a classic hotrod), I don't have to worry about making my credit card payment at the end of the month, and if I wanna buy somthing frivolis I have the cash to do it on the spot.

Why in God's name do all of you want to live with the threat of finacial ruin. Many people live in fear of losing their homes if they get laid off. I have managed my money and built up large sums of cash on a 25k job a year. I could quite now and take a 3 month vacation before I got serious about looking for a new job. I did it by not messin with stupid credit.

Why do all of you mess with somthing as stupid as a credit card?

For over a year I have been attacking the FICO score as a bogus measure of winning. All it measures is your interaction with debt. It is composed of 35 percent payment history, 30 percent amount of debt, 15 percent length of credit history, 10 percent type of debt, 10 percent applying for new credit.

So it really is the “I love debt” score because there is no way to have a great FICO score without getting into debt and staying in debt. If you make $1 million per year and have $10 million in the bank, you can have a low FICO score simply because you don’t borrow. So we tell people they can get a mortgage with a manual underwritten loan if they never borrow by paying their landlord early or on time and being on the job for two years.

The FICO score people are mad, oh darn.

http://www.daveramsey.com/

Answer 1

different strokes for different folks, why does this upset you so?

I use my credit cards religiously, pay them in full EVERY month (have for years), however it does take some discipline

When I have a large bill to pay (like a car repair) i do not have to run to the bank and withdrawl cash, I do not having to worry about carrying large sums of cash when on vacations etc. and make points for using my credit cards, which in turn earns me free stuff (in my situation I use a grocery store master card and earn about $300 in free groceries a year, I treat my family to Angus steaks and full Lobsters for New Years Eve and it does not cost me a single dime)

so why are YOU so afraid of credit anyway???


imagine the free stuff YOU could have earned if you had been using a credit card

Answer 2

I pay off my card every month. If I can't afford it, I don't buy it. I have never paid a penny of interest. I have never had a late fee.

I make a good living, income only a little hgher than yours, and have always been a save-first, buy-later kind of guy. Even with my house... I saved up, and essentially bought it outright. I HATE paying interest. I refuse to pay interest. My credit is terrific... not that I would be stupid enough to charge up to my limits (which are very high).

When everyone and their dog had cellphones, I waited years until I found a plan that worked for me. $50 per year for 500 minutes, T-mobile prepaid, and I have used 90 minutes over 4 months so far.

We live in a culture of "immediate gratification." No one wants to wait for anything. They want it now. Never mind that if they wait and save up, they can have twice as much stuff for the same amounts spent. The media pounds us with messages of "you must have..." whatever item they are peddling. And you must have it now, now now.

However, good credit is a must for almost everyone in the country. How many people will buy a house or a car in a single payment? But they figure it out too late, after they have been irresponsible, and then they beg for advice to restore their credit.

I feel sorry for them. High schools should drop the Driver's Ed course, and add a Buyers Beware course, with basic financial skills. I believe many people would handle their money the way I do, if only someone had shown them how.

BTW, saving up and buying later doesn't mean you don't use credit. After I have the available cash, I charge the item, then pay off the card. That way you get the added benefit of the rewards plans from credit cards.

Answer 3

Ah, after looking to see what question you answered, I see now why you are asking this.

FICO is NOT a measure of how much a person "likes debt".

You claim that the only way to raise FICO scores is to go into debt - very untrue. Please elaborate, if you can, how FICO raises ONLY if a person goes into debt.

Available credit IS NOT debt.

You talk about having no credit and when you need to make a large purchase, 'speaking to a manual underwriter that will see you as a person and not a number' - won't work for MANY people.

Underwriters have guidelines that they have to follow, while they can tweak them a bit, they can't tweak them that much for the average person.

I also like to "keep" my money. While I do have credit, I pay in full, rack up my rewards points and make the credit "work" for me!!

I guess a lot of people can follow your "leader". They can file bankruptcy, write a book about it and make a fortune (and not pay off the people that were stiffed in the bankruptcy) - and still be standing on the sidewalk in a city they are visiting because they "cannot" do something as simple as rent a car.


If your millionaire leader is shown the door at a car rental company, how do you think the average person (non-millionaire) will be treated in an underwriters office. That underwriter will probably be laughing for weeks.

Answer 4

Because people want stuff now instead of working for it. I have two payments every month. The house and the van. The van was purchased through a loan from my 401k, so essentially all the P&I paid goes right back into my 401k.

I can't tell you how many friends of mine buy stuff (new cars, boats, RV's, motorcycles) on credit, then get strapped financially. To bail themselves out they take out a second mortgage to pay it all off. All of a sudden they have all this extra income, so guess what, they buy more stuff. Funny part is, most of their stuff just sits around and depreciates in value.

Answer 5

I have a credit card only for convenience, and to avoid carrying a lot of cash. It takes discipline. I've got it, and you've obviously got it. It sounds like you know how to manage your money and to save. I think that's great.
I suggest you give some thought to investing some of your money in something that is comfortable for you whether it's bonds, high quality stocks, CD's, or mutual funds. I'll bet you've already looked into this .
You probably have learned about the build-up of money as a result of compounding.

Answer 6

Well, bravo for you. Obviously you don't own a home, have student loans or have a spouse and kids. Some people try to do what you described, but need to just wait until the end of month to pay those bills.

NOW, there are those that carry debt out of ego and they want the best and want it NOW. they are the ones that are will to face financial ruin in order to own the latest and greatest 'in thing'.

Answer 7

I know what you mean. I was like you till I moved out on my own. I had a nice amount of cash, paid all CC bills in full every month, bought used cars cash but then I moved out and finished college. Had to start using the CC's but you have to know how to play the game too. I'm very good at it too. All CC debt isn't bad if it's for furthering your education and making an investment in yourself.

Answer 8

because having good credit can save you a lot of money. the better your credit, the better interest rate you can get on a home loan, etc...

also, most credit cards have bonus rewards programs. if i were you, i would use my credit card all the time instead of using cash. then pay the balance in full. then you can get free stuff...

Answer 9

I totally agree. I paid cash for my house. We do not use credit cards. We live within our means. I think somewhere along the way, people developed a sense of entitlement for things that they haven't earned or will never be able to afford. And they lost the ability to value what is most important - providing a secure future for their families.

Answer 10

Because you need to build credit to get good rates on "good debt" such as a home. Part of building credit is getting credit cards because if you don't have credit, it's just as bad as having bad credit.

A credit card, in and of itself, is not bad. People just use it poorly.