Top 10 Reasons Why Credit Is Not Your Friend

 

Credit Hell2 Top 10 Reasons Why Credit Is Not Your Friend

Pay close attention to this post because all of the advice comes from actual experiences!  Here are my top 10 reasons why credit is not your friend:

1.  Gets You Into Debt:  Of course, this goes without saying.  While some people may argue there is such a thing as good debt, getting into debt leads to all kinds of problems.   I can tell you, money and debt worries are a major source of argument and conflict in a relationship. See #2.

2.  Attacks the Fabric of Your Home:  Being in a committed relationship is supposed to improve your mental well-being and health.  In fact, according to a 2004 study by the Centers for Disease Control and Prevention (CDC), mortality rates were found to be the lowest in married couples.  But add the pressures of debt to your relationship and painfully watch the bloom fall of the rose.

3.  Makes You Lose Focus of the Big Picture:   The small picture is the monthly payment; you can probably afford it, right?  The big picture truly is; what’s the total cost?  By focusing on the “affordable payment”, you will psych yourself into debt!  By focusing on “overall cost”, you will focus on the questions that need to be asked; can I afford this now and do I really need this anyway?

4. Robs Peter to Pay Paul:  When you use credit, you’re robbing from your financial future to obtain something now.  In return, you get “obligation” which we know, is the act of binding oneself.  In this case…to debt!

5.  Inhibits Your Resourcefulness:    I know this one all too well having gone from having a high 6 figure middle class living to being broke!  I use to throw money at a problem, not use credit. But this applies to people who have credit – but not the money too.

Instead of looking at the big picture (#3) you decide you’ll buy a product or service that could solve your issue, whether personal or for business, instead of finding ways to solve those issues without spending any money first.  Sound like you?  Well I can tell you this use to be me!  (This could be a whole post in itself)

6.  Makes You an Awful Steward of Your Children’s Future:  Say it with me; financial literacy is the key to our children learning how to manage their credit and financial future. If you’re home life is stressful because of money and debt worries, you’ve mortgaged your financial independence to keep up with the Jones’, and you haven’t learned that no one has a greater stake in, or is a better guardian of, your financial security than you – then you’ll be a horrible role model!

Teach them frugality, show them by how you live your life with them, that money is something to be valued!  And as Katy Wolk-Stanley says in her blog; “Use it up, wear it out, make it do, or do without”.  Pay particular attention to the “do without” part; I have!

7.  Blurs the Line Between What is, and What isn’t:  What’s the difference between credit and cash?  Credit is money you think you have and cash is the actual margin your life works within.  Got that?  If you can’t reach into your pocket or you don’t have it in a savings account, then you don’t have it to spend – PERIOD!  This “cash only mindset” can really set you on a course of building your wealth, which leads us to number 8…

8.  Inhibits the Creation of Wealth:  It’s a proven fact that using credit can affect not only how much you spend, but what you buy!  If you use plastic, you are unconsciously willing to spend more than those who pay with cash!  And if you are reading this saying to yourself, “yeah, but I pay off my credit card balance in full every month”, you are still hurting yourself.  Just because you pay off your card balances every month to supposedly avoid finance charges (I use to do this all the time myself) doesn’t mean using credit cards isn’t hurting you.

You are still overspending, simply because of the payment method you chose to make those purchases with.  See #3 and #7. Plus, last time I checked, none of us has a crystal ball so how can you see something cataclysmic and unexpected coming?  The answer is; you can’t!  What’s your plan B in case you can’t pay that balance in full?

9.  Makes You Spend More of Your “After Tax” Income on Debt:  In a recent report titled “Damage of Debt” written by Katherine Porter, she wrote that in the last decade, on average, more than one million consumer bankruptcy cases were filed annually.  To put that number in context, one million bankruptcy cases means that in 2012, more women will go bankrupt than will divorce, and the annual number of freshly minted bankruptcy debtors will exceed the number of new college graduates.  Can you say WTF?

She goes on to write the bankrupt are only a small subset of those struggling with debts.  In 2006, one in seven families was contacted by a debt collector.  The foreclosure crisis and the recession have only expanded the number of people struggling with debts and I went through every single one of those scenarios.  So the million dollar question is; why would you want to?

10.  Lose the Freedom You Seek:  Living a life without any debt means more freedom in deciding what to do with your life and how to live it!  What about peace of mind; does that qualify as freedom?  Knowing you don’t owe money allows you to sleep like you just took a whole ambien!  Knowing exactly where you stand financially gives you freedom!   Why would you ever willingly want to give that up?

Developing a Spending Plan Will Help

Knowing what’s coming in (your income) and what’s going out (your expenditures) and then carefully deciding what is, and what isn’t necessary, is the key to living a wonderful, peaceful, and happy life.  Living your life unwisely using credit and getting into debt will go a long way toward keeping you from achieving that freedom!

What other reasons can you think of for not using credit and staying out of debt?  I’d love to read what you have to say on the subject.  Please leave me a comment below and I’ll respond icon smile Top 10 Reasons Why Credit Is Not Your Friend

As included in the Carnival of Financial Planning 12/7/12 @ Master The Art of Saving Blog



Did You Know? Credit Bureaus Are Not Your Friend and We Are Not Their Client!

TAC Blog Pixel Template 1024x681 Did You Know? Credit Bureaus Are Not Your Friend and We Are Not Their Client!

Experian, through a recent press release, just announced the launch of TrueTraceSM.  In the release they state the product is the latest addition to Experian’s debt collection product suite! But not before boasting they are the leading global information services company which provides best-in-class skip-tracing capabilities across industries. 

And if you didn’t already know, Experian is one third of the band Rape, Pillage, and Plunder! OK, you got me; they aren’t really part of a band :).  Experian is actually one of the Big 3 Credit Bureaus with the other two being Equifax and TransUnion.  If you don’t know this fact, the 80’s called and they don’t want you back!

Role of the Credit Bureau

Look folks, there’s no need to research this and look up definitions.  Why don’t we just see what Experian themselves say their role is?  According to their own website, their role is to:

  • Promote and facilitate a data sharing culture amongst the subscribers
  • Provide the users with accurate information and solutions to support objective application processing models
  • Help the lenders reduce the risk of granting loans likely to default
  • Support fraud prevention procedures
  • Enable loans to be granted without “security”
  • Protect consumer against over-indebtedness by allowing for responsible lending by the grantors

Deciphering the Code Talk

Let’s make this simple, shall we?  The terms “subscribers”, “users”, and “lenders” don’t apply to you and me!  You may be asking yourself “But what about the consumer part; that’s us, right?”  Yeah; that one is us but they do not elaborate about anything concerning “consumer” or “consumer rights” other than stating Protect consumer against over-indebtedness by allowing for responsible lending by the grantors as one of their roles.

So Experian protects us, the amateur consumers, against getting in over our heads by telling their subscribers,” Hey, don’t extend that guy anymore credit because he can’t afford it?  Really?  I must be missing something here.  One of the things credit bureaus do not list on our credit report is income.  So one; how do they know we are over extended other than knowing what our debt to credit ratio is? And two; if they are actually doing this, then they are failing miserably!

What, with millions going bankrupt every year and credit counseling and debt settlement companies making millions every year as well!

Time To Call “Horse Shit” Again   

If you recall, in my post “Who Can You Trust When Taking Credit and Financial Advice”, I had to call horseshit a few times and here are 2 reasons why I’m calling horseshit on this one too:

  1. A credit bureau does not decide whether you should be extended credit. It collects, stores, and reports the relevant identifying and credit information of credit-active Americans. Using this information, credit grantors alone decide what standards you must meet to be granted credit.  So how in the hell do they Protect consumers against over-indebtedness?
  2. A credit bureau does not know the specific reasons why you are given or denied credit. The credit bureau does not track the decision a credit grantor makes after ordering a credit report; favorable or not. Need I ask the question again?

Say it with me people; HORSESHIT!

Libraries or Debt Collectors?

Let’s look at this “role” question again, shall we?  Consumer credit bureaus supposedly serve as control storehouses — or libraries — of credit repayment information. They collect the credit information from credit grantors such as banks, credit unions, finance companies, and retailers.  These credit grantors then access this combined information from the bureaus to help them make lending decisions.

But now they also market Debt Collection and skip-tracing products too?  Oh, it gets better! In the press release they state TrueTraceSM allows clients (not you and I) to designate accounts that require special handling (bankruptcy, deceased, litigious consumer scrubbing and more) and reduce regulatory risk.

Is this how they Protect consumers against over-indebtedness and getting in over their heads?  No my friends; this is how they make money!  In case you didn’t know, they are not a government entity nor a non-profit.  They are here to generate revenue and they do it well – consumers be damned!

Say it with me people; HORSESHIT!   What’s your opinion of the credit bureaus?  Are you OK with them working all the angles in the name of profit? Do you think this is a conflict of interest? Please lend your voice to the conversation by leaving a comment.



Why Having Good Credit Means Less Than Making Good Money

Make Money Why Having Good Credit Means Less Than Making Good Money

As a former high six figure earner and as a bankruptcy and foreclosure survivor, I have seen both sides of this coin first-hand.  As a credit and lending professional for over 20 years and having created the Better Credit Blueprint, I know what it takes to get your credit back on track.  But this really is the million dollar question, isn’t it?

What’s more important; having good credit or making good money?  I can tell you this; anyone can live without good credit!  This doesn’t mean you shouldn’t work on improving your credit.  What it means is if you can earn and save your money, you can live comfortably regardless of your credit rating.  Don’t believe me?  Well let’s put that theory to the test!

You Need Good Credit for Housing

As a Real Estate and Mortgage Professional for the last 10 years, I can tell you that you need good credit to purchase a home and your credit will be checked if you’re looking to rent. But without getting into the whole buying versus renting debate, if you are earning good money and have cold hard cash on hand, you will find a good place to live!  If you have 3 to 6 months minimum to put down as a deposit and your situation can be explained, you will not have to settle for less!

You Need Good Credit to Buy a Car

As a former bank representative and car buyer, of course your credit will be checked if you want to finance or lease a car.  But without getting into the whole leasing versus buying versus paying cash debate, if you are earning good money and have cold hard cash on hand, you can flat out still finance an automobile or just pay cash!  Will you pay more in interest?  Of course! If you’re buying cash, will you have to buy used? Probably!  That’s what I did but again, your lack of resources will hurt you more than your lack of good credit! I’m living proof.

You Need Good Credit for Utilities

If you have ordered new cable service recently like I have, or have tried to switch your phone service, you know one of the first things these companies do is pull your credit.  If you have bad credit, these companies will ask you for a security deposit to establish service in your name.  I have also read where some companies are able to offer no credit check utility service by charging a higher rate to account for the “so called” added risk.  But once you establish a solid payment history, usually 12 months, that deposit is usually returned to you and moving forward, if you need to transfer that service, you will not be asked for a deposit.

You Need Good Credit for Cell Phone Usage

This one, as far as I’m concerned, is the most perplexing to me.  Why in the hell would you want to get into a 2 year contract for cell phone usage when you can get a prepaid cell phone on a month-to-month contract? Oh, I see, you want an iPhone.  So buy the iPhone through Virgin Mobile which works on the nationwide Sprint® 3G Network and it will only cost you $50 dollars a month for unlimited usage with no contract.  And if you sign up for auto-pay, they discount that $5 dollars.  In fact, just about any phone you want is available through a pre-paid cell phone service.  Sure you’ll pay more for the phone, but credit won’t stop you from getting what you want!

By Using Cash You Are Actually Rebuilding Your Credit

Say what?  Yeah, you read that right!  Pay your rent on time; you’re rebuilding your credit.  Pay your car payment on time; you’re rebuilding your credit.  Pay your utilities on time; you’re rebuilding your credit!  While you’re doing this, you can perform a Credit Audit and Verification of your credit report and start checking for errors and inaccuracies to dispute and work on bettering your credit.

You can also get a secured credit card to help with that rebuilding process.  Again, if you are generating good money and being smart with it, you can live how you want.  To be sure, I’m not arguing against having good credit, I mean, my whole blog is about accelerating that process.  What I am arguing against is thinking the only way you can live comfortably and how you want is to place the most importance on chasing an 800 credit score and relying on credit for your quality of life.  As a bankruptcy and foreclosure survivor, I’m living proof it can be done but; I’m still working on improving my credit as well!

The Moral of The Story is this; worry about getting your financial situation settled first!  Start making the money you want, and need, and everything else will follow!  Especially if you have just come through credit and financial hell like I have.  I’d love to hear your thoughts on this subject so please, leave me a comment below icon smile Why Having Good Credit Means Less Than Making Good Money

Credit Card Debt Settlement eBook Cover2 223x300 Why Having Good Credit Means Less Than Making Good MoneyP.S. Don’t forget to check out my new eBook “How Credit Card Debt Settlement AffectsYour Credit Report and What You Can Do About It” available exclusively at Amazon.com