What is Digg?93 Comments
- brstilson, on 10/12/2007, -2/+23I think it's pretty sad that the person who only needs credit once in a while (pays bills on time, only buys things with money they have, etc.) to buy a house or a car is more of a credit risk than someone with constant credit card debt
- nlatimer, on 10/12/2007, -0/+13Of course if you pay off your balance every month the credit card companies refer to you as a deadbeat, since they don't make any money off of you. At least that doesn't affect your credit score though.
- idntunknwn, on 10/12/2007, -1/+13That isn't the point of the story. The point is that credit scores can be hurt by no-limit credit cards, even if you don't actually spend very much with them.
Suppose that the maximum you spend with a no-limit credit card is $100. Let's say that the credit bureau then assumes that this $100 is your credit limit, which may be completely inaccurate, but it's the best information that they've got since they don't have a better number.
Then one month you spend $50. Oops, you have 50% utilization. Which is a ridiculous conclusion for pretty much any credit card, especially a no-limit one. - violentvinyl, on 10/12/2007, -1/+13"It IS a good way to build credit, but you don't need credit unless you want to be in debt."
While we all envy you for being fabulously rich, some of us need to go into debt to be able to buy houses and cars. - idntunknwn, on 10/12/2007, -0/+10This problem doesn't affect just no-limit credit cards. It's been reported recently that a number of credit card companies simply choose not to report your credit limit. This can also hurt your credit score by about 20 to 50 points.
This practice is presently being challenged in court. More information can be found here: http://www.washingtonpost.com/wp-dyn/content/article/2006/06/30/AR2006063000609.html
So it's about time that I apply for a credit card. Anyone have suggestions for reliable companies to apply to? - inactive, on 10/12/2007, -0/+10@nlatimer
"if you pay off your balance every month the credit card companies refer to you as a deadbeat, since they don't make any money off of you"
Not quite... credit companies charge a percentage fee for every transaction run. Typically it's something like a fifty cent minimum and then 1.5 or 2% of anything over that. That's why many places don't accept credit cards for purchases under ten bucks. Just doesn't cover the fee. Also, some cards like American Express charge higher fees (hence the better rewards you get). Problem is that not everyone accepts them because of the higher fees. - sparkles, on 10/12/2007, -2/+12@maverick999
Actually, that's not true. Your credit report may be part of your background check for employment, it's used to determine premiums for insurance, and probably a lot of other things I'm not thinking of right this minute. - pianomahnn, on 10/12/2007, -7/+17@maverick
Living in a big city, I would much rather risk losing (read jacked, mugged, picked, etc) a wallet with thousands of credit dollars than thousands of real dollars. I suppose I could use a banking check card...but those don't always have the same protections as credit cards. - Narpas, on 10/12/2007, -1/+11Ant: Spoken like a true rich kid. Yeah, if I can't pay for a new car in cash, I probably don't need a new car. But I'm gonna need *a* car, and if my current one craps out on me, I gotta either repair or replace it. I don't have money to repair or replace a car. If I didn't have financial help, I would have to take loans for college. At best, I'll only have an extra few hundred dollars, and that's not going to rapidly change once I become a high-school teacher.
Hell yes, I bloody well do need credit. - tungsai, on 10/12/2007, -0/+9I would rather have a bad credit rating than be in as much debt as some people I know.
I guess I'm pretty lucky that all I have are a mortgage, student loans, and a car payment. I pay off my balance of my one credit card every month, (Well, almost always), and if that makes me look like a "Deadbeat", then so be it. - inactive, on 10/12/2007, -2/+10Equivax are some shady ***** anyway (the others are too, but they're the worst)- and credit ratings are all *****.
- PaulOwen, on 10/12/2007, -2/+10This is a little off topic, but really helpful for some people who are having problems with credit reference agencies perhaps ...
John Ford, the vice president of Equifax went on record recently (2002) to say "It's not your information, it's information about you".
That's a shocking statement from a company that buys and sells credit information ABOUT YOU.
IANAL, but personally, I have had out of court settlements with number of credit reference agencies because of false/inaccurate data. I read a US study from 1992 which identified over 30% of one large credit reference agencies' data to be incorrect "enough to adversely affect a credit decision". That should also be shocking, because most agencies will happily tell your bank that the information they hold about you is accurate and current.
In the UK at least, the process of taking action against a credit reference agency is easier (but longer) than you might think. To my suprise I ended up speaking to the president of one large agency to negotiate my settlement after they knowingly sold inaccurate information about me, and she was extremely uncomfortable about having to plead with me not to escalate the matter (yeah, I enjoyed that bit).
The root of the problems is that credit reference agencies have to have a cheap, transparent and auditable method of disputing the data they hold. If they don't have that, they are making trouble for themselves later on, as they often discover with me.
I don't know if you have an equivalent of the Data Protection Act 1998 in the US, but that small piece of legislation is my friend - if you know how to use it, it's very powerful. - Enigmastrat, on 10/12/2007, -2/+10Oh, I shouldn't get in on this, it's just a webpage, but the credit score is a hot button issue of mine. Let me start with the statement:
"Credit is absolutely positively useless and unnecessary"
I'll use a couple examples from above to state my case. (Maverick, you've got the right idea.) If you can't buy it cash, then you can't afford it. Period, with the exception of a house.
If you absolutely neeeeed a car and you don't have $500-$1000 cash, then take out the SMALLEST loan ever and don't worry about the interest rate because you'll pay it off in less than a year. When your car breaks down, you don't need to go buy a brand new car because you're sick of your old junker! Boohoo! Save up some cash and work your way up. After you've paid that small loan off, keep paying yourself the car payment and get a nicer car, cash, in a year or two.
Job background check: A zero credit score will NOT hurt your background check. Bad credit might, but a non-existent score will NOT. That's the end of that. Companies just want to know if you are going to be plagued with bankruptcies and possible situations where you could be taken advantage of financially.
Possibly getting mugged: Carry a debit card. If it has that little VISA symbol on it then it's the same as carrying the VISA credit card. Haven't you seen the commercials? That one actually is telling the truth. NO LIABILITY FOR STOLEN MONEY. And seriously, when was the last time you got mugged in that big city of yours, and even if you did, give them your wallet. And even if you are carrying cash, who really cares about $100 in the scheme of things?
Ok, here's more: School. School is great and you should finish college if at all possible. Kick your butt to get finished and if that means working 40 hours a week delivering pizzas now while going to school, so when you get out you don't have debt, DO IT! If you won't do that, you may just need to extend your school a couple years. Oh well, life goes on.
Two more: House. It's called full manual underwriting. They'll check your credit score and if that's no good the delve into your life. They will find if you can really afford that house without using a credit score. This may be worth using even if you are worshiping the credit score. With so much identity theft, you may just go to one of these companies, so when they find that your credit sucks and it's not your fault, they can continue with your mortgage while you go hunt down whoever is doing the credit fraud.
Last one. This one disturbed me: the "spoken like a true rich kid" comment (towards Antialias). Grow up. I am by no means rich and don't go buying that new 62" plasma or new car (or any car that I can't afford for that matter). Rich has nothing to do with it. IF YOU CAN'T PAY CASH, YOU CAN'T AFFORD IT. If you make $20,000 a year, you should not drive a car worth more than $5,000 ESPECIALLY if you have to finance it. Additionally, you should not have a $2000 TV, or even a $500 TV. The US has the biggest middle class in the world. In the last 75 years, Credit has become the great equalizer: Everybody's broke, they just don't know it. They may live in a $300,000 house, but they're house payment is less than they're monthly credit card payments. I live in a nice house, drive a nice car (maybe not by some of your standards), and have nice stuff, but it takes time to amass these things. Listen to wise people (I'm not saying I am, you have no idea who I am) they know what they're talking about. Most would say patience is a virtue. It's true. Finally saving up enough for the 62" plasma is great. The picture is clearer and the experience is more relaxing when you don't have the finance company grabbing your bal...ehem... neck. - HarryBauzonia, on 10/12/2007, -1/+9It is a decent way to build credit, but don't get one through a company. They all have a shady practices such as changing your due date in hopes you'll make a late payment. Capitol One is definitely a company to avoid.
Get one through your bank or (better yet) credit union. You'll be able to make payments through a teller or using your online banking. The interest rates are reasonable, and you'll always be able to deal face-to-face with a person if you ever need to. - hotpepper, on 10/12/2007, -0/+8Do you have any other suggestion on how to determine someone's ability to manage debt? Remember, it's not just having debt that counts for good credit, it's being able to manage that debt that leads to good credit. There's no point in carrying around a 10,000$ debt load if you can't make the minimum payments and no point in having a 2,000$ debt load if you always pay it off completely.
- moracity, on 10/12/2007, -0/+7That's not true. Credit is all about utilization and ratios. If you never use the credit you have, how can someone properly assess your credit risk? If you pay off your balance before your creditor sends your report, you're not helping your credit score. It took me awhile to figure this out. Finally, I started carrying $100 balances every other month or so to genreate a small finance charge. All of a sudden my credit limit gets increased AND my credit score jumps 20+ points. I've gone from a sub-600 score to a 760 in just a 2 years by using credit effectively. I started with a couple $1000 limit cards and now have 2 $20K+ cards and a couple $10K+ cards.
Right now I'm carrrying 6000 on a 25K card at 0% interest because it was a 0% for life balance transfer. Every 6 months, I request a credit limit increase. in a few months my credit score should be about 800.
As much as it sucks, credit is important and having an excellent credit score removes a LOT of stress from your life. It allows you the best rates on everything. I even got 4.9% on my used car. It allows to to use insurance companies that look at your credit score and take advantage of low premiums.
We knocked our auto inurance by half by switching from Allstate to Progressive. Allstate does use credit scores, but weights them lower than Progressive. We also get a big discount for paying annually. This goes on a 0% card and I can invest the cash instead.
It's all about being smart with your money and knowing how to manipulate it. The problem in America is that no one teaches us this stuff. I had to learn the hard way, going through crap like 22% auto financing because I didn't understand how credit works and how it affects your life. - inactive, on 10/12/2007, -0/+7Good point... It's like a punishment since you aren't on the hook for a large sum of high interest debt. Not sure why they bother, since those with large sums of high interest debt will eventually file for bankruptcy and wipe it out anyway because credit card debt is probably the *least* secured debt of anything, and is usually the first debt to be reduced in a Chapter 13 or discharged in a Chapter 7.
- gandhii, on 10/12/2007, -0/+7I'm afraid of debt at credit card interest rates...
- Lumiras, on 10/12/2007, -5/+11No-limit credit cards are just a terrible idea for anybody that doesn't have a no-limit income.
Sure, there's no limit to them, but that's really terrible for the average consumer. Before you know it, you've racked up $20,000 and you're in debt for the rest of your life - Canth, on 10/12/2007, -5/+11@wibblewibble
And who doesn't need credit?
You have cash to buy a house? car? car insurance? Home Depot, Sears, name your retailer, no interest loans?
All those rely on credit. No credit = paying 15%+ interest, higher costs, or outright not being elligible.
Believe me, I know. I pay it.
I moved to the US two years ago with a clean credit sheet.
Can't buy anything. And if you can, it's at outrageous rates. I couldn't even get a lousy $250 limit credit card up after being here for 18 months. (And that included having a mortgage for 6 months & car loan for 16 months almost paid off)
I can't get credit because I don't have debt.
The US credit system is useless.
Widows often (if everything was in their spouses name) don't have credit and can't get a thing done.. And they've lived here in the US all their lives and, as a familiy, have been paying all the bills. But it wasn't specifically in their name, so when their spouse dies, they're left with a clean credit sheet. And no credit is worse than bad credit. - bleonard, on 10/12/2007, -1/+6Amex. One of the best I've delt with in terms of resolving disputes and helpful customer service. If you only want one credit card I recommend you find an Amex with no yearly fee and then carry a mastercard/visa checking account card you can use when you are somewhere that doesn't take amex. And make sure you keep some $ in your checking account, but more in savings. And for savings, I recommend EmigrantDirect https://www.emigrantdirect.com over ING http://home.ingdirect.com/. I've used them both.
- moracity, on 10/12/2007, -0/+5There is no such thing as a no-limit credit card. Such animals are CHARGE cards. Diners Club and AMEX Green Card are examples of such. Most people will never have one of these. You have to be invited to obtain one and you have to have near perfect credit to even get an invitation. They usually come with some pretty impressive services (free airline tickets, etc), but these things are really just status symbols and are completely useless for most people.
My wife has received a few AMEX Platinum Charge invitations. The yearly fee was like 285 or something. There are some pretty compelling features, and we almost took advantage of the offer. In the end, it really didn't make sense for us. We're just regular people. These things are very convient for wealthy folks who don't have easy access to cash for large purchases. We already have several credit cards with $25K limits and carry no balances, so we have no need for a limitless card. For us $25K is essentially unlimited. - violentvinyl, on 10/12/2007, -2/+7I respect and envy that lifestyle, and I even dugg you for it. I do have to add though that I'm an extremely unapologetic consumer. I like driving fast gas guzzling cars, I like big expensive houses with plenty of space, and I love to nuke individually packaged pizzas when I'm not out charging outrageously expensive meals to my high APR credit card. Now, if I could pay someone to grow my food organically, supply me with renewable power, recycle, and swap all my appliances for energy efficient models, I would, but as far as I know, I can't
- violentvinyl, on 10/12/2007, -2/+6Getting a credit card is the easiest way to build credit, but there are several other ways.
http://articles.moneycentral.msn.com/CollegeAndFamily/MoneyInYour20s/9waysToBuildAKillerCreditScore.aspx
If you're out of college, you're a little late to the game. I'm 24, and I've had credit cards since I was 18, that's 6 years of credit history and I still get turned down for things because of "insufficient credit history" (and yes, that's much different from "delinquent credit history" in case you were wondering). - Lynxpro, on 10/12/2007, -1/+5
My tidbit of advice is if you want to protect your credit score, don't sign up for any cards through Household/HSBC. Without a doubt, they are the shadiest credit company out there, even worse than Beneficial. Unfortunately, they administer the BestBuy and CompUSA credit cards, as well as the Apple credit program too. Stick with Citibank and BankOne cards.
www.householdwatch.org - hollowmedia, on 10/12/2007, -0/+4It's amazing how many people are condemning the use of credit cards, even as a means to build credit. I have had my credit checked when I've: bought houses, bought cars (lease or financed), rented an apartment (yes. rented), got a job (at a very well-known company), and even purchased a cell-phone. Like it or not, building a solid credit score is something most people have to deal with in today's society (excluding countries where this doesn't apply).
- hotpepper, on 10/12/2007, -0/+4Another way to build credit is to get out a loan with a substantial monthly payment. Many vehicle dealerships offer credit-rebuilding programmes. They sign you up with a loan with a financial institution. The interest is often higher than a lease, so the term of the loan is often longer and the payments are higher, but a 350$ monthly payment will build your credit much faster than a 20$ monthly credit card payment.
- NJank, on 10/12/2007, -0/+4well, it makes perfect sense. The score represents their confidence in your ability to manage a significant debt load based on evidence of past behavior. You show no evidence of past ability to manage a significant debt load, but lack of 'bad stuff' keeps you with a reasonable score. Your friend apparantly has represented the ability to "responsibly" manage a significant debt load, making companies more likely to trust him to manage a debt load through them, assuming the debt limits remain typical relative to his income. (few companies give credit just based on a score, they also take into account debt/income ratio, "to keep you from borrowing more than they can expect you to handle") Of course, that acceptable ratio keeps creeping upward. And it all really shows how shady the whole thing is to begin with.
- Apreche, on 10/12/2007, -1/+5Credit ratings and such have been complete bs for so long. It's supposed to be a calculation of how reliable you are with money. They want to rate whether you are likely to pay back borrowed money and whether you borrow money intelligently. As a result, people who have never borrowed, have bad credit. It becomes very hard to get credit when you don't have any. Also, if you always pay off your debt right away, you won't have the best credit. People want to loan you money more if you are going to pay more interest, not if you're smart and pay as little interest as possible. The whole system is screwy. I just ignore it nowadays.
- licoricewhip, on 10/12/2007, -0/+4I humbly disagree. Capital One has been good. I have been a CapOne customer since the mid 90s. I don't recall any date change without my own consent/request. They have reasonable fixed rates, and you are not molested financially for the first late payment. Of course, make a second late payment and you better stock up on vaseline and gauze pads. For the record, though, I do keep my balance at zero. I guess, your mileage may vary.
- inactive, on 10/12/2007, -0/+3But your debt to income ratio is used to determine the amount you can borrow!
- qwickone, on 10/12/2007, -1/+4To reply to the original question: I've had a wonderful experience with Citibank credit cards (www.citicards.com). Their customer service is excellent, I've been with them for 5 years (since I was 18) and I've had numerous credit cards that I've canceled, but never this one. The Citi Dividend card has the best rewards of any no fee card I have ever seen (if you know better, tell me!). It's 5% cash back at pharmacies, grocery stores, and gas stations, 1% everywhere else. I can't comment on their interest rates, as I pay my balances in full every month. I will say this, I forgot to pay one month (in my 5 year history with them) and they were very nice about waiving my fees and interest charges for the one time oversight.
And @ shagg: I dont think anyone can deny that in this country, the best thing you can do for yourself regarding current debt/future debt is pay all your installment debt on time and in full (car loans, mortgages, etc) and pay at least the minimum on your revolving debt (credit cards, line of credit, etc) every month on time. From personal experience, paying off revolving debt monthly is the best way to go. This way you build a healthy credit score that is used for all kinds of things other than new debt. It's used in insurance premiums, by employers, by landlords, etc. It can only help you to have a good credit score. - inactive, on 10/12/2007, -0/+3I signed up for AMEX Green a year out of colelge and got one with questionable credit. I've since upgraded to AMEX Gold for things such as extended warranties on purchases and car rental insurance, but refuse to go to AMEX Platinum at $350 a year. What's the use? I think they had a free "Concierge Service" where you could call them up and say "I want a limo to pick me up at 5:23PM from the airport, and tickets to the 'Big Game' with the 'Local Sportsteam'."
You know they're not going to be getting you a good price on that impulse purchase.
From AMEX Platinum site:
" Taking Care of Your Home
A Platinum Card Concierge found a housepainter to paint a Card member's Paris home, helping select the color as well as ensuring the job was complete by the date the Card member specified."
Yeah, something all of us Middle Classers can relate to! - robdavy, on 10/12/2007, -1/+4@ Enigmastrat
In part I agree with you, but the one thing you have totally forgotten about is business financing. Starting (or even running) a business almost always needs credit. - hotpepper, on 10/12/2007, -3/+6They don't consider you a deadbeat, they consider you as someone who cannot manage debt, even someone who is afraid of debt.
- slipjack, on 10/12/2007, -0/+3Citibank has the worst online system of the credit cards I use. Slow clunky system, and not user friendly.
I would recommend Wells Fargo. They have the hands-down best online system out there. Very easy to make payments, automate billing, keep track of what's going on. It's well designed and very well thought out. I loved thier One-Look service before they took it down. I guess it was too expensive to keep going but they actually allowed you to aggregate all of your financial data at one point. (Cards, loans, IRA's, etc.)
If anyone knows a good replacement for that service, please comment. - wibblewibble, on 10/12/2007, -6/+9How about living with what you NEED and not what you GREED? I have very little here, just what I NEED and also its very low power and very efficient, I pay a little more up front but save on the back end. Its all about mindset. Also buy less BRANDS, do you expect to be fed by companies? Grow your own food where you can too, saves on medical bills :)
Same for waste, minimise it and reuse what you can, bottles for storing liquids you make from fruits you squeeze etc. you may laugh but its will save you ALOT and you gain ALOT.
Change your lifestyle. - violentvinyl, on 10/12/2007, -0/+3"Also, it helps your reputation with the credit card company if you keep a slight balance on the card itself - and the more they like you, the more they raise the cards limit, and the faster your credit rating goes up."
There's also nothing wrong with giving them a call every 6 months or so and asking for a limit increase, most cards even allow you to do that online now. - violentvinyl, on 10/12/2007, -0/+3@ shaggtastic
A mortgage IS debt. I didn't mean to imply that you need a credit score to get a mortgage, but a good credit score will certainly increase the amount they will let you mortgage.
I won't go into the whole car thing. I'm very aware that some people are perfectly content with economy cars, and others aren't. No one kids themselves about which side of that line they fall on. - idntunknwn, on 10/12/2007, -1/+4People tell me it's a decent way to build credit (assuming you're with a good credit card company). I don't foresee doing anything else in the near-time future that might build credit.
Any advice on that end? - qwickone, on 10/12/2007, -0/+3Well it's hard to ignore it if, like most of us, we can't pay for everything in cash. Do you have a better suggestion as to how to determine credit worthiness. I'm tired of reading threads where people are complaining that they dont borrow so they dont have credit and how that sucks for them. It DOES suck for you, but stop complaining about how much the system sucks and play the game. Obviously youre pretty fiscally responsible. Would it kill you to take out a low interest loan instead of paying cash for your car? Just put the money in a savings account that automatically debits each month to make your payment. Yes you're out a couple hundred dollars at the end, but then your credit rating is really high and you start qualifying for 0% and we don't have to hear your complain anymore.
- qwickone, on 10/12/2007, -0/+2Well I think most people know by now that Cap One is only out there to make a buck, they dont care too much about their customers (if youre a long-time, good customer, they make exceptions and treat you a little nicer)
- ErrandboyOfDoom, on 10/12/2007, -0/+2"Why the hell would you even WANT a no-limit credit card?"
Risk minimization? Risk averse individuals can use a no-limit card as a really cheap source of blanket insurance. - theburningficus, on 10/12/2007, -0/+2Not all Apple Credit accounts use Household. Verbatim from the website (*s are mine):
The credit card for the Apple Credit Account is available to qualified U.S. residents from Juniper Bank *or* HSBC Bank Nevada, N.A.® The rates, fees, and costs of the Juniper and HSBC Bank offers differ. See terms and conditions for more information.
Had a Juniper card for several years. Good customer service. I would imagine any one accepted by Household falls into the 'higher risk' column. I agree with your comments, though, Household spams me with offers all the time, seem kind of shady. - Lumiras, on 10/12/2007, -3/+5well, yes, I know that racking up $20 K isn't the easiest thing to do, but a lot of people can do it in a year.
Although those people may "deserve the worst", their ignorance still hurts our economy, which hurts everybody - Antialias, on 10/12/2007, -1/+3Credit doesn't buy you anything you couldn't afford otherwise. Perhaps it buys you something now that you could afford later, but it doesn't increase your buying power.
- ducttapekz, on 10/12/2007, -0/+2Income isn't a factor in your credit score but most loans are not approved solely on your credit score. They factor in your income, your monthly payments (minimum payments on credit cards), and your accounts (savings, checking, 401k, etc).
- NJank, on 10/12/2007, -2/+4ummm... i think that was his point.
- picaman, on 10/12/2007, -0/+2I have an AMEX Gold, and have refused the Platinum entreaties for years--I don't see the point either.
AMEX is the best when it comes to customer service and dispute resolution, though. Worth every penny of the higher fees. - maverick999, on 10/12/2007, -18/+20You don't have to worry about a credit score if you don't borrow money. That's my philosophy...
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