Do you, or someone you know personally, have a ZERO credit score like Dave Ramsey talks about? - Page 3

[ChristyMarie]

Originally Posted by Geist 

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Also I would add that nowadays, buying things like cars and houses and even appliances with cash makes you a terrorist: http://theintelligencer.net/page/content.detail/id/548851/Buying-a-Car-a-Little-Harder-Now.html?nav=515

...

I hadn't heard that.  I will say, we paid cash for my car and no one batted an eye.

[MyTwoAs]

Originally Posted by ChristyMarie 

I hadn't heard that.  I will say, we paid cash for my car and no one batted an eye.

Most of my family members pay cash and have never had a problem, either. This includes $30k+ vehicles.

On a related note, nearly 1/3 of homes purchased in January 2011 were paid for with cash - http://money.cnn.com/2011/03/10/real_estate/homebuyers_paying_cash/index.htm

[mnnice]

Originally Posted by velochic 

I think the disconnect is that a lot of people see "credit" and "debt" together as basically being the same thing.

They're not.

You can certainly live within your means and UTILIZE credit to increase your net worth.  This is the positive aspect of credit, where you are never paying any interest, but you are using other people's money while making a profit off of it.  I'm not talking about risk with investing, either, or even leveraging or anything of that nature.  I'm talking about simple things like 0% interest incentives.  You have the cash to buy the item, but instead of paying upfront, you let it ride on a year-same-as-cash and collect the interest from that money that would have been spent.  You pay the "debt" off before it rolls into these outrageous loan terms, but you've let your money make you money for the last year.  You're $2,000 ahead of what you would have been if you had just paid cash for it.

The problem, though, is that too many people DON'T think in these terms.  They buy things they really can't afford.  Then it's bad to have that credit because there is no discipline to keep it in check and that leads to bad debt.

What I'm talking about is *also* a mindset.  If you live on cash alone, you are likely not going to get ahead with your finances.  If you EXPLOIT your credit and acquire debt, you are not going to get ahead with your finances.

I truly cannot imagine living without credit.  It has been a part of our financial freedom.  But it has been used wisely.

I am going to respectfully disagree with much of this post.  I have bought both a car and furniture in the past with 0% deals.  I am far from convinced that is was a good idea.

The furniture deal introduced stress into the whole purchase that would not have existed and in order to be super sure that we didn't get assessed any interest we ended up paying it after 10 month vs the 12 months that we techinically had.  It seemed like a lot of hassle to earn approximately $50 in interest.   Our most recent furniture purchase was a bed and mattress from a small business that also made the mattress and has an Amish cabinetmaker make the bed.  We paid with cash and got a discount of 5% on the purchase.

We also purchase a new vehicle with 0%.  We had the cash to buy it outright, but we chose not to use it. We did buy a vehicle more expensive than I know either DH or I would have ever bought if we had had enteedr the car dealership with a stack of $100 bills.  It was far from a terrible purchase and we still drive is 9 and 1/2 years later.  Still not our smartest move.  Also if you have the cash for a car or have excellent credit you are nearly always better off taking the higher rebate over the 0% financing.

Also anything purchased with a credit card has another layer of expense built into it.  Using credit cards raises retail prices for both the people that pay cash and use credit. If you are dealing with a small business owner you nearly always get a better deal if you pay with cash (and ask for a discount).  I have gotten cash discounts for lodging, furniture, food (both resturants, grocery stores, farmer's market).  The "free" money from rebate cards are really not so free because they are reflected in higher costs for everyone.  Statistically, people spend about 20 to 30% more when the pay with credit than they do with cash.

I also don't think paying cash makes you less inclined to invest and grow you net worth. If anything becoming less of a credit user has increased our rate of savings.  I currently live in a place with some pretty depressed real estate and relatively low household income.  The discipline to only buy a house with cash is keeping us from spending too much on a home.  We would easily qualify to buy a house twice that median here.  But overall that would be a crummy idea since the high end of the market moves at such a glacieral pace and we know we won't live here forever.

I don't think all debt is bad either. Both the student loan debt I took on and the 3 or 4 different mortgages we have had in the past have all worked out just fine for us.  We also have a credit card that we do use one or twice a year just to keep it active.  But mostly I think it is easier to be mindful when you use the green rectangular stuff.  I also think there are lots of ways to "leverage" using cash that aren't available when you use credit.  I do think there are multiple routes to monetary wealth and more than one way to do things.  Living within/below your means is the first place to start regardless of what actual means you used to pay with it.

Edited by mnnice - 3/21/11 at 9:53am

[physmom]

Originally Posted by Geist 

Having no credit score really does make buying things more difficult. When we went to buy a house, we had major issues since my husband is an immigrant and has only been here for slightly over 3 years now, so his credit history here wasn't long enough (it was fine in his home country, but that doesn't count). We didn't get him on my credit cards as soon as we should have (like, immediately after he immigrated) because we just didn't think about it. So we've ended up getting higher interest rates than we otherwise might have. He also likes to point out--and I think this is entirely true--that the way credit scores are figured in the US is completely bizarre. Here, you can only get good credit by having had a lot of debt. In Finland, you get a good credit score by having a lot of money. He was so proud of the fact that he'd had a credit card (with a ridiculously low limit compared to what I had in the US) since he was 20 because it showed that the banks there trusted him and he had money.

Also I would add that nowadays, buying things like cars and houses and even appliances with cash makes you a terrorist: http://theintelligencer.net/page/content.detail/id/548851/Buying-a-Car-a-Little-Harder-Now.html?nav=515

or according to the if you see something, say something video by DHS, if you don't have a credit card while renting a room at a hotel and you want to pay cash, that could make you a terrorist, too, and it's suspicious behavior.

That's actually a GREAT point about the hotels room that I forgot to mention in my other post.  DH and I both have had to travel extensively for work and we couldn't get credit cards at first due to no credit, which meant we couldn't get hotel rooms!!! We had to get coworkers reserve the rooms for us (not something I personally felt very comfortable with but it was a necessity).  Also, when we moved we had to do the same thing with a car rental and the stupid place charged our friend instead of us!!! 

Another reason why credit is important is if you have to travel a lot for business.  We've actually almost not been able to pay rent a few times because we had to take an expensive business trip and our job didn't refund us right away.  Even though we HAD money it wasn't easily available for us...

[Tumble Bumbles]

We have never had a problem renting a hotel room, renting a car, getting airline tickets, or anything without a credit card. We get them on our debit using it as "credit". Maybe because we didn't pay with physical cash in hand (but it was cash and not credit nonetheless).  We also qualified for a house and a car based solely on my husband's "credit" of which they say he has no score -- though we didn't buy. Maybe they are calling it "no score" when they mean "no debt" but he doesn't have any open credit accounts at all and they couldn't establish a number score. I don't either but I do have one debt that's since been removed from my credit report. The only time we ever felt affected by no credit was with regard to the car. It would have been a higher downpayment but the interest rate was fine. We never had higher deposits on utilities either to my knowledge (there are standard deposits here for establishing new service, regardless of credit).

We pay for everything with cash and to my knowledge aren't on any watch lists

I dunno, maybe the game has changed a bit with so many people having foreclosures and bankruptcies and defaults on their reports due to the recession that no debt looks good now. Whatever the reason, not being able to acquire things (hotel rooms, airline tickets, appliances etc) has never been an issue while using cash and not credit.

I'm praying we never choose to turn to the credit game (sham, imo) to get anything. I love being free from it.

[ChristyMarie]

Originally Posted by Tumble Bumbles 

We have never had a problem renting a hotel room, renting a car, getting airline tickets, or anything without a credit card. We get them on our debit using it as "credit". Maybe because we didn't pay with physical cash in hand (but it was cash and not credit nonetheless).  We also qualified for a house and a car based solely on my husband's "credit" of which they say he has no score -- though we didn't buy. Maybe they are calling it "no score" when they mean "no debt" but he doesn't have any open credit accounts at all and they couldn't establish a number score. I don't either but I do have one debt that's since been removed from my credit report. The only time we ever felt affected by no credit was with regard to the car. It would have been a higher downpayment but the interest rate was fine. We never had higher deposits on utilities either to my knowledge (there are standard deposits here for establishing new service, regardless of credit).

We pay for everything with cash and to my knowledge aren't on any watch lists

I dunno, maybe the game has changed a bit with so many people having foreclosures and bankruptcies and defaults on their reports due to the recession that no debt looks good now. Whatever the reason, not being able to acquire things (hotel rooms, airline tickets, appliances etc) has never been an issue while using cash and not credit.

I'm praying we never choose to turn to the credit game (sham, imo) to get anything. I love being free from it.

This is VERY different from using cash.  First, you must qualify for that debit card.  Do you realize they ran a quick credit check before approving you?  Yep.  So you have to have a credit history to even get that.  After my divorce I was in a bad financial place because of my ex and I had to first get an ATM card, use that for 6 months and then was finally approved for a debit card.

Try calling and reserving a room without a debit card.  Try using just cash - actual paper money.  Very different experience.
 

[velochic]

Originally Posted by Tumble Bumbles 

We have never had a problem renting a hotel room, renting a car, getting airline tickets, or anything without a credit card. We get them on our debit using it as "credit". Maybe because we didn't pay with physical cash in hand (but it was cash and not credit nonetheless).  We also qualified for a house and a car based solely on my husband's "credit" of which they say he has no score -- though we didn't buy. Maybe they are calling it "no score" when they mean "no debt" but he doesn't have any open credit accounts at all and they couldn't establish a number score. I don't either but I do have one debt that's since been removed from my credit report. The only time we ever felt affected by no credit was with regard to the car. It would have been a higher downpayment but the interest rate was fine. We never had higher deposits on utilities either to my knowledge (there are standard deposits here for establishing new service, regardless of credit).

We pay for everything with cash and to my knowledge aren't on any watch lists

I dunno, maybe the game has changed a bit with so many people having foreclosures and bankruptcies and defaults on their reports due to the recession that no debt looks good now. Whatever the reason, not being able to acquire things (hotel rooms, airline tickets, appliances etc) has never been an issue while using cash and not credit.

I'm praying we never choose to turn to the credit game (sham, imo) to get anything. I love being free from it.

You must have never traveled abroad... because it's VERY difficult to do anything abroad with just a debit card.  Too many limits and the way they charge your debit card, it often doesn't go through their system.

Can I also just say that it is exponentially more dangerous to use a debit card (even as a credit card) that is attached to your bank account?  If it's stolen, while you may eventually get back most of what was charged, the fees (such as overdraft fees) can really add up and cost you a pretty penny.  My cousin (who is actually an attorney and still could not get this thing resolved) lost $8,000 of her money from such a thing.  She has taken the bank to court more than once, but she has no recourse.

If you can't discipline yourself enough to use credit wisely, you're still better off with a pre-paid card to be used as cash for such situations.  Just load it each month and when it's gone, it's gone.

[Tumble Bumbles]

It's not the discipline aspect of it (I hope you weren't suggesting we're not disciplined?) ...it's purchasing things on credit. I hear people say things like "oh we can afford it, we pay it back 100% every month!" -- and if that's true, more power to you, but I don't see the point - except maybe the "rewards" aspect of it.  I'm sure if we chose to play the game we could be disciplined at it, but I choose not to play the game and buy things with money I don't have -- and if i I have it, I pay with that money. That said, the people who are "disciplined" are in the very, very, very small minority.  I get that other people choose not to live that way but I wonder why there's misunderstanding and even sometimes hostility toward people who choose not to play the credit game. In all the years we've been using a cash/debit system we've never had an issue with theft or identity theft but I guess there's always a chance of anything. It's just something that doesn't keep me up at night at all. As far as going abroad, maybe things have changed dramatically but I didn't have an issue when I went to Europe -- that was some years ago now.

I'm not doubting other people's experiences, I just know what mine are... and we've never had a problem, ever (except for the potentially higher down payment situation with the car). Maybe we're just touched by an angel or something

[HollyBearsMom]

We pay our credit cards in full each month but none of them are rewards based (that I know of).  Now we don't use them often but we do use them. For us the point is to save money. I do a LOT of comparison shopping and often the best prices are available on line. Sure I could order via snail mail and a check but with free shipping why not use a card and get what I need faster.  Then there are the risks of mailing a check-it getting lost, promotional price is short-lived, the company could sell out prior, etc.

Perfect example- We recently needed a new sink (long story, LOL!).  I found the one I wanted at a big box retailer and wrote down the make and model. Their retail (on sale) was $395. After some on line digging I found it the exact same sink $275, free shipping. There was no brick and mortar stores and they did not accept checks or paypal- credit/debit cards only.

Another example is when we bought our first home.  We needed a fridge, a washer and a dryer since the home did not have them and our rental included them.  Sears offered me 20% off if I bought all 3 from them and if opened a Sears card I would save another 15% with no interest for 18 months.  I took the cash in my my pocket and opened 12 month CD. I actually MADE money on that deal.   

Originally Posted by Tumble Bumbles 

It's not the discipline aspect of it (I hope you weren't suggesting we're not disciplined?) ...it's purchasing things on credit. I hear people say things like "oh we can afford it, we pay it back 100% every month!" -- and if that's true, more power to you, but I don't see the point - except maybe the "rewards" aspect of it.  I'm sure if we chose to play the game we could be disciplined at it, but I choose not to play the game and buy things with money I don't have -- and if i I have it, I pay with that money. That said, the people who are "disciplined" are in the very, very, very small minority.  I get that other people choose not to live that way but I wonder why there's misunderstanding and even sometimes hostility toward people who choose not to play the credit game. In all the years we've been using a cash/debit system we've never had an issue with theft or identity theft but I guess there's always a chance of anything. It's just something that doesn't keep me up at night at all. As far as going abroad, maybe things have changed dramatically but I didn't have an issue when I went to Europe -- that was some years ago now.

I'm not doubting other people's experiences, I just know what mine are... and we've never had a problem, ever (except for the potentially higher down payment situation with the car). Maybe we're just touched by an angel or something

[mum4boys]

To answer your question about if our child needs surgery. As stated before we have a special needs child. We were very close to maxing out his life time cap of 1.5 million. (there is no longer a life time cap). We pay close to $1,000 a month for medication out of pocket. We have excellent health insurance. We pay our co-pays and that is. So even when we racked up $250,000 worth of medical care for Liam two years ago. We were able to pay for our share out of pocket. He has surgery a couple of times a year, not only that his brother who also has JIA had to have surgery and our other child had his appendix burst. We still did not charge anything.

For our family not using credit cards works. It has worked for us long term. We have several friends that do not use credit cards, they own their own house and they are debt free. It works for them also.

Also I have rented hotel rooms with no debit card and no credit cards from Holiday Inn Express and Best Western with no problems whatsoever.

[mum4boys]

Hollybearsmom you are right, about making money on deals using a credit card etc. There are a lot of opportunities out there like that.

We have not chosen to go this route, even though I am ubber frugal because every time we had used a credit card in the past, it was just a struggle for us. Something always happened that made it not possible to do what we budget. I was tired of the stress.

[Lisa1970]

Ours is not zero, but it is going down. We paid off our mortgage in 2008. Our last car loan was paid off then too. Now in recent times, we have been told our score has been dropping. It is still up near 700, and we have something on there that is wrong. But, it is lower than it should be, IMHO because we do not carry debt and we pay everything. 

I really hope someone does some sort of class action suit against the credit bureaus. They lower your rating for NOT being in debt and they put things on your ratings that affect even our ability to have insurance and hold jobs. They put things on your credit that you cannot get off unless the creditor willingly takes it off, or you spend a lot of time in court challenging it, which means a lot of money in fees to sue. I do not think any of it sounds right. I have an IVF on my credit rating that never happened. I had the doctor send a letter to the creditor (some collection agency) to tell them it was not valid but they still put it on my credit and call me all the time.

[ChristyMarie]

Originally Posted by Tumble Bumbles 

It's not the discipline aspect of it (I hope you weren't suggesting we're not disciplined?) ...it's purchasing things on credit. I hear people say things like "oh we can afford it, we pay it back 100% every month!" -- and if that's true, more power to you, but I don't see the point - except maybe the "rewards" aspect of it.  I'm sure if we chose to play the game we could be disciplined at it, but I choose not to play the game and buy things with money I don't have -- and if i I have it, I pay with that money. That said, the people who are "disciplined" are in the very, very, very small minority.  I get that other people choose not to live that way but I wonder why there's misunderstanding and even sometimes hostility toward people who choose not to play the credit game. In all the years we've been using a cash/debit system we've never had an issue with theft or identity theft but I guess there's always a chance of anything. It's just something that doesn't keep me up at night at all. As far as going abroad, maybe things have changed dramatically but I didn't have an issue when I went to Europe -- that was some years ago now.

I'm not doubting other people's experiences, I just know what mine are... and we've never had a problem, ever (except for the potentially higher down payment situation with the car). Maybe we're just touched by an angel or something

For us, we charge everything on our Amex card.  I rarely pay for anything with cash.  We earn so many points that we are able to upgrade about 80% of our plane tickets for free.  So we pay the coach fare (say $350) instead of the first class fare (roughly $1500) every time we fly.  That is a HUGE savings when my husband travels 4-8 times a year for business.

Their year end statements also makes it much easier to keep track of business expenses and write offs.  We also use their travel agency services for free instead of having a fee tacked on with a regular agency.

We pay our bill in full every month.
 

[AlexisT]

My husband had a blank credit report.

You get it by being new to the United States with zero credit history.

It stinks. We had to pay $300 to get electric service, because they didn't run my name, only his. There are jobs he could have been rejected from, because they check your credit score.

Unfortunately, not having any credit available ever is not very practical. From the small things (try renting a car without a major credit card. Try booking airline tickets--you can use debit, but there's a max of $3K per transaction, which can cause problems for large purchases) to the big ones (buying a house). Not having debt is a worthy goal, but a credit history is a good thing.

[Aridel]

Originally Posted by mum4boys 

To answer your question about if our child needs surgery. As stated before we have a special needs child. We were very close to maxing out his life time cap of 1.5 million. (there is no longer a life time cap). We pay close to $1,000 a month for medication out of pocket. We have excellent health insurance. We pay our co-pays and that is. So even when we racked up $250,000 worth of medical care for Liam two years ago. We were able to pay for our share out of pocket. He has surgery a couple of times a year, not only that his brother who also has JIA had to have surgery and our other child had his appendix burst. We still did not charge anything.

For our family not using credit cards works. It has worked for us long term. We have several friends that do not use credit cards, they own their own house and they are debt free. It works for them also.

Also I have rented hotel rooms with no debit card and no credit cards from Holiday Inn Express and Best Western with no problems whatsoever.

The point isn't that everyone who has a child with SN needs to charge things, the point is that life changes unexpectedly, and nobody is safe.  Your dh could be out of work long-term, or your children could have additional medical concerns which cost 250k not just for one year, but at least that much every year for the foreseeable future.  Or your dh could be injured and out of work, and disability insurance won't cover everything.  Like I said, a preemie can rack up 250k bills in a matter of months.  A severe accident-related injury can do the same.  Or both job + health at the same time  Or a million other things that can devastate a family financially.  Or you could squeak by, and have something happen just as you're getting back on track and wipe you out - and need credit then.  You can't quit your new job, that you just got after a  year out of work, because you ran out of money to pay for gas and your paycheck hasn't cleared yet.  That would hardly help your family's finances.

An emergency fund helps protect you but it cannot and will not provide you what you need to live on in any and all circumstances.  You can be more financially secure than others, and as financially secure as possible, but it is impossible to be so financially secure you are never at any risk.  You cannot guarantee ongoing income at your expected level, avoidance of catastrophic health issues, housing issues, etc.  You can commit to avoiding any debt/public assistance if possible but you can't guarantee it, because you don't have an endless supply of money.  Eventually it will run out. 

[mum4boys]

I am not sure how a credit card is going to protect me from life unexpected expenses. As some point it is going to have a cap on it whether it is $1.000, $10,000 or whatnot then what. What are you going to do after you tapped into all that credit and you still need more all you will have is all that debt? You are still back to square one. I have been there and done it. We are not interested in doing it any more. We have been through job lost and strike and survived without running up any more debt. It is a mindset that you have to have credit. I choose not to depend on the almighty dollar this way.

[VisionaryMom]

Originally Posted by mum4boys 

I am not sure how a credit card is going to protect me from life unexpected expenses. As some point it is going to have a cap on it whether it is $1.000, $10,000 or whatnot then what. 

There are credit cards without limits.

[ChristyMarie]

Originally Posted by mum4boys 

I am not sure how a credit card is going to protect me from life unexpected expenses. As some point it is going to have a cap on it whether it is $1.000, $10,000 or whatnot then what. What are you going to do after you tapped into all that credit and you still need more all you will have is all that debt? You are still back to square one. I have been there and done it. We are not interested in doing it any more. We have been through job lost and strike and survived without running up any more debt. It is a mindset that you have to have credit. I choose not to depend on the almighty dollar this way.

Many of us are not speaking of just having a credit card but, rather, the ability to obtain credit and financing options when needed.

I don't believe anyone here has said debt is needed, just an established credit rating to gain access to funds through credit in the event of a catastrophic financial emergency.  While you may be willing to move onto the streets instead of finance something, many are not willing to do that when there are other options to keep a roof over their children's heads.  

[monkey's mom]

It's funny isn't it? When I was 19/20 and living on my own I had to work *really* hard to build my credit. It was NOT easy. We started with a Sears card. What really opened our "credit door" was when I went back to school for my undergrad degree. Every text book had a credit card offer in it, tables were set up around campus with credit card offers, mail came pouring in with offers. For years as a working young person I could barely get anyone to look at me re. credit. But once I quit my job and went back to school, I was suddenly a perfect candidate. (And, of course, college students are the perfect prey as their parents will likely settle accounts the student can not.)

We spent nearly ten years actively building our credit. When we went to buy our first home our friend/mortgage broker couldn't believe how good our credit was.

Now, at 40 we are moving in the other direction. Our house is paid for, our loans are paid (less a 0% car loan), no balance on credit cards, and I'm sure our FICO scores are dropping like stones.   I have no idea what they are, as we don't have need for them currently. But I would never want to lose that option. We would love to buy a second home one day (at the beach). It'd be nice to finance it and rent it until we are ready for retirement and sell our current home. Still a pipe dream that I haven't fully examined, but it's nice to have options. Likewise, if my husband's work truck suddenly neeeded replacing, I would rather take another 0% loan and keep our money in investments/the bank, if given the choice.

We use our credit card sometimes, not necessarily for the rewards, but when I just made online reservations for camping and beach vacation trips, it sure made it easier to reserve and pay quickly. Lots of times I don't have cash or haven't shuffled money around (self-employed, so money needs to go through business accts. for tax purposes--and we always end up with all the money coming in a the end of the month), so the credit card is just convenient. I don't act like it's money I don't have--I take all those expenses directly out of the budget and keep a running tally of what will need to be sent in to the credit card company at the end of the month.

Credit, in and of itself, is not a bad thing. I respect people's choice to eschew it and I can see where it might not be necessary, but for me, it's one more choice/opportunity to have at my disposal. (And I haven't always been responsible with it, but that was MY fault....not the fault of credit.)

[mum4boys]

Originally Posted by ChristyMarie 

Many of us are not speaking of just having a credit card but, rather, the ability to obtain credit and financing options when needed.

I don't believe anyone here has said debt is needed, just an established credit rating to gain access to funds through credit in the event of a catastrophic financial emergency.  While you may be willing to move onto the streets instead of finance something, many are not willing to do that when there are other options to keep a roof over their children's heads.  

So you are just suppose to spend spend spend with no credit limit? When does it stop? At some point the funding is going to run out. If it did not this country would not be in the mess that it is in. Lots of people who used credit responsible and only for catastrophic financial emergencies have ended up loosing their homes and/or declaring bankruptcy. It is not a choice my family is willing to make. If other people want to live their lives like that fine. I have said repeatedly it is a personal choice. I have never ever said "you" should be doing it my way or else you are wrong for having debt. What I have repeatedly said is we choose not to live this way and it is very possible to live without credit.