No credit to bad credit?

[Kalmado]

I too have never heard of a specific % of balance you should carry to increase your score. While I worked in the mortgage industry as a loan originator I never discussed such points with clients as we had a separate department for that.

Regarding debt, instead of starting a new thread I'll ask here. I got into some trouble with 2 of my CC and I let them go and they were turned to collections. On my credit report both are showing as "charged off". Can anyone give a clear cut answer on what this means? I've researched it and some info says my credit will just be hit for awhile. Others say I will have to pay it eventually or I could receive garnishment. Any ideas?

[Maaglin]

Charge off usually means that after turning over to a collection agency, the creditor has exhausted all aveneus to collect, and have now listed the debt as unlikely to ever be collected. This helps them with their taxes and what not, but the debt is still valid, i.e., you still owe and they can still attempt to collect.

It will normally have a large negative impact on your credit score for several years at least.

I had a small amount of a debt listed as charged off due to some miscommunication with the creditor. In any case, it is still listed there (7 years ago now) but my credit score is well above 800, but as recently as a couple years ago, it had a much larger effect on my score.

[seppuku-gb]

The best financial advice I have ever been given is to not have a credit card and don't get loans where you don't already have 100% of the money to pay it off.

If you don't have surplus income, seriously look at what you own and determine what is frivolous and what is REQUIRED to survive - it'll save you a ton of cash. This includes getting a smaller place to live, walking/bicycling to work, clipping coupons for food, buying second hand clothes, etc. Get a notebook and budget your money. Within a year of establishing this habit you will maximize your monthly savings on your income.

I guess that was a bit of a tangent, but my point is that credit is not everything. It's borderline absurd how much value people place on credit. Really... it's a measure of how good you are at owing someone money. The only purchase I ever see remotely necessary to get a loan for is a house. Not for a car, not for a new TV, not even for school. There are options for everything, although some aren't as glamorous as other, and not over-extending your budget is a necessary skill to refine.

A credit card CAN be beneficial but only if you are very responsible with your money. Paying off your balance before the interest hits can get you rewards or cash back but I look around at the vast majority of the people I know and that's not the case. If you get in a little financial trouble, people rationalize that they can still afford some niceties because they can temporarily hold a balance on their card until their situation changes. It's a trap. The responsible decision would be to not spend money you don't have anymore.

I wrote a lot more then I thought I would.... but I love talking about finances. Hopefully this lends a different perspective to some people.

[Serif]

The best financial advice I have ever been given is to not have a credit card and don't get loans where you don't already have 100% of the money to pay it off.

If you don't have surplus income, seriously look at what you own and determine what is frivolous and what is REQUIRED to survive - it'll save you a ton of cash. This includes getting a smaller place to live, walking/bicycling to work, clipping coupons for food, buying second hand clothes, etc. Get a notebook and budget your money. Within a year of establishing this habit you will maximize your monthly savings on your income.

I guess that was a bit of a tangent, but my point is that credit is not everything. It's borderline absurd how much value people place on credit. Really... it's a measure of how good you are at owing someone money. The only purchase I ever see remotely necessary to get a loan for is a house. Not for a car, not for a new TV, not even for school. There are options for everything, although some aren't as glamorous as other, and not over-extending your budget is a necessary skill to refine.

A credit card CAN be beneficial but only if you are very responsible with your money. Paying off your balance before the interest hits can get you rewards or cash back but I look around at the vast majority of the people I know and that's not the case. If you get in a little financial trouble, people rationalize that they can still afford some niceties because they can temporarily hold a balance on their card until their situation changes. It's a trap. The responsible decision would be to not spend money you don't have anymore.

I wrote a lot more then I thought I would.... but I love talking about finances. Hopefully this lends a different perspective to some people.

I think like you but I quit posting stuff like this in threads because of the replies you will more than likely get. Never have or will I own a CC in my name.

[archibaldcrane]

Yeah if you can't control yourself, getting a CC is a bad idea.

[Dryr]

I have been told that having 3-5 CC in good standing is a staple of good credit. Not to mention, it's pathetic to be an adult completely dependent on a debit card that's subject to bank jitters, lacking in protection services and designed to cause the maximum amount of overdrafts possible.

[Maaglin]

Using someone's else's money to do the work while investing your own in area's that make more than the interest in what you borrowed is always a sound business move.

Everyone should have a credit card for at least emergencies.

[dejet]

Using someone's else's money to do the work while investing your own in area's that make more than the interest in what you borrowed is always a sound business move.

Everyone should have a credit card for at least emergencies.

This use to be true(my 5.something % card) however at the moment this wont hold true at all for any loans outside a house. A house loan being at less then 4%(as low as 2.xxxxx% for 15 year loans) would add up to use. Most credit cards are around 10~23% so ya your not going to make any money even on the best investments with that. Some credit lines I have seen as low as 6% but holy hell getting that rate lol

[seppuku-gb]

I have been told that having 3-5 CC in good standing is a staple of good credit. Not to mention, it's pathetic to be an adult completely dependent on a debit card that's subject to bank jitters, lacking in protection services and designed to cause the maximum amount of overdrafts possible.

I'm not an expert by any means with credit, but that's just not true. There are plenty of safer strategies for building credit, if that is your true intention, without ever having a CC. Even simply paying your utility/cell phone/internet bills on time for a few years will lend to good payment history (a huge chunk of your credit score).

A debit card isn't perfect. I agree that it is somewhat lacking in security when compared to a CC. But to imply that banks maliciously design them to cause overdrafts is ridiculous. A responsible person will never overdraft on their account (save for some obscure scenario like switching banks or accounts), especially with online banking being so prevalent now. If you're counting coins and coming close to spending every penny in your account, you need to re-evaluate your budget instead of pondering whether to take credit over debit. Credit will only compound a poor financial situation. Oh, and many good banks/credit unions offer a built in line of credit (albeit at a ridiculous interest rate) to protect a checkings account with a debit card from overdraft.

*EDIT* I'm also curious to know more about why you think it's foolish to use a debit card as your preferred choice of tender.

[seppuku-gb]

I think like you but I quit posting stuff like this in threads because of the replies you will more than likely get. Never have or will I own a CC in my name.

I hear you. I enjoy listening to people's financial standpoints and discussing finances in general though. It never hurts to offer advice.

[Dryr]

I'm not an expert by any means with credit, but that's just not true. There are plenty of safer strategies for building credit, if that is your true intention, without ever having a CC. Even simply paying your utility/cell phone/internet bills on time for a few years will lend to good payment history (a huge chunk of your credit score).

A debit card isn't perfect. I agree that it is somewhat lacking in security when compared to a CC. But to imply that banks maliciously design them to cause overdrafts is ridiculous. A responsible person will never overdraft on their account (save for some obscure scenario like switching banks or accounts), especially with online banking being so prevalent now. If you're counting coins and coming close to spending every penny in your account, you need to re-evaluate your budget instead of pondering whether to take credit over debit. Credit will only compound a poor financial situation. Oh, and many good banks/credit unions offer a built in line of credit (albeit at a ridiculous interest rate) to protect a checkings account with a debit card from overdraft.

*EDIT* I'm also curious to know more about why you think it's foolish to use a debit card as your preferred choice of tender.

debit is usually a bad choice because:

No way to stop account use - Sign up for a subscription of something and they can keep charging indefinitely even if you contest that you cancelled it.

Banks are cautious - a bunch of new activity while you're on vacation? They just turn off the card and you are left waiting on bank hours to fix it, good luck on a holiday weekend...

Banks design them to deduct large purchases first - ex. say you went shopping with $200 in your account. You stop for coffee ($5), get a pretzel ($3), get lunch and see a movie ($10 ea.) then buy a kindle (200). The banks will wait to the end of the day to process charges so long as you don't break the overdraft limit. They will process the largest purchase first (the $200 kindle), then process each small charge based on an empty account and add a fee to every one of them even if they weren't incurred when the account was empty. 20/20 or one of those shows did a story on it recently.

Unexpected charges - personal or emergency business expenses such as last minute travel (easily $1000) are hard to put on a debit card for many reasons, the most responsible of which is that you shouldn't have that much cash sitting in an interest-free account assuming you have that much liquid cash at all.

Points - I've gotten several hundreds of dollars in rewards swag outside of cash rebates that also total in the several hundreds of dollars. Debit cards don't give jack.

[noblemountain]

The biggest annoyance with using debit cards is the daily limit and traveling. They can and will cut that shit off without warning. I was in Thailand with a friend and he had to use my Amex because his debit card got shut down and they wouldn't even talk to him about it over the phone. He had to go into the bank and fix it. They didn't have any reason, just that it was "suspicious".

I've had a couple purchases "turned down" by my debit card because of it going over their daily limit, even though it was just one purchase. One bank I used to use, who I dropped, was only 500 bucks. My new one is 2500, but it's still dumb. I could put a house on my Amex and they'd just run that bitch.

[seppuku-gb]

I don't think it's irresponsible or illogical to have a large sum of money in a low interest savings account at all. It's called an emergency fund. No one has a perfect budget, and like you mentioned, there will be occasions where you need to spend a good chunk of money. Using a CC in substitute for a cash emergency fund has more cons then pros though. I'm not familiar with any accounts that are interest-free or dividend-free either.

You can set your daily spending limit on your debit account. Mine is $300. No one will ever take me for more then that, and in this way I mitigate the inherent 'lack of security'. If I intend to spend more then that, or if I plan on doing any sort of traveling, I call my bank and tell them so they don't freeze my account. And to touch on vacationing, this is one area which I have put thought into the value of a CC. In the meantime, I have 2 debit accounts when I travel internationally and always carry enough cash to keep me afloat for at least a week.

I find it suspect that you mention getting hundreds of dollars in cash rewards but are worried about overdraft charges. If doesn't make sense to me that you're responsible enough to pay off your CCs in full but not enough to know how much money you have in your account. Unless you don't pay off your card, and are saying you get some compensation in form of a rewards program. In which case you would get far more money by not paying interest and just saving up money and buying cash.

[seppuku-gb]

The biggest annoyance with using debit cards is the daily limit and traveling. They can and will cut that shit off without warning. I was in Thailand with a friend and he had to use my Amex because his debit card got shut down and they wouldn't even talk to him about it over the phone. He had to go into the bank and fix it. They didn't have any reason, just that it was "suspicious".

I've had a couple purchases "turned down" by my debit card because of it going over their daily limit, even though it was just one purchase. One bank I used to use, who I dropped, was only 500 bucks. My new one is 2500, but it's still dumb. I could put a house on my Amex and they'd just run that bitch.

Before you make a purchase that you KNOW will exceed your limit, call your bank and they will approve exceeding the limit for a designated amount of time. Also, customer service depends on the bank, just like any other business. I used to use Washington Mutual and Chase when I was 16-18. I agree they would pull some dumb shit like that even if you called them before hand. I have USAA/NFCU now and have absolutely no complaints.

Infact, when I rented a car in Ireland, USAA gave me a call an hour after I made the debit to ensure it wasn't fraudulent. It doesn't bother you in the slightest that you can purchase a house on your AMEX and they'll just 'run up the bitch'?

[noblemountain]

The calling the bank and letting them know you're traveling is not foolproof. My friend let them know a month in advance he'd be in Thailand for three months. They still froze it with no explanation when he got back other than "suspicious". The daily limit set to 300 is crazy...I bumped mine up so I could breathe easier and since I have fraud protection I don't have to worry about "what if" scenarios where people steal my money. Not to mention if you're not doing dumb things that will most likely not happen. My Amex isn't a credit card really, it's a charge card. I don't pay interest on it because you're not allowed to carry a balance. I do however, rack up a ton of points that I've used to pay for vacations and free flights multiple times.

Dumb people or irresponsible people should absolutely not get a CC. They will put you in bad trouble. If you're responsible and understand being an adult, they're a good way to build credit quickly if you need it and a good backup plan if you don't. I keep one regular credit card for emergency use that I have probably used twice in the last year and a half, my amex that I use a ton, and my debit card that barely gets touched.

[Kalmado]

Before you make a purchase that you KNOW will exceed your limit, call your bank and they will approve exceeding the limit for a designated amount of time. Also, customer service depends on the bank, just like any other business. I used to use Washington Mutual and Chase when I was 16-18. I agree they would pull some dumb shit like that even if you called them before hand. I have USAA/NFCU now and have absolutely no complaints.

Infact, when I rented a car in Ireland, USAA gave me a call an hour after I made the debit to ensure it wasn't fraudulent. It doesn't bother you in the slightest that you can purchase a house on your AMEX and they'll just 'run up the bitch'?

I understand you're saying there are ways around it, but you cannot always plan for it and there is nothing wrong with having a back up plan ie: credit card. My own personal experience in this realm, while I banked with Chase, I used my debit card 3 times in around an hour. Gas around $40, smokes inside the station around $8, and groceries for around $50. My debit card was declined at the register. The cashier reran it two more times and it came back declined. Talk about frustrating! I used a credit card and left. Got home, called Chase, and they said multiple purchases in a short period of time caused them to shut down my card. Not cool.

As far as not worrying about having no limit and Noble using the hyperbole of buying a house, I agree with him and wouldn't worry either. Every month I go over statements and make sure every purchase is from me. Twice I've had purchases from out of state for thousands of dollars, obviously fraud. I never had any issue with having all interest and charges removed and it was a very easy process. I've never purchases the extra insurance or w/e for cards either.

[seppuku-gb]

Yeah, $300 is low but I rarely find a need to spend more on a day-to-day basis. I like to keep a tight budget.

If you have a good fix on your finances CCs do offer advantages. I feel confident saying that CCs are harmful to the majority of the US population though.

[noblemountain]

Before you make a purchase that you KNOW will exceed your limit, call your bank and they will approve exceeding the limit for a designated amount of time. Also, customer service depends on the bank, just like any other business. I used to use Washington Mutual and Chase when I was 16-18. I agree they would pull some dumb shit like that even if you called them before hand. I have USAA/NFCU now and have absolutely no complaints.

Infact, when I rented a car in Ireland, USAA gave me a call an hour after I made the debit to ensure it wasn't fraudulent. It doesn't bother you in the slightest that you can purchase a house on your AMEX and they'll just 'run up the bitch'?

Again, the amex isn't a credit card. They know I'll be paying it off each month. So, no, it doesn't bother me because that's what I have it for. If anything was done fraudulently, I have zero liability as well. American Express is a great company that really protects its card holders. I got stranded outside of an arena in Canada after a UFC show thinking there would be cabs there and there were none. It was 10 degrees and I was calling cab companies trying to get someone out there...the arena people told me they had to lock up in 20 minutes and the fastest cab was an hour. I called amex concierge service, which is free, and they had a limo there in 15 minutes. Cost me 50 bucks to go back to the hotel instead of 30 for a cab, but whatever. I have used their cards for major purchases just to rack up points knowing that I'll pay it off.

I also pay cash for most everything. I don't finance things. I buy what I want, but I wait until I can afford it. I despise giving away money. I have good role models in my life though that have shown me what to do. My best friend came from nothing, just like me, and is now a multimillionaire with zero debt. Only thing he's ever financed was his house and that's almost halfway paid for in under 2 years. I made really good money for a few years before I decided to follow my heart and do the animal care thing for the last 5 years. I am just now starting back into a job with great money and have already paid for everything in my new apartment and bought a new car. It's all about how smart you are with what you got.

[Kalmado]

Yeah, $300 is low but I rarely find a need to spend more on a day-to-day basis. I like to keep a tight budget.

If you have a good fix on your finances CCs do offer advantages. I feel confident saying that CCs are harmful to the majority of the US population though.

Oh I agree too! If people aren't taught how to handle their finances or they don't care to learn on their own, it will be a disaster.

[noblemountain]

Yeah, $300 is low but I rarely find a need to spend more on a day-to-day basis. I like to keep a tight budget.

If you have a good fix on your finances CCs do offer advantages. I feel confident saying that CCs are harmful to the majority of the US population though.

I won't argue that they're harmful to the majority because the majority have terrible financial education. We don't teach fiscal responsibility at all in schools, which is why we're in the shitter.