Credit Ratings

[denhou1974]

Stop buying things you don't need and stop paying people to do things you can do. EG: Wash your own car, cook your own food, mow your grass, change your own oil, etc. Get rid of things that are wasting your money - like cable TV and expensive cell phone plans.

I agree that you should pay off highest int cards first. Maybe call the lower card co and ask them to raise your limit so you can transfer the high balances over. Then get rid of those high int cards.

At one time I was $20K in debt on one card. Zero savings. I paid off my house last year and have zero debt now. It can be done but you have to sacrifice.

 

[IPA]

Mine went from ok to great with one simple trick... I made more money

I carry a manageable balance (mostly slushing around from buying/selling basses) and have no kids and my car has 180k miles... Aside from more money in and less money out there's not really anything else to it.

 

[soulman969]

The whole thing is kind of insane. If you charge something on a credit card, you rating goes down because you debt to limit ratio goes up. But, you can go get another card, and your rating goes up because of the same formula. I'm convinced these people are mentally challenged.

That's why I quit. Trying to figure out their game was like playing dodge-ball but those on the sidelines could throw at you too. I'm more than happy to use 0% interest OPM deals and pay stuff off out of future cash flow but paying high interest rates on a purchase is essentially like paying a tax to the lender. I won't do that.

 

[Gravedigger Dav]

That's why I quit. Trying to figure out their game was like playing dodge-ball but those on the sidelines could throw at you too. I'm more than happy to use 0% interest OPM deals and pay stuff off out of future cash flow but paying high interest rates on a purchase is essentially like paying a tax to the lender. I won't do that.

I go for the 0% interest. I look for a card that has an introductory 0% and use that one until the intro runs out, the get another, transfer the balance. I'm in the high 700s

 

[soulman969]

That would make no sense. Ultimately, the ideal is not owing anything, but for "amount X" available to pay down debt this month, attacking the highest interest rate first gets the most bang out of amount X.

"Concentrate on paying off your 3% mortgage while continuing to pay 20% on credit card debt" - is just not logical.

I agree, that's not logical, but I think in this case we're dealing with short term high interest rate debt.

It's more about dollars than rate. If the higher balance on a 10% card is costing you more in monthly interest than a lesser balance on an 18% card reduce or eliminate it first and you'll create more free cash flow to attack the higher interest card. If the objective is to get the debts eliminated increasing cash flow should have a priority.

As for a 3% mortgage I'd keep that one as long as I could. Borrowing against an appreciating asset is fine. It's going heavily into debt on depreciating assets that's a financial killer.

 

[T_Bone_TL]

I agree, that's not logical, but I think in this case we're dealing with short term high interest rate debt.

It's more about dollars than rate. If the higher balance on a 10% card is costing you more in monthly interest than a lesser balance on an 18% card reduce or eliminate it first and you'll create more free cash flow to attack the higher interest card. If the objective is to get the debts eliminated increasing cash flow should have a priority.

As for a 3% mortgage I'd keep that one as long as I could. Borrowing against an appreciating asset is fine. It's going heavily into debt on depreciating assets that's a financial killer.

That has to be purely in the "emotional" realm. In math, it does not fly.

Example. I have $100 on an 18% card and 1000 on a 10 % card, and I have freed up $50/month over the minimums to pay one of them down. I'm now going to ignore the minimums and the accumulating interest to make the math simpler. The math still holds if you include the minimums and accumulating interest, it's just messier.

The 100 costs me 18 bucks a year as long as I carry it. The 1000 costs me 100 bucks a year, or $10 per 100 per year.

If I pay off the 1000 over 20 months, the 100 costs me $30 before I start paying it down.
If I pay off the 100 over 2 months, the 1000 costs me $16.67 until I start paying it down.
That's $13.33 in actual spendable cash money difference. Plus, I've freed up another $1.5 per month I'm NOT paying in interest on the $100 to pay down the $1000 faster.

Now, if you have freed up 1000 rather than 50 bucks to pay things off with, it still is cheaper to pay off the $100 and $900 of the 1000 than to pay off the 1000. Mathematically. Emotionally, I have no idea, I try to let math rule the land of money.

 

[skwee]

Treating my visa and mc like an American Express has helped my rating a ton: I use one card for all monthly purchases, and then pay it off completely (or almost completely) at the end of the month. My company seems to like that, and then I also get the benefit of a miles program, because of the throughput.

 

[Turock]

Dave Ramsey says to pay off the lowest balance first.

 

[soulman969]

That has to be purely in the "emotional" realm. In math, it does not fly.

Example. I have $100 on an 18% card and 1000 on a 10 % card, and I have freed up $50/month over the minimums to pay one of them down. I'm now going to ignore the minimums and the accumulating interest to make the math simpler. The math still holds if you include the minimums and accumulating interest, it's just messier.

The 100 costs me 18 bucks a year as long as I carry it. The 1000 costs me 100 bucks a year, or $10 per 100 per year.

If I pay off the 1000 over 20 months, the 100 costs me $30 before I start paying it down.
If I pay off the 100 over 2 months, the 1000 costs me $16.67 until I start paying it down.
That's $13.33 in actual spendable cash money difference. Plus, I've freed up another $1.5 per month I'm NOT paying in interest on the $100 to pay down the $1000 faster.

Now, if you have freed up 1000 rather than 50 bucks to pay things off with, it still is cheaper to pay off the $100 and $900 of the 1000 than to pay off the 1000. Mathematically. Emotionally, I have no idea, I try to let math rule the land of money.

Unless there's too much disparity in the rates or balances to overcome your highest debt load is typically sapping more of your cash flow so pay it down first then attack the lower debt load. Once you freed up the cash flow you can take that one out quickly. Or better yet, refinance it at a lower rate if you can.

It works out, trust me. Even mathematically.

 

[loveandbass]

Credit scores act way more important than they actually are. I am also troubled how they have been encroaching in many aspects of our lives day by day.

 

[soulman969]

Since there's both and emotional and a monetary component to this it seems to me we won't arrive at a consensus on this one so I'm out. I have to do this for a living so debating it here is too much like work.

 

[loveandbass]

That would make no sense. Ultimately, the ideal is not owing anything, but for "amount X" available to pay down debt this month, attacking the highest interest rate first gets the most bang out of amount X.

"Concentrate on paying off your 3% mortgage while continuing to pay 20% on credit card debt" - is just not logical.

He doesn’t mean mortgages or student debts. He’s referring to credit card debt specifically for that method

 

[blastoff99]

It sounds like most of us don't have this problem, but I would add that if you haven't ever owed anybody any money, or haven't for a long time, you'll be a ghost - and that's not great either. Building credit is something you should think about *before* you need to finance a car or a home, so having your own name on the utility bill, getting a store or gas credit card and using it sparingly and paying it off immediately, etc are not bad ideas.

My ex made me put everything in my name (except for stuff they already owned outright), and I had been highly financeable before the marriage, and was even more so after. 800+ credit score and all that. When we divorced, they couldn't get their own cell plan with a major carrier - it had been in my name for 10+ years - because they had no credit anywhere. I didn't come out real well either, as I had to remove myself from the AMEX and VISA we held jointly, as well as the insurance policies and utility payments and joint bank accounts. All of a sudden I was barely a 700, and hadn't done a thing wrong.

So... it's complicated.

 

[Jeff K]

Best advice I ever got about using credit cards was that when the bill hits at the end of the month, you pay it in full.
I've only got one card, and luckily, I've managed to keep ahead of the damn thing.

I know debt can be a necessary evil, but I am surprised how many, especially, of my American family and friends seem to consider it normal to use multiple cards, and not keep them clear.

Admittedly, I'm fortunate in that I'm able to do that (pay off the entire balance every month). I only use my credit card(s) for convenience, and always pay off the balance in full when the bill comes. And credit card companies hate that! They call US "deadbeats" because they're not sucking exorbitant interest rates out of us.

When I was young, there were times when I was NOT able to do that (pay off the balance immediately). It took awhile to get to this point, but unless something catastrophic happens to me, I'll never allow my credit card balances to go unpaid in full each month. Mortgage and car is different. MOST of us are not in a position to pay cash for those; but it sure would be nice if you could...

 

[toowrongfoo]

Credit is as credit does. My credit rating at 53? 774. The banks think that is grand, I think it's careless. I should be over 800 and I can't wrap my head around why it's not.

I don't DO late payments.

I think it's dicey. And there is some financial god looking over the whole thing and I'm not sure it's not like baseball umps......depends.

 

[denhou1974]

Mine went from ok to great with one simple trick... I made more money

I carry a manageable balance (mostly slushing around from buying/selling basses) and have no kids and my car has 180k miles... Aside from more money in and less money out there's not really anything else to it.

There's more to it than that. You have to make more money but NOT spend more money.

 

[roller]

And credit card companies hate that! They call US "deadbeats" because they're not sucking exorbitant interest rates out of us.

Oh no... they definitely are... ain't no doubt about it. And bank's are making tons of cash off fees and penalities.

When people make poor decisions, there's always someone to profit from it.

 

[Jeff K]

Oh no... they definitely are... ain't no doubt about it. And bank's are making tons of cash off fees and penalities.

When people make poor decisions, there's always someone to profit from it.

No doubt about it. But I was talking about when you pay off your entire balance every month. When you do that, you don't pay interest. Only the cost of the merchandise that you purchased. That's what the credit card companies hate. And the only credit cards I'll use are those with no annual fee.

 

[roller]

No doubt about it. But I was talking about when you pay off your entire balance every month. When you do that, you don't pay interest. Only the cost of the merchandise that you purchased. That's what the credit card companies hate. And the only credit cards I'll use are those with no annual fee.

Sans annual fee is a great way to go.

I can't help but chuckle and shake my head when I hear/read from others who've gotten into credit trouble that they've sworn off credit cards because "credit cards are evil," etc.

Shyeah, like it's a piece of plastic's fault. What's next -- you're gonna blame your fork when you can't button your pants? Clap... clap... clap.

 

[IPA]

Sans annual fee is a great way to go.

I can't help but chuckle and shake my head when I hear/read from others who've gotten into credit trouble that they've sworn off credit cards because "credit cards are evil," etc.

Shyeah, like it's a piece of plastic's fault. What's next -- you're gonna blame your fork when you can't button your pants? Clap... clap... clap.

I really wish basic financial and budget was part of high school curriculum. A lot of parents are unwilling or uneducated.