Quote:
Originally posted by Griff
Are you guys (Dave/Terry) talking about recovering from a bad credit rating or establishing good credit initially? It seems like those are two different issues. Either way, I don't buy paying for money I don't need. You risk being a tool of the credit card company rather than using their card as a tool. Folks need to look at their own financial circumstance and act accordingly. CC companies rely on people screwing up, if you're living on the edge of financial disaster and are carrying balances so you can get a reasonable loan rate you are getting screwed and need to change banks or maybe join a credit union.
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Obviously, I don't buy anything that I can't pay for that day. I used to go and pay off my credit card as soon as there were charges on it. Then, when I applied for a phone with Sprint, they ran a credit check and said "eh, you're getting there"... I talked to my credit advisor (I am a member of a credit union, not a bank) and she advised me that it was best to keep a balance on there - one that I could pay off any time, so I should keep the money in the bank. As it is, I try to keep a "buffer" of $5,000 in the bank in case I need it (and I have needed it recently, which means I'm considerably off that $5,000 right now
), but I still have enough money to pay off <b>all</b> of my debt (which amounts to a few thousand dollars in computer loans and a few hundred dollars on my credit card).
Anyway, the point is that since I have been keeping a balance on my card and making payments, my credit has gone up. I have never had bad credit - I just had <b>no</b> credit, which is almost as bad. I'm now working my way up, which means good things - the better your credit, the lower rates I'll pay on car loans and mortgages in the future. That translates to real dollars that I can save, which I put into my 401K and milk for all it's worth. I'm only 21; if I can put away an extra $50/month (saved from mortgage, since I got a lower interest rate), over 10 years, that's $6,000. So we'll just say that all starts tacking on interest when I'm 31 (which it won't) - by the time I'm 60 and ready to retire, how much do you think that will be worth?
My dad put away some $3,000 when he was 26 and forgot about it. It's worth about $50,000 right now, and that's with the market in the shitter. He's almost 53 so you figure it out.
You got it right though - you do <b>not</b> want to become a tool of the credit card company. You want to use them. I am using them to get good credit and save me money now so I can have more to retire on. You just have to be smart about it.