Banks won't help

[iswmle]

I think that many Americans were drawn into buying houses that they could not afford. By real estate agents, mortgage brokers, and appraisers. I found that a few years ago, appraisers would value houses on what the buyer wanted to spend, not on the true value of the house. Sub-prime loans - interest only, escalating ARMs, negative equity loans were offered to people just to get them into the house. And there is no doubt that people love to move into a new home. I always use this example - when people go to a car dealer to buy a new vehicle, see the vehicle, ride in it, and get approved to buy it, they almost never read the whole contract. When these same people go to buy a home, and see that they can get a very nice home, they never read all of the documentation. They are too excited about getting into the home.

This. This is key. I believe a falling for most people is that they buy into the mantra "why rent and throw away your money when you can buy a home and OWN it?" During my BK I managed to slide in and get a job at a prime bank... and let me tell you how much pressure that was on me! I was shocked... SHOCKED! that they hired me, albeit I believe if I was going for a higher position they would have kicked me to the curb.

Annnyywwaaay, while training there was a young lady that annoyed the hell out of me. She is no older than 23 and bragged CONSTANTLY about her home. One day I was sitting in the break room and talking with a man who had also just graduated from college. He was newly married, just moved to the state, and is looking at deploying next year. We were talking about renting apartments when the girl says: "Why would you throw your money away on rent when you can just BUY a house?" This is a girl who makes no more than $20,000 a year with a husband who was UNEMPLOYED at the time.... he finally got a job working for Geek Squad who are now forcing people to take time off because it is so slow.

I think it is this mentality that one needs to "stop throwing money away" to rent that is making people spend more than what they earn. I buy into it to a degree myself... I do want to own my own home, and it doesn't thrill me that I rent... but I realize that at this point in my life buying a house would be a horrible financial decision for me.

However, while working towards the goal of buying that home, I do feel I need to build credit. I see no other way other than saving up for a house, and that is asking for the impossible on my income and with my degree.

So saving and building, saving and building... that is all I am going to be doing for the next several years. I hope to have a nice savings and great credit by the time that house purchase rolls around.

[Amy26]

LOL, ok... to-may-toh ta-mah-to ... I don't see how putting something on the card and then paying it out (for something you would have spent the money on anyways (like rent) is going into debt. If you wanna look at it that way then even signing a lease agreement is going into debt or your utility bills. Whether I pay my rent with a cc or not, I better have the money to pay it or I'm out on the street. Course, if I charge my rent and know I don't have the money to pay it off... who's fault is that? Credit or myself?

The scenarios you described are of course true...but what will happen will happen. All we can do is give our kids guidance and the knowledge... if they still screw up, then we can't do anything about it. If someone can't balance their checkbook and know how much money they have before they pay a credit card balance off... then that isn't the fault of "credit"... that is the fault of the person.

This reminds me of the "guns don't kill people, people kill people" arguement. If the only way for a person like I just described to keep themselves straight is to not use credit whatsoever....then they by all means shouldn't. But, they should not be avoiding credit because its "evil" or "stupid" or anything else you wanna call it. They should be avoiding it because they can't trust themselves. Some people simply have an aversion to credit because they don't like it or they don't feel its necessary... that is perfectly ok too. Its just like abstaining from sex or alcohol for a variety of reasons.

People will get themselves into trouble in all sorts of ways... bad things happen every day. I certainly am not perfect and screw up tons of things... but we can't live in a bubble and never leave our homes or do anything because we're afraid, scared or too cautious. Hell, none of us may even be here next year as the world is going to end on December 21, 2012...

But yea to each his own, we are indebted in some fashion our entire lives regardless if its monetary or not. Debt is not a bad thing... not managing it properly is. I think sometimes that people try to blame other things for their issues/problems... like an alcoholic when they do something really stupid drunk.... "it wasn't me it was the liquor".

[DebtHater]

Charging things that you would normally just pay cash for and then subsequentally pay it off with that cash in the same month is not going into debt .....

I'm sorry but I must disagree with you. One of the definitions of debt is to owe money. Once you swipe that credit card to make a purchase (and you walk out of the store with the goods) you instantly become in debt as you now owe that financial institution money. The only thing that paying it off in the same month avoids is interest. Regardless, you are still borrowing someone else's money, even if it is only until the end of the month.

As innocent as the premise is to pay off the credit card monthly, this is how many get into trouble as you are now adding risk to the scenario. Murphy comes to visit and the unexpected happens now that money otherwise earmarked for the credit card company finds it's way into the hands of the mechanic for new brakes or similar situation. Yes, I understand someone financially responsible should have that emergency fund so they are covered, but many don't.

Unfortunately there are too many people that have credit cards when they have no business having them. Example, college students that don't have jobs (fortunately congress changed some of the laws regarding this). Sure, they'll pay them off monthly.... with what??? What's worse is these are the same folks that can't balance a check book. Then when they get the credit card at the end of the month and write a check with money they don't have because they don't have a job and can't balance their checkbook to see they have a negative balance, all heck breaks loose.

[IBroke]

And as I mentioned in my other thread... plenty people wake up after 2-3 years that didn't touch their credit and thought "time would heal it" only to find their scores are still in the 500's.

Absolutely right.

[Amy26]

I'm not sure on that one. Without a CC, it's impossible to reach a high credit-score because you have no utilization - that's already 30% of your credit-score.

Not to mention the Average Age of Accounts metric will be totally fubard because IIB accounts no longer count toward that and if you don't have any positive lines for that, will also suffer.

And as I mentioned in my other thread... plenty people wake up after 2-3 years that didn't touch their credit and thought "time would heal it" only to find their scores are still in the 500's.

[IBroke]

But the thing is, "active rebuilding" is largely a myth. You give me 2 people out of BK 7. Both clean up their credit reports afterward, person 1 takes out a few CC's to "rebuild", the other does nothing else and just let's it sit. In 2-3 years time, the credit scores of those 2 persons will be nearly the same. Not identical, but both will be back to PRIME level lending rates.

I'm not sure on that one. Without a CC, it's impossible to reach a high credit-score because you have no utilization - that's already 30% of your credit-score.

[Amy26]

That is not true. You do not need to go into debt to have good credit. Charging things that you would normally just pay cash for and then subsequentally pay it off with that cash in the same month is not going into debt and that is all one needs to do to have good credit. All you are doing is showing that you can have available credit and manage it wisely and not run up your cards with debts you can't pay. The only time one would go into debt for credit is getting a car loan or a home...but those are not requirements for good credit. Installment loans actually count much less as a factor in your score than revolving lines.

I have been frequenting another credit forum that has given me a wide birth of knowledge and insights and on that site, the people with 750 - 850 scores are not in debt at all. Those are the people with flawless credit and they may have huge lines of credit but they aren't charging them up. What they do, is they pick 1 credit card (perhaps one with really good rewards) and they run all their monthly charges through it for awhile... the whole time always paying off the balance or leaving just like 10 dollars on it. Then, they move to another one of their cards and rince and repeat.

One of course has to be disciplined and responsible to do this but having good credit is just a matter of self control and managing your funds responsibly.

[DebtHater]

I am sorry, but I don't recall saying anything about the need to "must have debt" for my clearance. I said show a positive history. Actually, the presense of debt is usually a bad thing for security clearances because they believe you might be easily manipulated if offered money. And you are completely correct about people with no credit having no problems at all with their credit. I happen to work in the office of the CFO and have a bankruptcy on my report that happened when I was trying to obtain the clearance, so my finances were very closely scruitinized. Does everyone have the same experiences with clearances? No.

Fair enough. I wasn't trying to criticize you or any other poster on this thread. I often hear that one must have good credit (as it was stated in a previous post) to have and maintain a security clearance. The only way to get good credit is to go into debt (borrow money). They only way to maintain a good credit score or credit history is to go into debt often. If you stop going into debt you credit score eventually fades away to the point that you will not have a credit score at all. Realistically, that isn't a bad thing. Unfortunately with today's society with lending and finances those with better credit scores are bowed down to by the lenders, where someone with no credit score be kicked to the curb even though they may make a 6 digit income with no debt.

Sorry for the rant, I'm only trying to get an understanding of what is required for security clearances as a curiosity if for no other reason. I understand everyone's situation is different.

[IamOld]

I wish you all the best of good luck - although I'm so burned off of credit that if/when I'm through this (Ch 13) I think I'll have a credit card with People's bank that CANNOT turn into a credit card but remains secured forever...I don't trust myself, and I don't EVER want to be in this situation again.

Thank you for sharing and again, all the very best to you!!!!!!

I agree that I may be able to mitigate my bankruptcy to keep my clearance with no credit at all. But last year, I had a SPIN investigation concerning my past activities and financial standing. During the investigation, the inspector (or should I say the interviewer) stated that the Office of Personnel Management (OPM), the people who grant the clearance after the investigation, prefers to see a positive credit history showing that the person can handle credit responsibly. I did not get the impression that no credit history since a BK would be good. In a way you are just as vulnerable to accepting money for favors, since you have no purchasing power beyond your own pay.

It can be argued both ways. But in my opinion, and only my opinion, I would prefer to never have to go through special investigations again. I would rather hedge my bets and show a small amount of credit history to end any doubts that I can handle credit, and that my credit usage is low.

And something I am not too proud of is that I declared a BK in 1991, after another huge downturn in the defense industry. It was under the old laws. It was a time when you went in front of a judge while he went over your filing. It was not a widely done thing. It was humiliating. And the investigation by the government had me attached to a lie detector. It was extremely stressful, and I worried for several months if my permanent clearance would be granted. My job did depend on attaining and keeping a clearance. No clearance, no job.

It took me until 1996 to be able to finance a car. I drove a 1984 Escort that blew smoke until I could afford a cheap clean car. I was able to get a FHA loan in 1999. We bought an underpriced house for $177k that is now worth $272k. We did buy siding for the house which required borrowing, and lost a lot of money in the real estate bubble on a rental condo we bought. We had some crazy idea that real estate appreciates. And we made some foolish buys on cars.

Not to sound old, but we just can't afford to lose our jobs and certainly to file a BK again. After the first BK, we build our savings up, lived on cash, and bought only what we could afford. And even when we used credit, the load was not more than we could afford with our pay.

But things happen. Sometimes bad things. And losing your job is one of those things. I have no data on this, and this is just my opinion, but I think the rash of bankruptcies filed in the last few years have been to job loss, medical bills, and the burst in the housing bubble.

I think that many Americans were drawn into buying houses that they could not afford. By real estate agents, mortgage brokers, and appraisers. I found that a few years ago, appraisers would value houses on what the buyer wanted to spend, not on the true value of the house. Sub-prime loans - interest only, escalating ARMs, negative equity loans were offered to people just to get them into the house. And there is no doubt that people love to move into a new home. I always use this example - when people go to a car dealer to buy a new vehicle, see the vehicle, ride in it, and get approved to buy it, they almost never read the whole contract. When these same people go to buy a home, and see that they can get a very nice home, they never read all of the documentation. They are too excited about getting into the home.

I do put some of the blame of overspending on a home on the mortgage and real estate industry. I also put blame on the same group for pushing second mortgages. Years ago, people rarely carried seconds. But with mortgage companies willing to give out loans up to 125% of the value of the home, people have been tempted that their houses became credit cards.

Credit is a tempting thing. People want to live well, and they make mistakes. My grandparents who suffered through the depression and lost their home always warned me of credit. The also told me never to smoke, drink, or have relations with the opposite sex until I graduated college. I was 18 and felt I knew more than two old cronies. They were right about credit. I will argue the other subjects.

I'm sorry everyone is getting so riled up about this subject. I was just posting my opinion. Everyone has one. I'm going to follow my plan. I know that the credit is a risk, but I want to show that I can responsibly handle it.

[tada]

I agree that I may be able to mitigate my bankruptcy to keep my clearance with no credit at all. But last year, I had a SPIN investigation concerning my past activities and financial standing. During the investigation, the inspector (or should I say the interviewer) stated that the Office of Personnel Management (OPM), the people who grant the clearance after the investigation, prefers to see a positive credit history showing that the person can handle credit responsibly. I did not get the impression that no credit history since a BK would be good. In a way you are just as vulnerable to accepting money for favors, since you have no purchasing power beyond your own pay.

It can be argued both ways. But in my opinion, and only my opinion, I would prefer to never have to go through special investigations again. I would rather hedge my bets and show a small amount of credit history to end any doubts that I can handle credit, and that my credit usage is low.

And something I am not too proud of is that I declared a BK in 1991, after another huge downturn in the defense industry. It was under the old laws. It was a time when you went in front of a judge while he went over your filing. It was not a widely done thing. It was humiliating. And the investigation by the government had me attached to a lie detector. It was extremely stressful, and I worried for several months if my permanent clearance would be granted. My job did depend on attaining and keeping a clearance. No clearance, no job.

It took me until 1996 to be able to finance a car. I drove a 1984 Escort that blew smoke until I could afford a cheap clean car. I was able to get a FHA loan in 1999. We bought an underpriced house for $177k that is now worth $272k. We did buy siding for the house which required borrowing, and lost a lot of money in the real estate bubble on a rental condo we bought. We had some crazy idea that real estate appreciates. And we made some foolish buys on cars.

Not to sound old, but we just can't afford to lose our jobs and certainly to file a BK again. After the first BK, we build our savings up, lived on cash, and bought only what we could afford. And even when we used credit, the load was not more than we could afford with our pay.

But things happen. Sometimes bad things. And losing your job is one of those things. I have no data on this, and this is just my opinion, but I think the rash of bankruptcies filed in the last few years have been to job loss, medical bills, and the burst in the housing bubble.

I think that many Americans were drawn into buying houses that they could not afford. By real estate agents, mortgage brokers, and appraisers. I found that a few years ago, appraisers would value houses on what the buyer wanted to spend, not on the true value of the house. Sub-prime loans - interest only, escalating ARMs, negative equity loans were offered to people just to get them into the house. And there is no doubt that people love to move into a new home. I always use this example - when people go to a car dealer to buy a new vehicle, see the vehicle, ride in it, and get approved to buy it, they almost never read the whole contract. When these same people go to buy a home, and see that they can get a very nice home, they never read all of the documentation. They are too excited about getting into the home.

I do put some of the blame of overspending on a home on the mortgage and real estate industry. I also put blame on the same group for pushing second mortgages. Years ago, people rarely carried seconds. But with mortgage companies willing to give out loans up to 125% of the value of the home, people have been tempted that their houses became credit cards.

Credit is a tempting thing. People want to live well, and they make mistakes. My grandparents who suffered through the depression and lost their home always warned me of credit. The also told me never to smoke, drink, or have relations with the opposite sex until I graduated college. I was 18 and felt I knew more than two old cronies. They were right about credit. I will argue the other subjects.

I'm sorry everyone is getting so riled up about this subject. I was just posting my opinion. Everyone has one. I'm going to follow my plan. I know that the credit is a risk, but I want to show that I can responsibly handle it.

[Amy26]

If you "must" have credit (more accurately debt)to obtain and keep a security clearance how do those I know with NO credit (debt) have one?

I am sorry, but I don't recall saying anything about the need to "must have debt" for my clearance. I said show a positive history. Actually, the presense of debt is usually a bad thing for security clearances because they believe you might be easily manipulated if offered money. And you are completely correct about people with no credit having no problems at all with their credit. I happen to work in the office of the CFO and have a bankruptcy on my report that happened when I was trying to obtain the clearance, so my finances were very closely scruitinized. Does everyone have the same experiences with clearances? No.

[Amy26]

Perhaps its because I work for the CFO's office of the agency and I deal with people's social security numbers and their financial records? No I didn't lose my job, but I could have ... and I was told that I had to show a positive history going forward by my investigators from OPM... I'm not making that up.

Yes yes... we all miss your points... ours apparently go in one ear and out the other as well. And also, time does not solve everything. As I pointed out in another thread people who totally ignore their credit after BK and expect that time will heal everything wake up 2 years later when they wanna buy a house or something and say wow, why are my scores still in the 500's. I just saw a post exactly like this on another forum a few weeks ago. Time is a great thing to heal a lot of things but its not the sole means to an end. So, I do not agree with your analogy. It could happen... yes...but its not the norm.

Yes, you don't "have" to do anything. Everyone is free to do as they wish... Also, it is not your job to change people's mind sets. I dunno why everyone always misses when I say these things in my posts. You are not here to mindwash, brainwash, change minds, alter reality or "judge" anyone. If you don't care about credit then more power to you... but other people do. And that's perfectly fine... I can live with alternate viewpoints on the subject without trying to alter people's mindsets ... why can't you?

All you can do, as I have said 5,000 times, is present your opinions, give advice, and share personal experiences... people will believe how they want and will either take your advice or not.

[HHM]

I didn't use any credit over the last 5 years - initially, because I was forced to do so but I can tell you it doesn't take too long to get used to live on a cash-only basis. You are right about that one.

However, I can't predict the future. Maybe I'll need a new cellphone-contract or want to switch my car-insurance. Heck, these days you might even need good credit to open a simple checking-account.
What I'm doing right now has nothing to do with "using" credit. Instead of paying with my debit-card, I'm charging it on my CC and transfer the money back on to it. Since I'm carrying a $0 balance at the end of the month, I'm not even paying interest.

Your point would be valid if my savings would be eaten up by what I'm doing every month - but that's not true. The cost of rebuilding credit in my case is at about $10/month. That's nothing.
Rebuilding credit doesn't mean you can't or shouldn't set aside any savings. It's not "either/or", its "and". My secured loan does just that: It establishes credit AND builds a cash-reserve. So what's wrong with that?

I'm aware that time is the most important factor in rebuilding credit - I'm just using this time wisely.

You're right about the middle class - as long as it still exists.

But the thing is, "active rebuilding" is largely a myth. You give me 2 people out of BK 7. Both clean up their credit reports afterward, person 1 takes out a few CC's to "rebuild", the other does nothing else and just let's it sit. In 2-3 years time, the credit scores of those 2 persons will be nearly the same. Not identical, but both will be back to PRIME level lending rates.

However, again, I am not saying "don't" do it, but what I am saying is that you don't have too. Also, I am trying to re-orient mindset on whether you should actually care about credit.

[DebtHater]

Oh and for the record... as tada mentioned as well... I have a top secret clearance... and yes HHM, my credit does affect my employment it is not as you say "poppy cock". I had to go through a lot of scrutiny and explaining about my credit and my bankruptcy and show a new positive history. They are also going to scruitinize me again when I am reevaluated when my clearance is up for renewal. If they did not believe that I was capable of being financially responsible and handling my debts and my credit going forward (and previously) then I could have lost my clearance and my job.

If you "must" have credit (more accurately debt)to obtain and keep a security clearance how do those I know with NO credit (debt) have one?

I personally know three people who do not have credit scores because they don't have credit. One works for a navel contractor on a vessel that went to work right from college and is second in command of the ship. He doesn't have a house, never had a credit card. Lives well within his means because of a high income and low expense.

The other two work at West Point. One is a civilian and the other is military. They, as far as I know, had debt at one time but decided to pay it all off. Seven years later all entries fell off the credit bureaus. If they were to look up their credit score they wouldn't have one. They both had goals of being debt free by the time they retire and were able to do so early, now they live a cash only lifestyle (by choice). They decided that they'd rather hold on to any interest that would otherwise be paid to creditors.

[IBroke]

But you are fundamentally misunderstanding how credit works...After BK, MORE THAN ANYTHING ELSE, time heals your credit. And again, I will point out "mindset" the idea that credit is for "emergencies" the fundamental trap of credit. I am not talking about having to file BK, it is about ever being in the position to have to rely on credit. Let me put it this way, if over the next 10 years, you had $500,000 in the bank...do you think you would really need credit.

I know my position may seem extreme, but the reality is, only the middle class relies on credit (the poor can't get credit, and the rich don't need credit...the problem is, the middle class try to live like they are rich).

I didn't use any credit over the last 5 years - initially, because I was forced to do so but I can tell you it doesn't take too long to get used to live on a cash-only basis. You are right about that one.

However, I can't predict the future. Maybe I'll need a new cellphone-contract or want to switch my car-insurance. Heck, these days you might even need good credit to open a simple checking-account.
What I'm doing right now has nothing to do with "using" credit. Instead of paying with my debit-card, I'm charging it on my CC and transfer the money back on to it. Since I'm carrying a $0 balance at the end of the month, I'm not even paying interest.

Your point would be valid if my savings would be eaten up by what I'm doing every month - but that's not true. The cost of rebuilding credit in my case is at about $10/month. That's nothing.
Rebuilding credit doesn't mean you can't or shouldn't set aside any savings. It's not "either/or", its "and". My secured loan does just that: It establishes credit AND builds a cash-reserve. So what's wrong with that?

I'm aware that time is the most important factor in rebuilding credit - I'm just using this time wisely.

You're right about the middle class - as long as it still exists.