Credit Cards...

[tyrius.]

Just My 2cents

Not sure who you're quoting, but the APR on an FHA loan is much higher than a conventional loan.  On the below site it's 0.75%.  This rate is due to paying higher fees.  That's a LOT of money over the life of a mortgage.

http://www.totalmortgage.com/current-mortgage-rates.asp

You're advice is sound financial advice, but has nothing to do with getting a credit card and building a good credit score.  For every person who is living paycheck to paycheck with a high score there is another that has a high credit score, no debt, and plenty of savings. 

[BadKarma42]

Your two cents or Dave Ramsey's?

Seems like there is a lot of advice and differing opinions so you have a lot to think about.

I'll simply add this:  If you use a card you must be disciplined and mature.  I was not and got into trouble.  It took years to fix.

I quote Speedbead because I personally think Dave Ramsey has a lot of good things to say.  I would suggest you read his books and check out his TV show on FBN before you make your decision.

Even if you chose to go the credit card route, I would still suggest you read Ramsey's books.

[Lund Explorer]

Your two cents or Dave Ramsey's?

Seems like there is a lot of advice and differing opinions so you have a lot to think about.

I'll simply add this: If you use a card you must be disciplined and mature. I was not and got into trouble. It took years to fix.

I quote Speedbead because I personally think Dave Ramsey has a lot of good things to say. I would suggest you read his books and check out his TV show on FBN before you make your decision.

Even if you chose to go the credit card route, I would still suggest you read Ramsey's books.[/quote]

But be prepared to write a check, because the last I knew, he didn't accept c/card orders!

[preach4bass]

Your two cents or Dave Ramsey's?

Seems like there is a lot of advice and differing opinions so you have a lot to think about.

I'll simply add this: If you use a card you must be disciplined and mature. I was not and got into trouble. It took years to fix.

I quote Speedbead because I personally think Dave Ramsey has a lot of good things to say. I would suggest you read his books and check out his TV show on FBN before you make your decision.

Even if you chose to go the credit card route, I would still suggest you read Ramsey's books.[/quote]

But be prepared to write a check, because the last I knew, he didn't accept c/card orders!

That's right.  Dave practices what he preaches.  He will accept a debit card, but no credit cards.

My dad has followed Dave's principles for years, and thankfully passed what he learned on to me.  I've never had a student loan, car loan, house loan, or a personal loan of any kind.  I graduated from a four year university, put my wife through grad school, drive a decent (used) truck, and have roof over my head and food on my table.  We're not rich.  We don't have 6-digit incomes (they're not even 6-digits combined ;D).  But, we have financial peace and we've got it without debt!  Like fishinbuds, we didn't buy into the "you've got to have a credit card so you can get into more debt later" philosophy.  Hookem, I'm so thankful that someone taught me Dave's financial principles (which are really just Biblical principles) that I'd love to send you one of his books for free.  PM me your address and I'll get it in the mail!

[Hookemdown.]

Guys...not going into debt FOR ME is unavoidable.  Grad school alone will cost me anywhere from 100k to 250k. (Dental school)

But thanks for the help! 

I applied for a Citi card.  I talked to a friend of mine (VP at a local bank) and it's what he recommended.  The plan is to buy my gas during the school year on credit (around $200 a month) and pay it off each month in full through my checking/debit account.

Thanks for the advice guys!

[SirSnookalot]

Building wealth and using credit wisely can go hand in hand, having credit be available does not mean it has to be used.  The pros that have been mentioned already far outweigh the cons.  I've been retired nearly 10 years and could not have done it without using credit to build my businesses which allowed me to build wealth.

[Nice_Bass]

Just My 2cents

Not sure who you're quoting, but the APR on an FHA loan is much higher than a conventional loan. On the below site it's 0.75%. This rate is due to paying higher fees. That's a LOT of money over the life of a mortgage.

http://www.totalmortgage.com/current-mortgage-rates.asp

You're advice is sound financial advice, but has nothing to do with getting a credit card and building a good credit score. For every person who is living paycheck to paycheck with a high score there is another that has a high credit score, no debt, and plenty of savings.

The higher APR is due to the upfront mortgage insurance premium.  Rate on an FHA runs about the same.  The upfront MIP essentially allows a lower monthly mortgage insurance paymert. 

600 fico can qualify, but really there are not a lot out there that will do it under 620, which will also have some large hits to your rate.  Also, manual underwrites are a thing of the past, and not traditional credit qualifying is gone.

[Catt]

Don't do it...it's a trick 

Every one regardless of age should attend Dave Ramsey's Financial Peace University. At the private school my kids attended it is a requirement for seniors to graduate.

Wisest decision you'll ever make period!

[Hookemdown.]

Another question:

I was informed that if my parents (who have excellent credit) add me as an "authorized user" on their current line of credit it will boost my credit score.  Is there any truth to this?

[SirSnookalot]

I can't give a definitive answer but I would say no.  Last year my wife and I were at the airport and Spirit airlines had a kiosk signing people up for their credit card offering a free flight, so we each applied.  Both of us have fico scores over 800, but just about every credit card is in my name with my wife being the secondary user.  I was accepted but my wife was rejected and the reason given was little or no established credit in her name only.  Didn't settle to well with me as we are an established "partnership" with a longterm excellent standing.  Knowing that I may not live forever I had my wife apply for other credit cards and glad to say she was accepted.  I make sure she uses each of them on a regular basis.  One of the cards was a Southwest Airlines Visa, she as primary me as secondary and we use this card most of the time now, within 6 months we have been awarded 1 free flight ticket already and close to getting another.

If I'm not mistaken credit was tighter last year.

[Catt]

credit score???

Oh you mean debt score! The only way you raise it to go in debt more

Credit cards & credit score, biggest scam played on the American people.

How much in interest do y'all pay for a credit score?

Equity: the money value of a property or of an interest in a property in excess of claims or liens against it

Every thing I own is paid for , every thing I own is mine, all income into my household less tax is 100% mine!

That's how you build wealth 

[Sam]

Hookemdown,

Try the Bass Pro Shop VISA and get some BPS points if you use it.

I keep my credit cards in a box at home and do not take any with me unless I plan to use it during a vacation or shopping trip. Please consider doing the same and do not take the card with you unless you plan to use it.

Pay off the balance every month, or do like me after you graduate and are making the big bucks: put an amount on the card if you are going on a trip to help offset the expected charges.

We went to the Kutztown Festival last month and I put $500 on the card before we left home. It was nice to know that the hotel room, gas, resturants and what my wife bought was preapid, although I must admit my wife overspent so I did have a balance at the end of the month.

In addition, when you use a credit card to rent an automobile use one that gives you a discount and other special coverages, like insurance.

AND USE THAT CARD ONLY FOR THE CAR RENTAL AND HAVE A SECOND CREDIT CARD FOR ALL OTHER EXPENSES.

If you have an accident with the rented vehicle the rental company will FREEZE your card and make it worthless until you work out the repair details.

This has happened to two of my clients while on vacation.

I use my USAA Platinum card for car rentals and carry the BPS card for all other purchases on the trip.

And if you want to stop using a card, don't cancel it. That goes against your credit score. Just put it away or cut it up and let it die a natural death.

Just a word to the wise. 

[Catt]

Join a Credit Union, mine offers

Minimum opening deposit of $25

Thereafter, no minimum balance

Minimum average daily balance of $500 to earn monthly dividends

Point of purchase and ATM access Visa ATM/Check Card

Direct Deposit from most employers and government checks

Direct deposit of social security and most retirement checks

Dividends compound monthly

No monthly service charge

Overdraft Protection available free of transaction fees

Transfer funds from your other accounts or MoneyMaster Line of Credit with Call 24 or the_Max! eBranch

Access through these ATM networks: Cirrus*, Maestro*, Star*, CO-OP*, Norteller* (proprietary ATMs) Withdraw up to $400 per day at ATMs and make deposits at Norteller, many CO-OP ATMs and at CU Service Center branch and kiosk locations

With my debit card I can do anything your credit card can do & most importantly I pay no interest

[Root beer]

Nothing wrong with having credit card on standby long as you got a plan to pay it off. I'm in my third year of college and I had to take out a small loan for my apartment. Up to this point I have been debt free.

Only credit card I have is I'm co-owned with my mom. I believed we are both obligated to make any payments on it, therefore, I believed it does affect both of our scores. I'll look at the contract again soon. My budget is beautiful. 

Catt, Dave Ramsey don't got nothing on me.

[SirSnookalot]

Whether it's Dave Ramsey, Suzy Ormond or any other Guru they offer pretty much common sense, but give valuable information on changes in the investment & credit world that the average layman may not know or have the resources to find out.

In the case at hand, dental school costs then getting established in business requires a good deal of money.  Unless you have some pretty rich parents to foot the bill this endeavor requires credit and that starts with a credit card for a young person and build from there.  Some of this debt free advice may work well for people that have jobs with pretty much fixed incomes to live with in their means, but for people seeking to be in business credit is essential. 

As mentioned many times already, credit cards are interest free money if paid in full on time, and there are some good reward programs as well.  Even some cards with an annual fee are ok, like Spirit Airlines offering $9.00 flights if you have one of their cards, which I have used and was worth the fee.

[Catt]

Living at the alter of the all mighty Fico Score is not building wealth it is building debt!

Example you own a $1,000,000 house but you owe $850,000 to the bank and I own a $500,000 house that is paid off.

Who has a higher Fico Score?

Who has more equity?

Who has more wealth?

The only way to keep a high Fico Score is to stay in debt, the only way to accumulate wealth is to eliminate debt.

Do you want a Fico Score or Financial Independence

[Hookemdown.]

Catt, I understand what you're saying...but credit is ESSENTIAL to me.  Dental school = $200,000.  Starting up a practice = $400,000+.  I am from rural Arkansas.  My parents are middle class.  We don't have that kind of change in our dreams.  If you know of any way for me to pay for that stuff without credit, by all means tell me.

[fishfordollars]

Item          Balance

Veh #1           0

Veh #2           0

Veh #3           0

Boat               0

J. C. Penny      0

Dillards            0

Macys              0

Shell Card       0

Mastercard      0

Visa                0

Home (BOA) 82,212

PAYING 500.00 ADITIONAL EACH MONTH ON PRINCIPAL.

Pay any outstanding balance before the due date each month.

FICA score   805.

That's how you do it.

[tyrius.]

The higher APR is due to the upfront mortgage insurance premium. Rate on an FHA runs about the same. The upfront MIP essentially allows a lower monthly mortgage insurance paymert.

Yep, that's why I used APR instead of the actual published rate.  The published rate is meaningless because you don't know how many fees are required to get that rate.  The true comparison is done on APR because those fees are added to the principle balance and then amortized over the life of the mortgage.

[tyrius.]

Oh you mean debt score! The only way you raise it to go in debt more

False

How much in interest do y'all pay for a credit score?

Could easily be ZERO dollars.

Every thing I own is paid for , every thing I own is mine, all income into my household less tax is 100% mine!

That's how you build wealth

Not necessarily.  You build wealth by making smart financial decisions.  You can get a mortgage right now under 5%.  That mortage is tax deductible so you'll likely be paying an effective rate of around 4%.  So, if you have an investment that pays higher than 4% interest you are wasting money by paying off you mortgage early. 

Ramsey, et al's advice is not always good advice.  Debt is not the devil.  If used as it should be it allows one to caplitalize on opportunities that otherwise would not be available to them.  Such is the case for hookemdown.  Without access to debt he wouldn't be able to become a dentist.  Simple as that.  He knows this and is taking the appropriate steps to ensure access to that debt and make the costs as small as possible.  Advice to ignore his credit score is basically advice to ignore his choice of career.  Is that really what you want to do?

[Catt]

Ok Hookemdown let's lay it out & you decide

Scenario

Your on the way home from college, your car breaks down and it's going to cost $500 in repairs. That's easy you just put on you Credit Card problem solved!

Same scenario except instead of a credit card you have a Visa Debit Card you purchased at WalMart for $3.00 and put $500 on it in case of emergence.

Now this emergence occurs 1 week before the end of the month which means you now have the burden of coming up with a lump sum payment for the Credit Card or be penalized with interest.

But with the Debit Card you have the peace of mind in knowing I can build my emergence fund back up at my leisure.

Choice is yours

[tyrius.]

Catt,

This decision isn't even about these scenarios,  they're completely irrelevent to the situation. 

Hookemdown HAS to get a loan in the future in order to pay for his education.  Knowing this, he is best served by getting a CREDIT card to build his credit history so that he is better able to be approved for that loan and get a better rate (because he has a better credit score).  No other scenario matters.  By getting and using a credit card he is putting himself in the best position to get the loan that he will need.  A debit card is worthless in this situation.

[Catt]

tyrius, please explain how having my house paid off is a waste of money?

Equity: the money value of a property or of an interest in a property in excess of claims or liens against it

The equity in my house is 100% so tell me again how that's bad?

Hookemdown, if you start now and baby step your way up you could easily obtain your goal without being so far in debt you'll never get out.

I could easily buy a new Cadillac Escalade on credit but I choose to drive a paid off 2007 Ford Taurus with only 40K miles on it.

I could easily buy a new Skeeter FX 21 on credit but I choose to fish out of a paid off 1996 Stratos.

[Root beer]

tyrius, please explain how having my house paid off is a waste of money?

Equity: the money value of a property or of an interest in a property in excess of claims or liens against it

The equity in my house is 100% so tell me again how that's bad?

Hookemdown, if you start now and baby step your way up you could easily obtain your goal without being so far in debt you'll never get out.

I could easily buy a new Cadillac Escalade on credit but I choose to drive a paid off 2007 Ford Taurus with only 40K miles on it.

I could easily buy a new Skeeter FX 21 on credit but I choose to fish out of a paid off 1996 Stratos.

I didn't want to get into this, but you are saying irrelevant thing and not getting the point of this post...

Age difference...Hookem is probably 19-20 years old. You are probably 60-70. He doesn't have a million dollars laying around to pay for graduate school, a house, etc. You probably do, congratulation. Nobody cares. I'm betting you took out a mortgage years ago or some type of loan and found a way pay it off...

My dad used a credit card as an emergency when my truck needed repair, he used the credit card because his debit card was being used to pay bills that week and house payment. His next paycheck he paid off the credit card bill. There nothing wrong with credit along as you know you got make it a 1st priority to pay it off. If you used the credit card, you got to realized you cannot go out and spend money loosely on wanted goods. That how people build debts. I have a credit card in my mother's name, and I'm a college student and have yet to pay any interest on it...

I got a subsidized loan from the government to pay for my apartment, but the loan is small which is what I wanted. By the time I graduate with a bachelor my student loan be under 8 grands.Plus graduate school, but I could pay this off real fast if I don't buy a car or a boat after college immediately. I already have a saving account to pay off principle of my loan. That account is solely for paying back the government after my education is completed.

Hookem, is not going graduate from college and buy a $1,000,000 house and pay it off on the spot. I'm sure when he your age his house, boat, car, and loan all be paid for.....And everything after tax will be 100% his....

[tyrius.]

tyrius, please explain how having my house paid off is a waste of money?

Equity: the money value of a property or of an interest in a property in excess of claims or liens against it

The equity in my house is 100% so tell me again how that's bad?

I never said it was bad.  I simply said that it may not be the best financial decision.  As I said in my previous post paying off debt or not utilizing it is not always the best financial decision.  One should compare real interest costs vs interest income available elsewhere along with the need to have access to that money prior to paying off any debt.  Once, I've paid down debt the cash that I used to do so is no longer available to me if I need it.

High interest, non deductible debt is always bad (credit card debt).  Low interest, tax deductible debt is not.  For example, I have a little student loan debt that is at 3.75%.  The interest is also tax deductible.  So, it's probably really only costing me 3%.  On a 1 year CD I can still get almost 1.5% (a longer term CD would get me a higher rate).  That's taxable so it's really probably closer to 1.25%.  Now I have to decide if that 1.75% loss is worth paying off the loan balance early or since rates will likely go up (given that they can't go down much more) if it's worth continuing to pay the minimum amount each month.  To me, this is an easy decision.  I'd borrow MORE money under those terms if I could.