@Anonymalous wrote:
@brk1971 wrote:Even pretending (and it takes a lot of effort to pretend) that purchasing with cash is something viable for the masses and that lending should be avoided at all costs... Dave's stated opinion on credit scoring misses several non-loan impacts of not knowing, establishing, and cultivating a healthy FICO score... among them:
Auto insurance - Even if you paid cash for your car, you need insurance, and not every state allows you to post your own bond with cash in lieu of insurance coverage... Bad FICO = higher rates.
Utilities (including cell phone) - Bad FICO = leaving a deposit on account at every utility / every time you move cellular providers, and being limited to only certain types of plans with many carriers.
Renter evaluation - Bad FICO = higher deposit or even rejection as a potential tenant.
There are many many industries that use FICO modeling as a decision making tool.
As someone who avoided credit for many years, most of those are manageable. Car insurance doesn't seem to have that big an impact. Not all utilities require a deposit, and when they do it's typically fairly small, and they usually give the deposit back in a year or so. Renting a place does limit your options, but it's typically the big companies that are a stickler about it, and I prefer dealing with small companies or individuals, anyway. Note in these situations there may be a difference between no credit (I was an empty file/unscorable) and bad credit.
The biggest pains tend to be rental cars and hotels. I've managed fleets of vehicles, but couldn't rent one on my own. And hotels can be a hassle because they often require a signficant security deposit and it's not something they're used to dealing with, though that's still manageable.
The most important reason for most people to cultivate a healthy FICO score is a mortgage. Nothing else comes close.
But, I don't want to deal with the hassles and inconveniences of having to jump through an extra hoop for stuff like this. I don't wish to have to pay an extra $30 or $40 per month for car insurance (due to no credit or bad credit). I've lived through trying to book a hotel with my debit card, where they suck up $500 - $1,000 as a hold--yeah, no thanks. As a reformed landlord, every single time and I mean every single time, I made an exception for someone with no credit, limited credit or poor credit, I got burned without exception.
I subscribe to finances over FICO 99.999% of the time AND I believe FICO to be extremely important for life in the Western World.
Starting Score: 469
@Anonymalous wrote:
@brk1971 wrote:Even pretending (and it takes a lot of effort to pretend) that purchasing with cash is something viable for the masses and that lending should be avoided at all costs... Dave's stated opinion on credit scoring misses several non-loan impacts of not knowing, establishing, and cultivating a healthy FICO score... among them:
Auto insurance - Even if you paid cash for your car, you need insurance, and not every state allows you to post your own bond with cash in lieu of insurance coverage... Bad FICO = higher rates.
Utilities (including cell phone) - Bad FICO = leaving a deposit on account at every utility / every time you move cellular providers, and being limited to only certain types of plans with many carriers.
Renter evaluation - Bad FICO = higher deposit or even rejection as a potential tenant.
There are many many industries that use FICO modeling as a decision making tool.
As someone who avoided credit for many years, most of those are manageable. Car insurance doesn't seem to have that big an impact. Not all utilities require a deposit, and when they do it's typically fairly small, and they usually give the deposit back in a year or so. Renting a place does limit your options, but it's typically the big companies that are a stickler about it, and I prefer dealing with small companies or individuals, anyway. Note in these situations there may be a difference between no credit (I was an empty file/unscorable) and bad credit.
The biggest pains tend to be rental cars and hotels. I've managed fleets of vehicles, but couldn't rent one on my own. And hotels can be a hassle because they often require a signficant security deposit and it's not something they're used to dealing with, though that's still manageable.
The most important reason for most people to cultivate a healthy FICO score is a mortgage. Nothing else comes close.
Having no credit can also keep you from getting certain jobs. There is no logical reason for someone to avoid credit. Avoid bad debt sure. 1000%. However, credit is a tool that everyone should employ to their benefit.
@increasingmyfico wrote:Having no credit can also keep you from getting certain jobs. There is no logical reason for someone to avoid credit. Avoid bad debt sure. 1000%. However, credit is a tool that everyone should employ to their benefit.
Agreed! Absolutely.
I grew up in a household headed by a grandmother who'd lost everything in the Depression; she and my grandfather had been wealthy, then basically had to start over. After he died, she took their existing wealth and turned it into a LOT more, buying up rental properties in the Pasadena area--residential and business--and paying cash for all of them. I remember going with her from property to property, how she'd look around, make sure projects were being done correctly and the property was being kept up--and collecting rent! Kind of like Fred and Ethel in "I Love Lucy." 
Their experience in the Depression formed various opinions/beliefs, one of which was "cash only"--as in "never be in debt to anyone for any reason." My mother was the same way. (My parents divorced when I was little.) I grew up in a credit-free, debt-free household, where everything from new cars to office buildings were paid for by writing a check. My mother was in her late 60s when she *finally* agreed to get ONE credit card.
But those days are long gone. There aren't too many people left who lived through the Depression. That era of thinking that debt is wicked and should be avoided like the plague is gone. I'm all for being debt-free, and try to live that way, but I simply have never had the resources to pay cash for things like 7-figure houses! I've bought new cars with cash, though, and that was fun--I remember writing my first-ever 5-figure check for a new Toyota RAV4 and feeling so proud. 
I think people today who equate credit with evil just don't get it. Using credit wisely, and not letting it take over your life, is a good thing and can open many doors that are shut if you don't have credit.
@SoCalGardener wrote:
@increasingmyfico wrote:Having no credit can also keep you from getting certain jobs. There is no logical reason for someone to avoid credit. Avoid bad debt sure. 1000%. However, credit is a tool that everyone should employ to their benefit.
Agreed! Absolutely.
I grew up in a household headed by a grandmother who'd lost everything in the Depression; she and my grandfather had been wealthy, then basically had to start over. After he died, she took their existing wealth and turned it into a LOT more, buying up rental properties in the Pasadena area--residential and business--and paying cash for all of them. I remember going with her from property to property, how she'd look around, make sure projects were being done correctly and the property was being kept up--and collecting rent! Kind of like Fred and Ethel in "I Love Lucy."
Their experience in the Depression formed various opinions/beliefs, one of which was "cash only"--as in "never be in debt to anyone for any reason." My mother was the same way. (My parents divorced when I was little.) I grew up in a credit-free, debt-free household, where everything from new cars to office buildings were paid for by writing a check. My mother was in her late 60s when she *finally* agreed to get ONE credit card.
But those days are long gone. There aren't too many people left who lived through the Depression. That era of thinking that debt is wicked and should be avoided like the plague is gone. I'm all for being debt-free, and try to live that way, but I simply have never had the resources to pay cash for things like 7-figure houses! I've bought new cars with cash, though, and that was fun--I remember writing my first-ever 5-figure check for a new Toyota RAV4 and feeling so proud.
I wish that I was as smart as SoCalGardener
Thanks
Mark
@Anonymous wrote:
@SoCalGardener wrote:
@increasingmyfico wrote:Having no credit can also keep you from getting certain jobs. There is no logical reason for someone to avoid credit. Avoid bad debt sure. 1000%. However, credit is a tool that everyone should employ to their benefit.
Agreed! Absolutely.
I grew up in a household headed by a grandmother who'd lost everything in the Depression; she and my grandfather had been wealthy, then basically had to start over. After he died, she took their existing wealth and turned it into a LOT more, buying up rental properties in the Pasadena area--residential and business--and paying cash for all of them. I remember going with her from property to property, how she'd look around, make sure projects were being done correctly and the property was being kept up--and collecting rent! Kind of like Fred and Ethel in "I Love Lucy."
Their experience in the Depression formed various opinions/beliefs, one of which was "cash only"--as in "never be in debt to anyone for any reason." My mother was the same way. (My parents divorced when I was little.) I grew up in a credit-free, debt-free household, where everything from new cars to office buildings were paid for by writing a check. My mother was in her late 60s when she *finally* agreed to get ONE credit card.
But those days are long gone. There aren't too many people left who lived through the Depression. That era of thinking that debt is wicked and should be avoided like the plague is gone. I'm all for being debt-free, and try to live that way, but I simply have never had the resources to pay cash for things like 7-figure houses! I've bought new cars with cash, though, and that was fun--I remember writing my first-ever 5-figure check for a new Toyota RAV4 and feeling so proud.
I wish that I was as smart as SoCalGardener
Well, when it comes to acquiring credit cards, you're the king! I'm a mere peoen compared to you--so it had to take some smarts to get where you are!
@SoCalGardener wrote:Their experience in the Depression formed various opinions/beliefs, one of which was "cash only"--as in "never be in debt to anyone for any reason." My mother was the same way. (My parents divorced when I was little.) I grew up in a credit-free, debt-free household, where everything from new cars to office buildings were paid for by writing a check. My mother was in her late 60s when she *finally* agreed to get ONE credit card.
But those days are long gone. There aren't too many people left who lived through the Depression. That era of thinking that debt is wicked and should be avoided like the plague is gone. I'm all for being debt-free, and try to live that way, but I simply have never had the resources to pay cash for things like 7-figure houses! I've bought new cars with cash, though, and that was fun--I remember writing my first-ever 5-figure check for a new Toyota RAV4 and feeling so proud.
I have stories about relatives who went through something similar in the Great Depression. But while that may be in the distant past, 2008 is not. A new generation of people had very bad experiences in that housing market because they took on more debt than they could service after things started to go south.
I think debt is useful, but I think it's important to strike a balance. If you're leveraged and there's a disruption of some kind, you can lose everything. But it's also hard to buy something like a house without a mortgage. The middle ground is to have a healthy concern about taking on debt, to the extent that you don't overextend yourself. But not so much worry that you avoid it entirely, or lose sleep. It's a tool, and like all tools, it can be dangerous if used improperly.
@Anonymalous wrote:
@Junejer wrote:But, I don't want to deal with the hassles and inconveniences of having to jump through an extra hoop for stuff like this. I don't wish to have to pay an extra $30 or $40 per month for car insurance (due to no credit or bad credit). I've lived through trying to book a hotel with my debit card, where they suck up $500 - $1,000 as a hold--yeah, no thanks. As a reformed landlord, every single time and I mean every single time, I made an exception for someone with no credit, limited credit or poor credit, I got burned without exception.
I subscribe to finances over FICO 99.999% of the time AND I believe FICO to be extremely important for life in the Western World.
Then don't jump through those hoops. But it's a choice and a matter of convenience, not a necessity. They're hardly unmanageable.
And I've never burned a landlord, despite having no credit at all until recently. You seem to be lumping together a lot of completely unrelated things. A grown adult who has a background in contracting, accounts receivable, running procurement operations, putting together budgets, and all kinds of other financial experience, yet lacks a credit score, isn't the same as someone who's failed to handle their own personal debt responsibly, or someone who has never had any significant financial responsibilities. They're essentially polar opposites, even if FICO treats them similarly.
The reason they're treated similarly is because a FICO score is not a holistic assessment of all the factors that go into making someone good with money. A person can live within their means, manage their finances responsibility, keep sufficient money to deal with short term problems, pay every utility bill and make every rent payment on time, and do this for decades, without the credit bureaus knowing enough about them to even associate a name with a social security number. FICO scores aren't based on any of that data. Instead, they're based on a very specific and limited set of data points.
Because FICO scores aren't an assessment of someone's entire life, and instead are based on very specific data points, it's more useful to see them as a way of proving yourself in a formal way. You may have all the skills, but have you shown it in a way that people who don't know you well and may just be skimming a resume or applying an algorithm will recognize? No? Then work on your scores. It's not that dissimilar from someone who's been working with computers for years getting an A+ or AWS certification, even though they already know all that stuff cold. It's a credential, a formal and widely recognized way of saying that yes, I have those skills. A FICO score is the same.
Which is one of the reasons why this board is useful. Just as it helps to know what areas are going to be covered by a test, it's very useful to know what goes into the FICO score. It's not always obvious, and sometimes people who think they are being responsible with their finances can hurt themselves by doing something like closing an old card they rarely use, because FICO's actuarial assessments and scoring quirks often run counter to popular common sense.
Truth. Very few things in life are necessities. I never said that I need credit or debt. In fact, I tend to feel quite the opposite. It wasn't until recently that I have started to dive deeper in the CC game. We routinely pay cash for our "new to us" cars. We typically buy a year or two old and pay cash.
Not at all. I was also reacting to a PP who spoke to those issues and was agreeing with them wholeheartedly.
@Anonymalous wrote:
@Junejer wrote:
Truth. Very few things in life are necessities. I never said that I need credit or debt. In fact, I tend to feel quite the opposite. It wasn't until recently that I have started to dive deeper in the CC game. We routinely pay cash for our "new to us" cars. We typically buy a year or two old and pay cash.
That's a good approach. Cars lose too much value just driving them off the lot, so buying a car that's a year or two old is a sweet spot. My family sometimes buys new cars anyway, but they typically keep them indefinitely, until repairs start costing too much compared to the remaining value. It's the people who lease new cars every year or two who absorb a lot of cost for a status symbol.
Had a good time at the salesman's expense a few years ago when we bought DW's Lexus. One year old with 14K miles and saved about $25K off the original sticker. Salesman asked if we had financing lined up. I played dumb like I didn't understand what he was talking about. I asked what he meant by that a few times. After DW finally pinched my leg, I asked if he would accept our personal check.