The depreciation of your investment has nothing to do with whether or not your debt is good or bad. The lender doesn't care if your house depreciates. Or if your car depreciates. What they care about is the circumstances in which you went into debt, and that you pay back your debt in a manner that demonstrates that you are a responsible and reliable debtor. It's perfectly normal to borrow money to buy a house or a car, and to pay them off promptly and reliably demonstrates that you are a responsible debtor. That bodes well on your credit rating and encourages lenders to lend to you in the future. That's good debt. I never said I do 2 x minimum payment on my credit cards. I think you're confusing my post with someone else's. I said I keep my credit cards in relatively small debt. There'll be anywhere from $500 to $2000 at any given time, but I pay them off quickly and never default on payments. I don't let them spiral out of control.
true. it is good debt in the eyes of the bank... but not good debt for your personal finances was refering to op with 2nd point
What you're trying to say is that it's not a wise investment (because it depreciates). But even that might not be true - it depends on the intent of your purchase. If you buy a '67 Mustang Shelby for $10,000 from a grandma who never drove it, well that's a very wise investment because you can turn around and sell it for a lot more. Going into debt for $10,000 to buy that car is not an unwise decision. But since most cars do not appreciate in value, let's talk about the norm... If you buy a 2005 Camry, it's not going to appreciate in value like that Mustang will. It will depreciate (like most cars). But, the depreciation is only significant if you intend to sell it again soon. If you intend to drive it until it completely falls apart, the depreciation is mostly irrelevant, and so, going into reasonable debt to purchase it is probably not an unwise decision. If, however, you purchase a Camry for $25,000 and turn around and sell it three years later for $15,000 it may have been a bad investment. Ask yourself, "Did I get $10,000 of value out of that car over the last 3 years?". If the answer was "yes" it was probably a good investment. If the answer is "no" then it was probably a bad investment. The car probably won't keep its monetary value, but it may have had personal value to you. If It was a truck that you used to haul a whole bunch of crap around for three years, or if it was a reliable source of transportation to your high-paying job, or if you're a realtor and you drive customers around all day looking at houses, etc.... well, then, you might have gotten $10,000 of value out of that car in three years.
As a young credit builder such as yourself, this is what I do: -Do NOT let your BALANCE go over 30% of your total credit limit. *for example, if your total credit limit is $1,000.00, then your balance should not go over $330.00. -Once you reach the 30% "maximum" balance, pay half of it right away. Then, pay the other half off in 2 months (half for the upcoming due date, and the remaining half for the next min. pay due date.) *for example, you buy a Nintendo Wii for $300.00 flat. You pay $150.00 right away on your credit card, leaving you a balance of $150. Then, when that pay period closes and asks for a minimum payment of say $15, then pay $75.00. Then when the next payment is due, pay off the remaining $75. Take it one balance at a time. the more you zero-out your balances, the better your chances of a better score. Don't pay off all your debts in full every month, use the above method I use. I used to pay off everything, not once did I get an increase in limit (usually a good indicator of where your credit score is heading). I thought I had good credit because I paid it off every month. I applied for another credit card 8 months later, and my limit was only $500. So, I started doing the method above, and my credit limit shot up $2,000. You get bigger increases as time passes, it starts to get ridiculous like $10,000. -DO NOT close your credit card accounts, if you don't want them, just don't use them. Especially, your first credit card. *your first credit card will represent the 'birth' of your credit history. The longer your history, the better your score. So as long as you pay responsibly. The most important thing is to know what you CAN and CAN'T afford. My rule of thumb, DON'T charge it to your credit card just because you don't have any cash to pay for it. Make sure you can pay for it in cash, then you could charge it to your card. Minimum purchases should be $100. or you could just use your card as a gas card. Otherwise, pay in cash.
Neither the wife nor I have credit cards. We cut ours up a few months back. Emergencies? We have Several Thousand in a Money Market account gaining 5% interests just for emergencies. We can pull it out, or transfer it to our checking account online at any time. Once we're out of debt completely (5K credit cards, 30K her Student Loans) we'll baloon that emergency fund up to about 15K. Your supposed to have 3-6 months of expenses saved up for emergencies. We don't need credit anymore..we already have a house, and we'll ONLY pay CASH in the future for cars. Save up..then buy. Just like people used to do..before the average American was in debt because they wanted to buy a bunch of stuff they don't need. If you want to buy a house..save up until you have 15% for the down payment (if you have NO debt, it won't take too long). Then find a bank that does manual underwriting for mortgages (i.e...does NOT use a FICA score). Many still do this. If you have a lot of debt and want to use someone like Consumer Credit Counseling...they are the Best. I'd rather not use a company like that, because We could do it on our own quicker. Overall, your best bet is to make a WRITTEN BUDGET each month to track your expenses. It helps you realize where your money goes. Start with your Mortgage, then food, then utilities..The Basics NEEDS first. Figure out which items are WANTS vs. NEEDS. If your in Debt, stop spending so much money on WANTS. Plan where your money is going to go before you get that money each month. This will help you tremendously. if all else fails..listen to this guy live online..or on the radio all over the country. http://www.daveramsey.com/
This may be a dumb question, but is there a smart way to find out my credit score? I hear it is reduced each time you check it.
I have CC balance of 25K. I bought a house and I used my CC for downpayment. The good thing is the APR is only 1.99 for the life of the loan. Much better than borrowing from a bank that charges 8% for the second lein of mortgage.
did you read the fine print? it may say that one late payment will cause that APR to skyrocket to 23%. but if you're payments are automated it shouldn't be a problem.
When you carry over $10 and your monthly bill is $500, you don't pay interest on $10. You pay interest on $500.
What helps me keep my spending in check are my parents...my parents still have Credit Card debt to this day and so in essence they are a living reminder of may happen to me if I don't keep things in check.
I can't help but chuckle at a lot of these responses. I take it that most of the posts that are suggesting ways to get out of or avoid credit card debt are those by single people. Believe me - I used to be in that same group. Things change a lot when you get married and have a family. I'm not justifying that you go into credit card debt once you get married and have kids, but you can't sit there and tell me it won't ever happen to you. I spent close to 5 grand on my wife's engagement ring - you think I had that much money saved up?? Make me laugh. Just try to keep making your payments on-time each month and always try to pay more than the minimum if you can. Also, it goes without saying that you should quit borrowing on a card if you want to pay it off. We have my credit card (which we really need to work on in getting paid off), a car loan, our mortgage, a home equity loan, and her school loans and that's it. And my credit score was around 750 when I applied for the home equity loan. And this is with my credit card having a balance for the last 4 years or so. You just have to learn to live within your means. Having some credit card debt isn't the end of the world but having so much where you can't make the payments is (just ask Lucky-azn).
payment is automated but I still check my account regularly. can't afford to to miss even it's due to server problem with the bank.
One more thing, the catch here is I don't get to enjoy house loan interest tax deduction. But I save more by paying 1.99 APR instead of paying 8% and include it as part of your tax d.
So..... you're paying back the amount of the mortgage ($125,000 ?), plus interest on the mortgage (which is probably somewhere around 6% ?) AND you have to pay back the 25k to the card plus 1.99% interest?
80-20 loan, no downpayment. 80% is 6% and the balance is 1.99%. I didn't bother to calculate whether it's bad or good. The bottomline for me is I live in my own house and I'm paying the same amount I was paying for a 3 bedroom apartment.
No, having some credit card debt is not bad as long as you follow those steps but it is hard for many to follow those steps. They figure, "Hey, I got a $2000 limit, why not but that new tv I've been eying and pay it off in small payments monthly?" Like you and the $5000 ring, was that really in your means at the time? Like I said, I used to have credit cards but got out of the mess in a hurry and now use a debit card only and if I must I dip into my savings account.
