My plea to America...kill your credit card.
If you watch the news; if you don’t watch the news. If you read my blog; if you balk at my rantings about China, socialist policies, and the Oakland Raiders that’s fine. But it is undeniable that We (America) have some serious issues to confront. As individuals we often feel that we’re too small and insignificant to make a difference. Not true. There is something that you can do. Just under 30% of the U.S. National Debt is owned by those who buy our debt and finance our indulgence (Britain, Japan,China and others). We cannot reverse this over night but you can prepare yourself for the worst if you think “the best is yet to come”.
A simple suggestion, consolidate all your credit cards down to one. One credit card per household. Use your debit card as you would your traditional credit card. Only use your credit card for those emergencies (i.e. death in the family, immediate travel or a must have purchases [we still have to live]) in the event that you do have to charge it pay it off the same month. Maybe you have to eat cheap a few nights out of the week (here’s a recipe). The looming mortgage crisis is going to get worse. What that means is that loans for homes are going to get harder to qualify for because the banks will be regulated into a corner. I rode the real estate boom of the 90’s. I watched the real estate crash of 21st century.
Our mortgages are purchased buy China, directly from the Federal Reserve Bank. If they were to call the loans on America we would instantly go into recession, interest rates would go through the roof and those credit cards would bankrupt you. I’m not predicting a doomsday scenario nor telling you my version of the truth, I’m just stating the facts. Hedging against a recession requires cash-on-hand; plan for the worse, hope for the best.
Concerned about you and yours,
Bycha Buxton
buxtonbycha@aol.com
Comments
So pay off your credit cards -- yes. Necessarily closing your cards -- no.
Once you have your cards paid off, you should occasionally use them and immediately pay off the balance so the credit card companies don't close them.
I supposes that's a way for you to put your spending habits 'on ice.' Or maybe you are just looking to 'freeze' your assets. Whatever the case, it's important to recognize that you need to 'chill out' before you go purchasing goods on borrowed money.
Ok. I'll stop.
I just wanted an excuse to use a few Mr. Freeze puns from 'Batman Forever.'
My FICO score sucks now. The best way to go, as Dox says, is to use your credit card for regular expenditures like groceries, and consistently pay these off every month. The Credit Card company will hate you, but your score will look good.
In shopping around for home loans on a first purchase before I took the above credit improvement strategy, I found that I didn't qualify for A list credit. In the Inner Bay Area you can bet that it is necessary to have top notch credit when buying a home. Oh well... I can wait until I see a foreclosed property that I like. Plenty of those available.
I was a consumer loan officer (2nd mortgages, cars, boats, secured, and unsecured) prior to moving to the west and the biggest misconception is that although closing out the "old" cards effect your fico score the new ones will effect you even less. Your fico is based upon 35% payment credit history(lates, past dues, etc..), 30% current usage, 15% length of credit history, 10% applications for new credit, remainder misc.
The bottom line is that the credit cards not being used with a zero balance are still used against you when it comes to a loan because you still have the ability to use them. In most cases, you are charge 3-10% usage which goes against your debt to income ratio.
If you do not plan on making any large purchases a reduction in your fico isn't going to matter that much because you can build it back up. Yes! It takes longer to build it up than to lower it, but it's better for you in the long run.
With the housing market changes that are taking place, you will definitely need the 20% or more down with very little exceptions at this time. Most banks are no longer allowing you to do a purchase money 2nd which is to buy with equity already in the home and use that as your down payment.
Although it's a buyers market, renting is truly the way to go if your finances are not up to par. Wait it out and get your credit in order.
At this point and maybe from the beginning, the American dream of owning a home is overrated. Owning a home does not dictate your success or failure.
Bycha you are on a roll. Keep them coming.
God Bless,