Finance folks please chime in.

[TOY2G]

Question:

Should I pay off my most recent truck purchase?

Back story:

In 2009 I made the choice to leave my job and go 100% self employed via Pathfinder Outdoors and ASC Automotive Group (50% partner). I made the move July 2010 on a Thursday. The following Monday my wife lost her job.

Over the next 10 months we sucked our savings dry (2009 was a really bad time to be job hunting) and eventually tried to short sale our house. We still owed over 250k on it and in the end the bank took it along with our 2008 jeep unlimited. Our credit was effectively demolished. By late 2010 I took the job I am currently at and we started to attempt to correct what we had damaged as far as credit was concerned.

I vowed to never be so deep in debt again, and to this day I pay every bill off every month. In December 2012 we bought our 2013 4runner, the anxiety of having the debt was killing me (perhaps literally) so after paying on it for 8 months I decided to pay it off.

My credit remained unchanged from before I bought the vehicle. Paying it off, or even financing it in general seemed to do nothing for my credit. In fact, my Kohl's charge card, Home Depot credit card, and Conn's card seemed to be the only thing reporting to my credit.

I thought it would show up later, but it never did and I find myself wishing I had just paid cash. Fast forward to 7 weeks ago, I bought a 2010 TE...... I was torn again, do I try again to rebuild my credit, or do I just buy it outright. Again I decided to finance it. I put $10k down to reduce my debt to income, but financed over $18k after TT&L. I made my first payment (paid $1000) before I even had the vehicle shipped (bought in FL shipped to TX, live in OH). As soon as my first payment cleared about 2 weeks ago, I made another same amount. Again, the anxiety is getting the better of me so yesterday I paid $15k on it so there was not so much hanging over my head (I had to resist the urge to pay it off until I could get some advise). So now I owe a little less than $1000 on the truck, the loan is showing on my credit report, and most of my anxiety is under control.

So back to the question, do I pay it off now and walk away with the title? Or do I start paying $75 a month for the next 13 months to build my credit? Will it even help my credit to keep paying? It was hard to even get approved for this truck in the first place with a foreclosure and a repo all in the last 5 years..... In fact getting this loan so far has hurt my credit due to the 8 hard inquires it added to my credit and the new DTI.

Note: moving across the country and refurnishing a new house (rental) has taken our saving down to under 5k. We have not even started rebuilding our savings yet, our focus has been on reducing debt and preparing to buy a house in Columbus. My goal is to reduce DTI and increase my credit score as much as possible before we start house shopping, so I need to know what would be better, pay off loan, or let it ride.

There has to be someone on this forum in this line of work, so if you know for sure what would be best.....please chime in....if your advise is more personal, please PM me. I sent a similar message to an old friend at Wells Fargo, and I'm holding what I got until I get a little feedback.

Thanks for letting me make my problems your problems.

 

[Lineman]

No debt here. You don't need credit when you pay cash. The way you spend cash to pay off these last two vehicles you definitely don't need credit. You could save for a cash purchase on a car/house in no time.

Why vow to never be in deep debt again? Vow to NEVER be in any debt again.

To many people are hung up on this "I need to built credit". The Banks own you. Welcome to being their slaves.

 

[TOY2G]

No debt here. You don't need credit when you pay cash. The way you spend cash to pay off these last two vehicles you definitely don't need credit. You could save for a cash purchase on a car/house in no time.

Why vow to never be in deep debt again? Vow to NEVER be in any debt again.

To many people are hung up on this "I need to built credit". The Banks own you. Welcome to being their slaves.

You will hear no argument from me about not wanting credit, but there is a situation where you need credit.

It would take me a while to come up with 200-300k for a house in a good safe neighborhood, with good schools. I really don't want to rent two more years as i save money an keep throwing it away. Plus, for my little company, if i ever want to grow it I may need credit.

the cost of moving, buying all new stuff, paying off (or near paying off as it were) 2 vehicles is no disposable income for family fun stuff, and a savings account that is pretty well empty (again)

So whats worse.... Owing the bank for a house, or throwing $1900 a month rent away?

I hope to find a repo house that is in good shape and finance it.. then i can pay it off pretty quick once the needed renovations are done, but that just a best case scenario

 

[Tif]

Question:

Should I pay off my most recent truck purchase?

I work for a small credit union so I'm not well versed in "big bank finance" stuff but I'll try to offer what little knowledge/opinion I do have..

I agree with what the other guy said that you don't need to go into debt. Debt is never a good thing, but it is ALWAYS good to have a good credit score/history. No credit is just as bad as having bad credit.
Having credit cards typically is bad for your credit because in some situations they can count against you even if there is no balance on them because it is a revolving loan that can have a balance put on it at any time so some financial institutions require that they be counted in D/I ratios even if there is no balance currently on them.
However, when you have zero credit or bad credit you can use them to your advantage to rebuild your credit by charging stuff and paying the bill off IN FULL each and every month. It shows a payment history which will boost your score over time but you don't have to pay interest or have a balance on there.
As far as the auto loan..
Keep it, and make the payments. You need at least 12-18 months of making payments on time for it to start building your credit.
What I would recommend, if you have a substantial amount of money in your savings (ie enough to pay cash for the vehicle) consider getting a savings secured loan.
You can leave your money in your savings account and use it as the collateral for the loan. The bank will place a hold on those funds until the loan is paid but there is no risk to you or the bank because your money is already there securing it. Usually the rates are drastically lower than on traditional loans.
You would use the loan check to pay off the auto loan and the vehicle would be yours, title in hand. No risk of losing the vehicle.
Should you lose a job, you wouldn't be risking anything that you wouldn't have already risked by paying the cash for the vehicle.
The best part, when the loan is paid off. You still have the money in your savings, and the vehicle. And you have build up a payment history which helps your credit score!

Yes, it's true if you always pay cash you don't need credit.
But as you've already pointed out, sometimes you have to have credit.
It's better to build it and be in good standing and not need it.. than to need it and not have the option.

(I hope I explained all that in a way that makes sense, if you have any questions let me know)

 

[Jumpkix]

You will hear no argument from me about not wanting credit, but there is a situation where you need credit.

The only people who need credit are the ones that love to borrow money. But the fact remains: You don't need credit to buy a house. In other words, you can still get a mortgage without credit. Shocking, right? I know this for a fact to be true, despite what all of you Chase Visa worshippers want to believe.

You should always pay cash for a car. Why? First off, because there's no better feeling in the world than to sit in your car and know that it's YOUR car, not Bank of America's car. And that feeling is far better than sitting in a brand new, sexy car that makes you feel good for a few months until suddenly it's just like everyone else's car. Except you still have a monthly payment wrapped around your neck, slowly strangling you. I don't see a gorgeous 2014 BMW or Audi next to me at the light, I see a monthly payment figure that would send my blood pressure through the roof.

Another reason you should pay cash for a car is because it frees you from keeping up with your friends. Even if that means paying $1500 for some POS loaner that all of your friends make fun of you for, it's just a stepping stone. When it boils down to it, a car simply gets you from A to B. Don't get me wrong, cars are fun, and there's nothing wrong with enjoying them at all. But American society tends to think that since Joe Blow down the street bought a new Scion FR-S, well I guess that means I should get something better. But with time, you can move up in car slowly and steadily and pay cash along the way.

Some guys will try to tell you that you can make money by using the cash you would have used to pay for the car by investing it instead. Sure, car loan interest rates are extremely low, but they're not measuring risk. I have a chance to make money on that cash, or lose money. Whereas paying cash for that car from the get go, I have just guaranteed that I saved myself interest payments.

Lastly, having a paid off car gives you peace of mind. Your not worried if something happens to it because in the end, it's your car. I would obviously not be very happy if someone totaled my car today, and I would definitely miss it. But I certainly wouldn't be worried about it. Even if money was extremely tight and I couldn't afford to just write a check and replace it, I would find a way to scrape up money and buy a beater.

In the end, you have to choose if you'd rather serve the bank as a slave, or live in freedom and within your means. You can't put a price on my financial independence, so I hate payments of any kind. House payments are the one exception to this rule, though I still think paying cash for a house is not as crazy or impossible as people say it is.

Pay off your car, my friend. And then start your journey to building wealth and living the life you want. I highly recommend you look up Dave Ramsey, who can tell you exactly how to pay for cash for anything when it doesn't seem possible.

 

[ohuett]

I agree with most everyone else. If you can pay cash for it, pay it off now. (And if you haven't read Total Money Makeover by Dave Ramsey, check it out...it was a good read for me and has changed my outlook on finances...just my opinion...there are a lot of Dave Ramsey haters out there too.)

I vowed 2 years ago to never be in debt again. I found out a few weeks ago that the hospital where I work is being "acquired" by a much larger health system. While everyone else is worried about what might happen to them if they get laid off, I'm feeling much better knowing that I have no debt and a 6 month emergency fund sitting in the bank. If this same thing would have happened to me 2 yrs ago when I was living paycheck to paycheck, I wouldn't have been able to sleep at night.

 

[bofa]

Now we're getting into one of my areas of expertise. I'll reply to you first and circle back with thoughts on the other replies.

Question:

Should I pay off my most recent truck purchase?

Back story:

In 2009 I made the choice to leave my job and go 100% self employed via Pathfinder Outdoors and ASC Automotive Group (50% partner). I made the move July 2010 on a Thursday. The following Monday my wife lost her job.

Over the next 10 months we sucked our savings dry (2009 was a really bad time to be job hunting) and eventually tried to short sale our house. We still owed over 250k on it and in the end the bank took it along with our 2008 jeep unlimited. Our credit was effectively demolished. By late 2010 I took the job I am currently at and we started to attempt to correct what we had damaged as far as credit was concerned.

I vowed to never be so deep in debt again, and to this day I pay every bill off every month. In December 2012 we bought our 2013 4runner, the anxiety of having the debt was killing me (perhaps literally) so after paying on it for 8 months I decided to pay it off.

My credit remained unchanged from before I bought the vehicle. Paying it off, or even financing it in general seemed to do nothing for my credit. In fact, my Kohl's charge card, Home Depot credit card, and Conn's card seemed to be the only thing reporting to my credit.

I thought it would show up later, but it never did and I find myself wishing I had just paid cash. Fast forward to 7 weeks ago, I bought a 2010 TE...... I was torn again, do I try again to rebuild my credit, or do I just buy it outright. Again I decided to finance it. I put $10k down to reduce my debt to income, but financed over $18k after TT&L. I made my first payment (paid $1000) before I even had the vehicle shipped (bought in FL shipped to TX, live in OH). As soon as my first payment cleared about 2 weeks ago, I made another same amount. Again, the anxiety is getting the better of me so yesterday I paid $15k on it so there was not so much hanging over my head (I had to resist the urge to pay it off until I could get some advise). So now I owe a little less than $1000 on the truck, the loan is showing on my credit report, and most of my anxiety is under control.

So back to the question, do I pay it off now and walk away with the title? Or do I start paying $75 a month for the next 13 months to build my credit? Will it even help my credit to keep paying? It was hard to even get approved for this truck in the first place with a foreclosure and a repo all in the last 5 years..... In fact getting this loan so far has hurt my credit due to the 8 hard inquires it added to my credit and the new DTI.

Note: moving across the country and refurnishing a new house (rental) has taken our saving down to under 5k. We have not even started rebuilding our savings yet, our focus has been on reducing debt and preparing to buy a house in Columbus. My goal is to reduce DTI and increase my credit score as much as possible before we start house shopping, so I need to know what would be better, pay off loan, or let it ride.

There has to be someone on this forum in this line of work, so if you know for sure what would be best.....please chime in....if your advise is more personal, please PM me. I sent a similar message to an old friend at Wells Fargo, and I'm holding what I got until I get a little feedback.

Thanks for letting me make my problems your problems.

First, make sure the lender would even accept $75 payments. If you are in a contract for monthly payments, they typically expect the full payment amount, regardless of previous overpayments. Don't get your credit into a bind because you decided to pay big chunks and then slow pay. Credit Unions are usually okay with this. Traditional lenders and banks, not so much.

As far as the impact on credit, installment loans in general have a very minor effect on your credit. The real benefit comes from the diversity of credit account types, but even that is fairly small in the grand scheme of things. I'm of the opinion that you don't pay interest to build credit. If you can pay cash, do so. You can just as easily build credit with a credit card, making a small purchase every few months, and paying in full.

The 8 inquiries did not tank your credit. There is a 45 day rate shopping window built into most FICO models that actually counts all inquiries that would be considered rate shopping (auto, mortgage, and student loans) as 1 inquiry for scoring purposes. In other words, they could have hit your credit 100 times within those 45 day and it would still count as 1 inquiry. You can still see them individually, but they aren't hurting our score.

What's really hurting your score is the negative remarks. You can actually work on getting those removed (legally) and it's not hard. It just takes some time and patience. See the referral below.

Your DTI only matters for future installment loans... so if you are planning to buy a house or car in the future, it should be a priority. Otherwise, don't sweat it unless you are doing it for budgeting reasons as well.

Finally, I'll add I was in a similar situation around the same time. I lost an awesome consulting gig in 2008 and went unemployed for 4 months. The new job payed less than half what I made in previous years and the unemployment stint was just long enough to deplete our savings and tank things. I totally understand where you are and your concerns. If you need any help, just ask or PM me.

Also, by far the best forum and resource for all things related to credit is creditboards.com. The mods are a little cranky at times, but you cannot beat the wealth of information there.

 

[bofa]

No debt here. You don't need credit when you pay cash. The way you spend cash to pay off these last two vehicles you definitely don't need credit. You could save for a cash purchase on a car/house in no time.

Why vow to never be in deep debt again? Vow to NEVER be in any debt again.

To many people are hung up on this "I need to built credit". The Banks own you. Welcome to being their slaves.

You don't need to be in debt to build credit. Whats more, credit is much easier to build when you don't need it. When you do need it and haven't prepared accordingly, you'll find yourself in a bind. I have no problems with the living debt free mantra... but you should always be cognizant of your credit profile, and you may even be able to take advantage of that from time to time.

I work for a small credit union so I'm not well versed in "big bank finance" stuff but I'll try to offer what little knowledge/opinion I do have..

I agree with what the other guy said that you don't need to go into debt. Debt is never a good thing, but it is ALWAYS good to have a good credit score/history. No credit is just as bad as having bad credit.
Having credit cards typically is bad for your credit because in some situations they can count against you even if there is no balance on them because it is a revolving loan that can have a balance put on it at any time so some financial institutions require that they be counted in D/I ratios even if there is no balance currently on them.
However, when you have zero credit or bad credit you can use them to your advantage to rebuild your credit by charging stuff and paying the bill off IN FULL each and every month. It shows a payment history which will boost your score over time but you don't have to pay interest or have a balance on there.
As far as the auto loan..
Keep it, and make the payments. You need at least 12-18 months of making payments on time for it to start building your credit.
What I would recommend, if you have a substantial amount of money in your savings (ie enough to pay cash for the vehicle) consider getting a savings secured loan.
You can leave your money in your savings account and use it as the collateral for the loan. The bank will place a hold on those funds until the loan is paid but there is no risk to you or the bank because your money is already there securing it. Usually the rates are drastically lower than on traditional loans.
You would use the loan check to pay off the auto loan and the vehicle would be yours, title in hand. No risk of losing the vehicle.
Should you lose a job, you wouldn't be risking anything that you wouldn't have already risked by paying the cash for the vehicle.
The best part, when the loan is paid off. You still have the money in your savings, and the vehicle. And you have build up a payment history which helps your credit score!

Yes, it's true if you always pay cash you don't need credit.
But as you've already pointed out, sometimes you have to have credit.
It's better to build it and be in good standing and not need it.. than to need it and not have the option.

(I hope I explained all that in a way that makes sense, if you have any questions let me know)

I agree with:
"you don't need to go into debt"
"No credit is just as bad as having bad credit"
"rebuild your credit by charging stuff and paying the bill off IN FULL each and every month"

I disagree with:
"Having credit cards typically is bad for your credit because in some situations they can count against you even if there is no balance on them because it is a revolving loan that can have a balance put on it at any time so some financial institutions require that they be counted in D/I ratios even if there is no balance currently on them."
This may be true in certain scenarios but is very uncommon. Most institutions will not count open to buy against you. The ones that do, keep looking. There are plenty of places that do not. I have over 100K open right now and it has never been an issue with new cards, cars, or mortgage.
"You need at least 12-18 months of making payments on time for it to start building your credit."
Usually you will take a small hit from the inquiry (0-3 points) and then another small hit from the new account (affects "average age of accounts") depending on how thick your credit file is. At most, maybe another 5-10 points for the thinnest of files. That's usually made up in the first 6 months after the account is open. Underwriters like to see 12 months on an account for manual review. FICO doesn't care how long the account as been open with the exception of your oldest account and how it impacts the AAoA calc. It will report once opened and continue to report for 10 years or more once closed, so long as it has positive history.
What I would recommend, if you have a substantial amount of money in your savings (ie enough to pay cash for the vehicle) consider getting a savings secured loan.
Disagree here. If you were able to get an auto loan, you should have no problem getting an unsecured card to build credit. Getting a savings secured loan is for the most desperate of rebuilders that are not yet ready to qualify for an unsecured card. You shouldn't need to pay interest to a bank to borrow your own money.

The only people who need credit are the ones that love to borrow money. But the fact remains: You don't need credit to buy a house. In other words, you can still get a mortgage without credit. Shocking, right? I know this for a fact to be true, despite what all of you Chase Visa worshippers want to believe.



You should always pay cash for a car. Why? First off, because there's no better feeling in the world than to sit in your car and know that it's YOUR car, not Bank of America's car. And that feeling is far better than sitting in a brand new, sexy car that makes you feel good for a few months until suddenly it's just like everyone else's car. Except you still have a monthly payment wrapped around your neck, slowly strangling you. I don't see a gorgeous 2014 BMW or Audi next to me at the light, I see a monthly payment figure that would send my blood pressure through the roof.

Another reason you should pay cash for a car is because it frees you from keeping up with your friends. Even if that means paying $1500 for some POS loaner that all of your friends make fun of you for, it's just a stepping stone. When it boils down to it, a car simply gets you from A to B. Don't get me wrong, cars are fun, and there's nothing wrong with enjoying them at all. But American society tends to think that since Joe Blow down the street bought a new Scion FR-S, well I guess that means I should get something better. But with time, you can move up in car slowly and steadily and pay cash along the way.

Some guys will try to tell you that you can make money by using the cash you would have used to pay for the car by investing it instead. Sure, car loan interest rates are extremely low, but they're not measuring risk. I have a chance to make money on that cash, or lose money. Whereas paying cash for that car from the get go, I have just guaranteed that I saved myself interest payments.

Lastly, having a paid off car gives you peace of mind. Your not worried if something happens to it because in the end, it's your car. I would obviously not be very happy if someone totaled my car today, and I would definitely miss it. But I certainly wouldn't be worried about it. Even if money was extremely tight and I couldn't afford to just write a check and replace it, I would find a way to scrape up money and buy a beater.

In the end, you have to choose if you'd rather serve the bank as a slave, or live in freedom and within your means. You can't put a price on my financial independence, so I hate payments of any kind. House payments are the one exception to this rule, though I still think paying cash for a house is not as crazy or impossible as people say it is.

Pay off your car, my friend. And then start your journey to building wealth and living the life you want. I highly recommend you look up Dave Ramsey, who can tell you exactly how to pay for cash for anything when it doesn't seem possible.

Have to disagree here my man. Credit and debt are not synonymous. Credit is not only for those that love to borrow. Further, having good credit can actually make you money. And like I mentioned above, building credit when you don't need it is crucial. Not building credit and then needing it will never work out in your favor.

Also, I disagree with always paying cash for a car. It really boils down to the rate. If you can get a car with 0-2% financing (because you were smart and built your credit ahead of time), you can take the cash you would have paid and invested it, usually for a better return. The bad news is these rates are slowly going away, short of the subsidized rates from manufacturers.

I agree with most everyone else. If you can pay cash for it, pay it off now. (And if you haven't read Total Money Makeover by Dave Ramsey, check it out...it was a good read for me and has changed my outlook on finances...just my opinion...there are a lot of Dave Ramsey haters out there too.)

I vowed 2 years ago to never be in debt again. I found out a few weeks ago that the hospital where I work is being "acquired" by a much larger health system. While everyone else is worried about what might happen to them if they get laid off, I'm feeling much better knowing that I have no debt and a 6 month emergency fund sitting in the bank. If this same thing would have happened to me 2 yrs ago when I was living paycheck to paycheck, I wouldn't have been able to sleep at night.

Dave Ramsey is a hack. Okay, well he's much better than doing nothing, but his objectives are over simplified for the masses and are not built around maximizing your financial situation nor your credit. He's a good starting point. Don't get me started on Suze Orman.

 

[ohuett]

Dave Ramsey is a hack. Okay, well he's much better than doing nothing, but his objectives are over simplified for the masses and are not built around maximizing your financial situation nor your credit. He's a good starting point. Don't get me started on Suze Orman.

I don't want to start a Dave Ramsey "war" b/c this thread isn't about that. I just wanted to introduce Dave Ramsey to the OP since the thread was debt related. Personally I think that Dave Ramsey is great at motivating people to get out of debt...but I don't think he is good at giving investment advice b/c obviously his outlook on how investments perform are exaggerated. So take Dave's "good" advice on getting out of debt and ignore the rest of his advice if you want.

 

[bofa]

I don't want to start a Dave Ramsey "war" b/c this thread isn't about that. I just wanted to introduce Dave Ramsey to the OP since the thread was debt related. Personally I think that Dave Ramsey is great at motivating people to get out of debt...but I don't think he is good at giving investment advice b/c obviously his outlook on how investments perform are exaggerated. So take Dave's "good" advice on getting out of debt and ignore the rest of his advice if you want.

Yep, and I think my caveat covered that pretty well. I just take issue with anyone giving advice to thousands of people, and profiting on it, without disclaiming that his intentions are limited and not necessarily in the best interest of the individuals buying it.

 

[Tif]

I disagree with:

I disagree with:
"Having credit cards..."
This may be true in certain scenarios but is very uncommon. Most institutions will not count open to buy against you. The ones that do, keep looking. There are plenty of places that do not. I have over 100K open right now and it has never been an issue with new cards, cars, or mortgage.
^^ True. I didn't mean to imply that it was common. But it's more likely if someone has poor credit.

"You need at least 12-18 months of making payments on time for it to start building your credit." - Tif
"Underwriters like to see 12 months on an account for manual review." -Bofa
^^ This is what I was referring to by saying he needed 12-18 months of payment history. Something for the lender to see as 'effort' toward rebuilding.


"What I would recommend, if you have a substantial amount of money in your savings (ie enough to pay cash for the vehicle) consider getting a savings secured loan." -Tif
"Disagree here. If you were able to get an auto loan, you should have no problem getting an unsecured card to build credit. Getting a savings secured loan is for the most desperate of rebuilders that are not yet ready to qualify for an unsecured card. You shouldn't need to pay interest to a bank to borrow your own money." -Bofa
^^ I agree with you 100%. I added that recommendation as an option if there are no other ways to get started rebuilding. (If no one will give a card/loan due to bad credit or a lack thereof)
Yes, paying a bank to borrow against your own money would suck! Most definitely didn't mean to imply that it was the absolute best option out there. That's why I left it for last. But it's better than nothing/somewhere to start. IF there are no other better options.


As I said, I'm not good with 'big bank' finance stuff.
Just offering my thoughts..
I apologize if I've offended or confused anyone.

 

[bofa]

I disagree with:
"Having credit cards..."
This may be true in certain scenarios but is very uncommon. Most institutions will not count open to buy against you. The ones that do, keep looking. There are plenty of places that do not. I have over 100K open right now and it has never been an issue with new cards, cars, or mortgage.
^^ True. I didn't mean to imply that it was common. But it's more likely if someone has poor credit.

"You need at least 12-18 months of making payments on time for it to start building your credit." - Tif
"Underwriters like to see 12 months on an account for manual review." -Bofa
^^ This is what I was referring to by saying he needed 12-18 months of payment history. Something for the lender to see as 'effort' toward rebuilding.


"What I would recommend, if you have a substantial amount of money in your savings (ie enough to pay cash for the vehicle) consider getting a savings secured loan." -Tif
"Disagree here. If you were able to get an auto loan, you should have no problem getting an unsecured card to build credit. Getting a savings secured loan is for the most desperate of rebuilders that are not yet ready to qualify for an unsecured card. You shouldn't need to pay interest to a bank to borrow your own money." -Bofa
^^ I agree with you 100%. I added that recommendation as an option if there are no other ways to get started rebuilding. (If no one will give a card/loan due to bad credit or a lack thereof)
Yes, paying a bank to borrow against your own money would suck! Most definitely didn't mean to imply that it was the absolute best option out there. That's why I left it for last. But it's better than nothing/somewhere to start. IF there are no other better options.


As I said, I'm not good with 'big bank' finance stuff.
Just offering my thoughts..
I apologize if I've offended or confused anyone.

Not at all! At least not me I was just adding my perspective and experience. I meant no offense in my response either.

 

[TOY2G]

Yep, and I think my caveat covered that pretty well. I just take issue with anyone giving advice to thousands of people, and profiting on it, without disclaiming that his intentions are limited and not necessarily in the best interest of the individuals buying it.

I am not a proponent of any ambiguous advise based on the findings of a single individual, especially when their motive is to sell said findings.

I disagree with:


"You need at least 12-18 months of making payments on time for it to start building your credit." - Tif
"Underwriters like to see 12 months on an account for manual review." -Bofa
^^ This is what I was referring to by saying he needed 12-18 months of payment history. Something for the lender to see as 'effort' toward rebuilding.

I don't intend to stretch myself out on credit, I simply want my credit to be usable should I find myself in need of it. right now I have roughly $1200 in credit that I owe ($900 is my truck). At the moment I really do not need credit, I have the means to own everything i have......with the exception of a house, in the price range I am looking at, with my current disposable income it would take me 3 years to be able to buy a house outright IF i spent no extra money on anything else. that comes out to $68k in rent I will pay as I am saving to buy a house.... I do not see any benefit to saving and paying cash if i have to cough up $68,000 in rent (or more), I would be better off getting a loan and paying the house off in 3-5 years and tossing roughly $16k in interest out the window.


all that said.... should I pay my truck off, or should I use it to try to increase my credit standings (presently under 700)?

 

[nevada]

with that low of a balance, if you have the means, just pay it off.

 

[bofa]

I am not a proponent of any ambiguous advise based on the findings of a single individual, especially when their motive is to sell said findings.



I don't intend to stretch myself out on credit, I simply want my credit to be usable should I find myself in need of it. right now I have roughly $1200 in credit that I owe ($900 is my truck). At the moment I really do not need credit, I have the means to own everything i have......with the exception of a house, in the price range I am looking at, with my current disposable income it would take me 3 years to be able to buy a house outright IF i spent no extra money on anything else. that comes out to $68k in rent I will pay as I am saving to buy a house.... I do not see any benefit to saving and paying cash if i have to cough up $68,000 in rent (or more), I would be better off getting a loan and paying the house off in 3-5 years and tossing roughly $16k in interest out the window.


all that said.... should I pay my truck off, or should I use it to try to increase my credit standings (presently under 700)?

Pay it off. We can find other ways to get you over the 700 hump and they won't cost you anything but time.

 

[Jumpkix]

Have to disagree here my man. Credit and debt are not synonymous. Credit is not only for those that love to borrow. Further, having good credit can actually make you money. And like I mentioned above, building credit when you don't need it is crucial. Not building credit and then needing it will never work out in your favor.

You are right, credit and debt are not the same thing which I came across as saying. But let me be clear: I have zero problem with someone having a credit card and paying off the balance every month, though I don't necessarily recommend it. My objection is that most people lack the discipline to do that every month without getting into trouble at some point. If you use a credit card with little or no annual fee and never maintain a balance, that's just fine.

Also, I disagree with always paying cash for a car. It really boils down to the rate. If you can get a car with 0-2% financing (because you were smart and built your credit ahead of time), you can take the cash you would have paid and invested it, usually for a better return. The bad news is these rates are slowly going away, short of the subsidized rates from manufacturers.

You are not factoring risk in this scenario. Yes, there is plenty of potential to invest the cash and come out way ahead. But you could easily take a big hit going the other way. Again, I understand that in many given scenarios you could make money this way. But not having to pay interest on a loan is guaranteed money that stays in your pocket.

Dave Ramsey is a hack. Okay, well he's much better than doing nothing, but his objectives are over simplified for the masses and are not built around maximizing your financial situation nor your credit. He's a good starting point. Don't get me started on Suze Orman.

Lol, I know exactly how you feel about Orman. That woman's face gives me the creeps.

You are correct that Dave Ramsey does not teach you how to build and maximize credit. Rather, he teaches you how to live without credit. He teaches you that living in a world without mortgages and car payments is not a fantasy, but a reality that tons of people are achieving everyday. Mortgages especially don't have to be a part of your life if you don't want it to be. It is simply about living a life within your financial means, and how you can become wealthy over time doing it.

Basically, Dave Ramsey is trying to dispel the lie that you need to work hard to get a good credit rating to be financially successful. Again, I personally hate debt, so I will always say to pay cash for everything. With the exception of a home, if you cannot pay cash for something, I believe that means you cannot afford it.

 

[BrianSD_42]

I would not confuse "stay out of debt" with never have any debt.

I think financing a vehicle is fine if the interest is low. My car loan is at 0.9% whats the downside of that loan?

 

[CXS]

I would not confuse "stay out of debt" with never have any debt.

I think financing a vehicle is fine if the interest is low. My car loan is at 0.9% whats the downside of that loan?

I agree as long as you're getting interest on your money above 0.9% which is not real easy right now.

My wife's looking for a car to buy now and refuses to get a loan since we've been debt-free for a very long time. We have 1 credit card, use it for everything and pay it off every month. Every once in a while we take cash for the "points" earned for some extra cash. We never pay interest or fees.

 

[KidVermicious]

Question:

Should I pay off my most recent truck purchase?

Yes. I didn't even bother reading the rest of your post. You're swimming in money, you shouldn't have any debt at all.

 

[TOY2G]

Yes. I didn't even bother reading the rest of your post. You're swimming in money, you shouldn't have any debt at all.

Man Kevin I wish that were true. Fact is, we calculate every dollar and plan months ahead I literally have less than $8k to my name and half of it is in savings, and the rest will be gobbled up on the second when I pay bills.


Wet work does not pay like it use to.