Why do people think they need to establish credit right after bankruptcy?

[trying_to_fix]

The Dave Ramsey school of thought simply makes the life of someone who just filed for BK even more difficult.

Why struggle to have to pre-pay items or pay more for insurance, a mortgage, or even utilities just because you feel credit is "evil?"

Why not take what you learned filing bankruptcy and use credit to your advantage? Don't make unnecessary charges, don't carry large balances, and don't go nuts with impulsive purchases. Use credit to build up your credit score because whether you like it or not, there will be one day that your credit score could potentially hold you back from either a purchase or an opportunity.

Simply saying no to credit is not practical in today's world. Sure you can do it but why struggle and stress yourself even more?

[oregonpilot]

I have just been discharged and I am looking to reestablish my credit..First because I have a business and have to have a bond and they check my credit upon renewing. It it renewed every 2 years...This year I was lucky they didnt check my credit scores when I renewed in May. It will come to renewal in 2 years and I want to start right now to reestablish credit. I already had a car loan that I reaffirm so thats good, but I think I need another card or so to get my credit back. I also wanted because unfortunately it is necessary to have good credit for insurance purposes, rental (if I need to rent another business location) and eventually in 2 years I would like to buy a little condo for my old age if the prices are still low. I have a house now that I owe $730,000 and a rental but I did not reaffirm those, so I guess they wont count.

OOOHHHH . Boy do i know the bond problem. I paid my contractor bond last fall. Usually pay for 2 yrs but last fall i paid for 4 yrs . Was already seeing the writing on the wall and wanted to cover myself for a longer period of time.
Well, about a month ago my bonding agent called me and said that (the bonding company X) checked my report and found something "QUESTIONABLE". DUH
I was now going to be charged 5 times the amount i was paying. I just about lost it. Well, truthfully i did lose it.
Told my agent , after i got myself back together, that its too bad that the bonding co. was kicking me and then flushing me.
Guess thats what they do when your down.

I thought they wouldn't check my report until it renewed 4 yrs from Oct 09. Well. it seems they check every yr in sept to continue it for another yr. That way they can just drop you when ever they think you're not a good risk. My bond is only for 10k and i was paying $80. a yr now its going to be $400.

[nc73]

Dave Ramsey is full of crap. Life as we know is ruled by credit unless you have lots of money. You want a house? Unless you have cash you have to borrow money. You want a decent new or used car? You need credit or save up lots of cash. You want a job with the highest clearance, you better check your credit to make sure there is no mistakes. It's a society based on credit. The sooner you start rebuilding, the better. If you don't want a huge limit, well tell the creditors to lower your limit so you're not tempted to spend, spend, spend. If you can't hand credit, don't bother with repairing. I want to purchase a house in a few years and that's why I got a credit card the day after discharge.

[HOMEBODY]

wow..you mean they can check your credit and triple charge your for the bond? I hope not. Mine is paid for 2 years and so far no one has said anything. I better get my credit score up as soon as possible. See...that is the only reason I need credit.

[oregonpilot]

Actually quadruple. Just to keep my bond i had to get a co-indemnitor (co-signer) that had good credit AND own property in OR.
My ex told me that he would do it for me but then his new wife said NO WAY.
Then my son was able to co-sign for me.
The co-signer form had them show the worth of their property and all their checking & savings accts.

I had not even filed BK yet. I just had some late payments.
You can probably tell i still have a bit of energy on this one.

I'm hoping to get my sons name off as co-signer. Could take a few years.

[IBroke]

It's not hard to advise people not to get credit cards and go into more debt, that should be obvious. I'm not talking about getting a house or maybe a car. I'm talking about people getting and opening credit cards that will not help you in rebuilding your credit. What sense does it make to say I have to have credit cards to get good credit?

Now, what "credit cards" are we talking about? The unsecured $30K credit-limit from Chase or a $300 secured card? Both are CCs and I don't think any CC with a limit of $1000 or less - secured or not - is going to get you in trouble. What's the minimum payment on such a card? $40/month? And yes, to get a good credit score, you also need a CC on your record.

Especially after a BK, it is crucial to rebuild credit - even if it's 100% on "secured grounds" like a secured installment loan from your local CU and 2 secured CCs with relative low limits. If you don't rebuild your credit fast, you might not only run into difficulties in obtaining those "obvious loans" like car and mortgage - you are also underestimating that a lack of re-established credit post-BK might cause you to pay much more in interest on those "obvious loans". Having a small $300 CC on your credit-file can make a heck of a difference - even when trying to get a mortgage. The mortgage (at that time, a $370K) for the house we are living in could only be approved due to a $300 CC with a 6 month credit-history and a reported balance of $6 which brought the FICO to 680. That might sound silly but that is how the system works. We do not decide what we have to do to achieve certain goals because in these days, others make these decisions for us. I don't like it but I certainly know these facts.

I'd rather pay $40/month on a CC (where I actually get something in return) than an additional $200/month in interest on my car and/or mortgage just "because I never want to touch a CC again" - but that's certainly a personal choice...

[oregonpilot]

HOMEBODY......
when you renewed your bond in May had you filed yet OR been behind on any payments???

[LSUTiger32]

LOL! Some of the replies in this post are too much. Some of you will be back on the BEFORE THE DISCHARGE boards in no time!

[despritfreya]

LOL! Some of the replies in this post are too much. Some of you will be back on the BEFORE THE DISCHARGE boards in no time!

So true and thank heavens as I am guaranteed job security.

Des.

[Logan]

Credit is what got most of us in this mess. Don't say you learned your lesson because we all know what will happen down the road. Listen to Dave Ramsey.

http://daveramsey.com/d/6005

Maybe because I get 1.25% cash back along with other rewards every time I use my credit card. I also get 3% back for gas purchases, other incentives for shopping through my CC's website and my checking account gets 4% interest so the 3 to 4K float I have every month earns interest.

Oh yeah, it also helps me establish credit so it will be easier to get a mortgage when it comes time to buy a house.

Logan

[Pandora]

Maybe because I get 1.25% cash back along with other rewards every time I use my credit card. I also get 3% back for gas purchases, other incentives for shopping through my CC's website and my checking account gets 4% interest so the 3 to 4K float I have every month earns interest.

Oh yeah, it also helps me establish credit so it will be easier to get a mortgage when it comes time to buy a house.

Logan

But aren't your cards off of your wife's credit and you're just an AU? So technically - the rates and cards you have arent really "yours" - they're your wife's and she didnt file for BK, correct? There's a big difference I think in what the OP means by this topic vs. what you've done/are doing Logan.

+1 on LSUTiger's post

[backtoschool]

But aren't your cards off of your wife's credit and you're just an AU? So technically - the rates and cards you have arent really "yours" - they're your wife's and she didnt file for BK, correct? There's a big difference I think in what the OP means by this topic vs. what you've done/are doing Logan.

+1 on LSUTiger's post

My credit is not based on a spouse, and I am getting much better rates for insurance and a car since I started repairing my credit. The car loan I just got was for 4.42%. I would have never gotten that rate if I had not repaired my credit. That rate saved me thousands of dollars.

[Pandora]

My credit is not based on a spouse, and I am getting much better rates for insurance and a car since I started repairing my credit. The car loan I just got was for 4.42%. I would have never gotten that rate if I had not repaired my credit. That rate saved me thousands of dollars.

I understand your position and view - and I suppose for some people, FICO and credit is important - but there are people that have never had credit, never filed BK and have paid cash for everything their entire lives, and still get great rates - by paying a certain % down or paying cash for items.

Most people that file BK do so because they ran up too much credit card debt for unnecessary things and lived outside of their means. Then there are others that filed due to job loss or illness (unavoidable) lived within their means, yet had 2nd mortgages or medical bills that couldnt be covered. In the end I guess it depends on how you look at it - I mean, BK is BK is BK in the eyes of the court and credit reports, the end is still the same regardless of the "how's and why's". However for those that got in over their heads due to credit cards, the promise of "I will use it responsibly this time since filing BK.." most times does not hold true. Its like taking out a 2nd mortgage, paying off all debts with that $ - doing good for a while not incurring more debt (I’m sure there are many reading this that have done this exact thing). Eventually that 0% offer comes in and you think "GREAT! I can handle that, I'll just charge $50 a month and pay it off each month!" What happens? You're good at first ... then something comes up that you hadn’t been saving for (AC goes out – car breaks down – dentist bill) – or you start justifying your purchases – or you say “just this once, I really want this..er no.. I really NEED this” and the snowball keeps rolling. Before you know it, you're back here.

I guess it just depends on what your needs are. For us, personally - we havent had a credit card since 2008 (only had 1) and paid it in full when they decided to jack the rate from 7.9 fixed for the past 4 years we’d had the card to 19%, for no reason "because they could". We pay cash for everything, and while we have financed vehicles at 0-6% interest (depending) prior to ever finding ourselves in this position due to job loss - we will never again do so. I'll pay cash for our next vehicle vs. paying a bank any money out of my pocket - and credit cards? Nope...biggest rip off going, even secured ones. I would never pay $XXX for a secured credit card that has annual fees and higher interest rates than regular, unsecured cards. You're paying the bank to let you use YOUR money! Calculate it out over a 1-2 year span in fee’s and interest rates should you decide to “carry over” a balance - what payback are you giving the bank for your initial $XXX? Not to mention you must make payment every month and get your account balance back up to the $ it needs to be at. Also, not all secured credit cards report to the Big 3 - you need to make sure yours reports if you're doing it this way.

Makes no sense - but again, thats my opinion on the matter - and again - to each their own.

[backtoschool]

I understand your position and view - and I suppose for some people, FICO and credit is important - but there are people that have never had credit, never filed BK and have paid cash for everything their entire lives, and still get great rates - by paying a certain % down or paying cash for items.

Most people that file BK do so because they ran up too much credit card debt for unnecessary things and lived outside of their means. Then there are others that filed due to job loss or illness (unavoidable) lived within their means, yet had 2nd mortgages or medical bills that couldnt be covered. In the end I guess it depends on how you look at it - I mean, BK is BK is BK in the eyes of the court and credit reports, the end is still the same regardless of the "how's and why's". However for those that got in over their heads due to credit cards, the promise of "I will use it responsibly this time since filing BK.." most times does not hold true. Its like taking out a 2nd mortgage, paying off all debts with that $ - doing good for a while not incurring more debt (I’m sure there are many reading this that have done this exact thing). Eventually that 0% offer comes in and you think "GREAT! I can handle that, I'll just charge $50 a month and pay it off each month!" What happens? You're good at first ... then something comes up that you hadn’t been saving for (AC goes out – car breaks down – dentist bill) – or you start justifying your purchases – or you say “just this once, I really want this..er no.. I really NEED this” and the snowball keeps rolling. Before you know it, you're back here.

I guess it just depends on what your needs are. For us, personally - we havent had a credit card since 2008 (only had 1) and paid it in full when they decided to jack the rate from 7.9 fixed for the past 4 years we’d had the card to 19%, for no reason "because they could". We pay cash for everything, and while we have financed vehicles at 0-6% interest (depending) prior to ever finding ourselves in this position due to job loss - we will never again do so. I'll pay cash for our next vehicle vs. paying a bank any money out of my pocket - and credit cards? Nope...biggest rip off going, even secured ones. I would never pay $XXX for a secured credit card that has annual fees and higher interest rates than regular, unsecured cards. You're paying the bank to let you use YOUR money! Calculate it out over a 1-2 year span in fee’s and interest rates should you decide to “carry over” a balance - what payback are you giving the bank for your initial $XXX? Not to mention you must make payment every month and get your account balance back up to the $ it needs to be at. Also, not all secured credit cards report to the Big 3 - you need to make sure yours reports if you're doing it this way.

Makes no sense - but again, thats my opinion on the matter - and again - to each their own.

Excellently put. (even though as you know I have made different choices than you)

I work in financial services as a principal analyst for a venture firm and I work with models like fico every day. In order to get the best deals your behavior has to fit within the models for responsible credit users. By not "playing the game", you fall between the cracks of the models that mortgage lenders, etc use. It is not impossible to get a house when you fall between the modeling cracks, but it is more difficult. I am just making things easier for myself in a year a half, by putting myself squarely within the model for responsible credit behavior.

[MeLLE159]

What I don't understand is why the need to judge others. Your thought is to not have credit and that's fine but why and try to put others down because of your preference. In MI credit is used to obtain your auto insurance rate and it makes a difference if you have no credit, bad credit, or good credit. Let's just all allow each other to do whatever we deem necessary for our lives. Right now I haven't filed and my insurance rate because of the late pays is high, not because i have tickets and accidents but because my credit is poor. So yes after filing I want to learn how to use credit reponsibly so i can get better rates on my insurance and so yes in the future i can buy a house. I'm just saying let's not judge others!