Banks won't help

[DebtHater]

I am sorry, but I don't recall saying anything about the need to "must have debt" for my clearance. I said show a positive history. Actually, the presense of debt is usually a bad thing for security clearances because they believe you might be easily manipulated if offered money. And you are completely correct about people with no credit having no problems at all with their credit. I happen to work in the office of the CFO and have a bankruptcy on my report that happened when I was trying to obtain the clearance, so my finances were very closely scruitinized. Does everyone have the same experiences with clearances? No.

Fair enough. I wasn't trying to criticize you or any other poster on this thread. I often hear that one must have good credit (as it was stated in a previous post) to have and maintain a security clearance. The only way to get good credit is to go into debt (borrow money). They only way to maintain a good credit score or credit history is to go into debt often. If you stop going into debt you credit score eventually fades away to the point that you will not have a credit score at all. Realistically, that isn't a bad thing. Unfortunately with today's society with lending and finances those with better credit scores are bowed down to by the lenders, where someone with no credit score be kicked to the curb even though they may make a 6 digit income with no debt.

Sorry for the rant, I'm only trying to get an understanding of what is required for security clearances as a curiosity if for no other reason. I understand everyone's situation is different.

[Amy26]

That is not true. You do not need to go into debt to have good credit. Charging things that you would normally just pay cash for and then subsequentally pay it off with that cash in the same month is not going into debt and that is all one needs to do to have good credit. All you are doing is showing that you can have available credit and manage it wisely and not run up your cards with debts you can't pay. The only time one would go into debt for credit is getting a car loan or a home...but those are not requirements for good credit. Installment loans actually count much less as a factor in your score than revolving lines.

I have been frequenting another credit forum that has given me a wide birth of knowledge and insights and on that site, the people with 750 - 850 scores are not in debt at all. Those are the people with flawless credit and they may have huge lines of credit but they aren't charging them up. What they do, is they pick 1 credit card (perhaps one with really good rewards) and they run all their monthly charges through it for awhile... the whole time always paying off the balance or leaving just like 10 dollars on it. Then, they move to another one of their cards and rince and repeat.

One of course has to be disciplined and responsible to do this but having good credit is just a matter of self control and managing your funds responsibly.

[IBroke]

But the thing is, "active rebuilding" is largely a myth. You give me 2 people out of BK 7. Both clean up their credit reports afterward, person 1 takes out a few CC's to "rebuild", the other does nothing else and just let's it sit. In 2-3 years time, the credit scores of those 2 persons will be nearly the same. Not identical, but both will be back to PRIME level lending rates.

I'm not sure on that one. Without a CC, it's impossible to reach a high credit-score because you have no utilization - that's already 30% of your credit-score.

[Amy26]

I'm not sure on that one. Without a CC, it's impossible to reach a high credit-score because you have no utilization - that's already 30% of your credit-score.

Not to mention the Average Age of Accounts metric will be totally fubard because IIB accounts no longer count toward that and if you don't have any positive lines for that, will also suffer.

And as I mentioned in my other thread... plenty people wake up after 2-3 years that didn't touch their credit and thought "time would heal it" only to find their scores are still in the 500's.

[IBroke]

And as I mentioned in my other thread... plenty people wake up after 2-3 years that didn't touch their credit and thought "time would heal it" only to find their scores are still in the 500's.

Absolutely right.

[DebtHater]

Charging things that you would normally just pay cash for and then subsequentally pay it off with that cash in the same month is not going into debt .....

I'm sorry but I must disagree with you. One of the definitions of debt is to owe money. Once you swipe that credit card to make a purchase (and you walk out of the store with the goods) you instantly become in debt as you now owe that financial institution money. The only thing that paying it off in the same month avoids is interest. Regardless, you are still borrowing someone else's money, even if it is only until the end of the month.

As innocent as the premise is to pay off the credit card monthly, this is how many get into trouble as you are now adding risk to the scenario. Murphy comes to visit and the unexpected happens now that money otherwise earmarked for the credit card company finds it's way into the hands of the mechanic for new brakes or similar situation. Yes, I understand someone financially responsible should have that emergency fund so they are covered, but many don't.

Unfortunately there are too many people that have credit cards when they have no business having them. Example, college students that don't have jobs (fortunately congress changed some of the laws regarding this). Sure, they'll pay them off monthly.... with what??? What's worse is these are the same folks that can't balance a check book. Then when they get the credit card at the end of the month and write a check with money they don't have because they don't have a job and can't balance their checkbook to see they have a negative balance, all heck breaks loose.

[Amy26]

LOL, ok... to-may-toh ta-mah-to ... I don't see how putting something on the card and then paying it out (for something you would have spent the money on anyways (like rent) is going into debt. If you wanna look at it that way then even signing a lease agreement is going into debt or your utility bills. Whether I pay my rent with a cc or not, I better have the money to pay it or I'm out on the street. Course, if I charge my rent and know I don't have the money to pay it off... who's fault is that? Credit or myself?

The scenarios you described are of course true...but what will happen will happen. All we can do is give our kids guidance and the knowledge... if they still screw up, then we can't do anything about it. If someone can't balance their checkbook and know how much money they have before they pay a credit card balance off... then that isn't the fault of "credit"... that is the fault of the person.

This reminds me of the "guns don't kill people, people kill people" arguement. If the only way for a person like I just described to keep themselves straight is to not use credit whatsoever....then they by all means shouldn't. But, they should not be avoiding credit because its "evil" or "stupid" or anything else you wanna call it. They should be avoiding it because they can't trust themselves. Some people simply have an aversion to credit because they don't like it or they don't feel its necessary... that is perfectly ok too. Its just like abstaining from sex or alcohol for a variety of reasons.

People will get themselves into trouble in all sorts of ways... bad things happen every day. I certainly am not perfect and screw up tons of things... but we can't live in a bubble and never leave our homes or do anything because we're afraid, scared or too cautious. Hell, none of us may even be here next year as the world is going to end on December 21, 2012...

But yea to each his own, we are indebted in some fashion our entire lives regardless if its monetary or not. Debt is not a bad thing... not managing it properly is. I think sometimes that people try to blame other things for their issues/problems... like an alcoholic when they do something really stupid drunk.... "it wasn't me it was the liquor".

[iswmle]

I think that many Americans were drawn into buying houses that they could not afford. By real estate agents, mortgage brokers, and appraisers. I found that a few years ago, appraisers would value houses on what the buyer wanted to spend, not on the true value of the house. Sub-prime loans - interest only, escalating ARMs, negative equity loans were offered to people just to get them into the house. And there is no doubt that people love to move into a new home. I always use this example - when people go to a car dealer to buy a new vehicle, see the vehicle, ride in it, and get approved to buy it, they almost never read the whole contract. When these same people go to buy a home, and see that they can get a very nice home, they never read all of the documentation. They are too excited about getting into the home.

This. This is key. I believe a falling for most people is that they buy into the mantra "why rent and throw away your money when you can buy a home and OWN it?" During my BK I managed to slide in and get a job at a prime bank... and let me tell you how much pressure that was on me! I was shocked... SHOCKED! that they hired me, albeit I believe if I was going for a higher position they would have kicked me to the curb.

Annnyywwaaay, while training there was a young lady that annoyed the hell out of me. She is no older than 23 and bragged CONSTANTLY about her home. One day I was sitting in the break room and talking with a man who had also just graduated from college. He was newly married, just moved to the state, and is looking at deploying next year. We were talking about renting apartments when the girl says: "Why would you throw your money away on rent when you can just BUY a house?" This is a girl who makes no more than $20,000 a year with a husband who was UNEMPLOYED at the time.... he finally got a job working for Geek Squad who are now forcing people to take time off because it is so slow.

I think it is this mentality that one needs to "stop throwing money away" to rent that is making people spend more than what they earn. I buy into it to a degree myself... I do want to own my own home, and it doesn't thrill me that I rent... but I realize that at this point in my life buying a house would be a horrible financial decision for me.

However, while working towards the goal of buying that home, I do feel I need to build credit. I see no other way other than saving up for a house, and that is asking for the impossible on my income and with my degree.

So saving and building, saving and building... that is all I am going to be doing for the next several years. I hope to have a nice savings and great credit by the time that house purchase rolls around.