credit rating is a scam

[5yrplan]

You don't need a credit rating or what it actually is , is a debt rating. You can and should live debt free. Bankruptcy should have taught you that.
A credit/debit rating is the biggest marketing scam ever created. A mortgage can be written without a debt rating it's called manual under writing.
Debt free is the shortest path to prosperity. Commit to never borrowing money again. Yes you must build an emergency fund of 3-6 months of expenses to live debt free.

[shipo]

I would dispute virtually all of your claims above; credit, like pretty much everything else in life, is a tool. Used properly it can be greatly advantageous, used poorly and it can bring financial ruin.

Here is a simple example of how credit can be used beneficially; buying a car, new or used, does one pay cash, or does one finance it and keep the cash invested? I would argue the relatively low interest rate these days, especially compared to even conservatively invested market gains, are such that, paying cash versus obtaining a car loan, is a money losing proposition.

So, to rewrite your premise, "Credit, used wisely, is the shortest path to prosperity."

Long story short, I (and many like me) have absolutely zero plans to stay debt free for life.

[justbroke]

The best leverage I have seen, where credit is a factor, is with 0% automobile loans. Imagine using other people's money while using your savings for greater leverage.

I'm actually watching a video right now on how to leverage a line of credit to paydown a 30-year mortgage in 5-7 years. Leveraging credit and "other people's money" is a key driver to achieve and maintain wealth.

[5yrplan]

Imagine when shit hits the fan ( 2008 & 2020 ) and you cannot make the payments? Debt comes with risk, eliminate the risk. It catches up with those the leverage credit they end up BANKRUPT. All Debt is dumb unless it's your primary home mortgage 15 year fixed and the total payment including taxes and insurance is less then 25% of your take home pay.

Imagine payday with ZERO debt payments every month. How much could you save and invest then?

[shipo]

Sorry, false. Now, if you're living paycheck to paycheck, they yeah, your point is well taken, however, if you are living within your means and are saving wisely, credit is a tool which is advantageous, even if you suffer a temporary job loss.

[5yrplan]

Yup more then 80% of USA is living paycheck to paycheck and can't cash flow a $400 emergency. If there is credit available it will get used so to avoid stupid don't have any credit available. Debit card is all you need. Imagine owing no one a dime after bankruptcy discharge and beyond.

[shipo]

Yup more then 80% of USA is living paycheck to paycheck and can't cash flow a $400 emergency. If there is credit available it will get used so to avoid stupid don't have any credit available. Debit card is all you need. Imagine owing no one a dime after bankruptcy discharge and beyond.

LOL, ever try to rent a car with a Debit Card? Apparently not.

I don't need to imagine, my Discharge came through in March and beyond my one credit card (which I pay in full every month), I don't owe a dime. That said, I will definitely be taking on more credit over the next few years.

[justbroke]

I am now learning more as I re-enter the real estate investment world. What I found is that putting more than 6-months reserves in a savings account, doesn't help build wealth. Wealth is built by actually leveraging credit (a/k/a other people's money) and property. Creating a stream of passive income and, hopefully, unencumbered property. Keeping some funds semi-liquid (cash-value insurance policy) also helps in cases of panic.

It's not for everyone, as some truly can't afford basic necessities. However, once you have a decent salaried job, there's no reason to not think about building wealth.

From the money I saved since bankruptcy, I'm looking to leverage that money (and my home) to 6-10 unencumbered properties in 10 years. It takes discipline, but, alas, it also takes credit.

[5yrplan]

And when you lose that income suddenly who makes those payments? Eliminate risk, tortise beats the hare, you can invest and save thousands month when there is no debt payments. The entire debt marketing scam is setup to take your money. Incomes are valued with debt in mind. Without the debt incomes are high.

Live like no one else so you can live like no one else. Be weird not normal. The Jones s are broke.

dollar car rental no credit card needed

Think about how much debt you want to risk to drive a rental car?

[shipo]

dollar car rental no credit card needed

Only partially true, Dollar at many major airports will not rent you a car with a Debit Card; I know, I tried.

Think about how much debt you want to risk to drive a rental car?

What kind of a comment is that? I have a life, I travel, I rent cars, get over it.

[justbroke]

And when you lose that income suddenly who makes those payments? Eliminate risk, tortise beats the hare, you can invest and save thousands month when there is no debt payments. The entire debt marketing scam is setup to take your money. Incomes are valued with debt in mind. Without the debt incomes are high.

I don't understand what you're talking about. These are investment properties and are rental units. I have never heard of anyone achieving wealth through savings. You say "invest" and save thousands, but purchasing real estate -- especially rentals -- is investment.

If you're anti-debt, just say that you don't like debt and would like to continue to exchange your labor for dollars. Myself, and perhaps shipo would rather earn income without exchange of our labor. Your plan is to hope to build up enough savings in order to invest in -- I'll guess -- the stock market. Not everyone can invest at those levels and for most people real property is a better investment. The problem with how most real property is treated is that most people obtain 30-year loans and, well, keep refinancing the property every 5 years! They earn no equity that way.

In any event, the rental property investment strategy (with unencumbered property in 6-10 years) is a good one if you can afford the down payments. There are well-known occupancy rate calculations and massive spreadsheets (per property) that analyze and predict cash flow. And that's the issue... cash flow. A positive cash-flow property can be leveraged or you could take the savings as passive income.

The properties that I'm purchasing have positive cash flow of $400-500/month. They have mortgage payments of around $475/month. Costs, related to property management expense (hiring a company), along with taxes and insurance come to another $400/month. Rent is $1,300/month each. Even if 10% of your properties were empty (which is actually a figure used in the calculations known as occupancy rates), the others would still create positive cash flow of $3,600/month. The banks will use 75% of the cash flow so even they "discount" part of that cash flow.

If everyone just shoved their money in the bank... the wealthy would keep getting wealthier. That's because the wealthy will buy the properties and the others will just be renters.

In the end, credit is not a scam. It's no different than trading labor for dollars. With credit, you trade your future dollars for dollars today. Hopefully you make that trade work for you so that you either break even, or obtain a substantial asset in exchange.

[5yrplan]

Yup then the market crashes and your over extended. I.e. 2008 Good luck
Its your money do what you want.

You can double your money every 7 years at 10% returns.

[shipo]

Yup then the market crashes and your over extended. I.e. 2008 Good luck
Its your money do what you want.

You can double your money every 7 years at 10% returns.

Clearly a very short-sighted view. When the market (stock market in this case) crashed in 2008 we had seven figures in the market; yeah the hit we took was huge, but then by 2011 we were already back above where we were before the crash. Now, where the money went which led us into bankruptcy; that's a different story which has virtually nothing to do with markets.

All this is to say, credit, properly managed, will help one gain wealth much faster than if one does not use it. What I've been trying to point out to you is your original premise was a global statement about credit and credit ratings being a scam, and while you personally may not find any use for credit, maybe because you're scared, or maybe because you don't understand it, doesn't mean others should universally avoid using credit.

[justbroke]

Yup then the market crashes and your over extended. I.e. 2008 Good luck
Its your money do what you want.

You can double your money every 7 years at 10% returns.

Of course, this is all in the spirit of debate.

How is a real estate (property) investor over-extended when the market crashes? No more than someone who invested in the stock market? A real property investor of unencumbered rental properties, is not overextended. They may be "over-leveraged" but they are leveraging the value of the property against the real property. With rents coming in monthly., supporting positive cash flow (which is the key), the property investor can also exit when they want to retire. Hopefully with over $1.0 million of unencumbered property. Even major property developers use credit while they leverage existing builds. They don't want their cash flow interrupted.

Unless you're beating the S&P 500 every year, with your mix, you run the same risk in other investments. Luckily the stock market came back this year and my portfolio is doing 13.36% year to date. Earlier this year, is was -21.5%. The housing market actually crept up during that same period of negative rates. As always, your mileage (and dollar) may vary.

I believe that all investors should take risk commensurate with the exposure that they can afford. I can beat the 100% return in 7 years by buying down 6 properties at $100K and paying them off with the cash from those properties. At the end, on a $120K investment, I'd have about $900K in assets. If I had done the market and beat S&P the last 10 years, I may have $240K.

So risk profile means everything. Being risk adverse is not a bad thing as different people have different tolerances for the type of risk. Whether that's in business or investing, most people take zero risks while trying to achieve their goals. Save for tax-free bonds or inflation protected treasuries, most other investments have "some" risk to large risk. I'm not worried about the rental market in a major city at all.

So, leveraging credit for investment plans is okay. I think what you 5yrplan is saying that leveraging credit for common, ordinary things is not sound advice. I can agree with both.

In the end, use credit wisely.

• Don't use it to fund your wants, desires or needs.
• Learn how to keep positive cash flow. Develop a strategy to save and invest.
• Choose the best investment vehicle for you (your income, age, temperament and risk acceptance).
• Don't gamble (even with your investments or real money).
• Not only have a plan, but put it on paper and analyze the plan.

At least that's my strategy.

[5yrplan]

Risk eliminate it. Banks can call loans, income can cease, payments and rents can be missed. No debt no worries just press pause. 6 million millionaires can't be wrong.
- Dave Ramsey