The great credit scam

Warning: The following post is a bunch of my own personal opinions which are based mostly off of personal experience along with looking back through recent history.

We were told a great lie. We were told that in order to become better people, have better things, and to succeed in life, we had to have good credit. The only way, of course, to have good credit is to have loans and credit cards, then to make the minimum monthly payments each month. And as a nation, we ate it up.

Even now, they still try to tell kids that they have to have credit. I had a guy from Lincoln Tech sitting at my kitchen table trying to tell my kid that if he didn't get loans for college, he wasn't going to accomplish his goals. He was telling my kid that he had to get credit just to do things like find a place to live. I called him out on lying to my kid and he left.

Bear was irritated. He had been told that in order to rent a home, he'd have to have credit and to build credit through the use of cards, etc. And of course, no matter how often I tell him the opposite, some idiot has to go and tell him differently. It's one of those things he has to learn for himself.

It is the goal of banks and financial institutions to put a yoke upon you. (If you don't know what that is, please Google it.) The idea, for them, is to create a steady stream of residual income. Those high rate interest fees are their residual income. It is not in their interest to advise you to pay the bill off completely each month. It is not in their interest to tell you to pay cash instead of credit except in times of emergency. They want that residual income. That residual income is breaking a large amount of consumers!

Colleges now charge much higher rates for educations and they tell their students, "just get a student loan." Student gets that loan, which pays for school but also gets them a little extra each month. At the end of their education, that student now owes anywhere from $15,000 to $40,000. So already, just getting out of college, your kid has enough debt to put a decent sized down payment on their own house.

Kid has six months to start paying that off. In the meantime, they need money for clothes to job hunt in. If they're lucky, they manage to find a job right away. Most aren't lucky and have to take small jobs like fast food or Wal Mart, or writing for 1 cent per word, while trying to break into their chosen field. Instead of living within their means, getting roommates, eating ramen for a year or two, fix a junked car for transportation what do they do? They pull out the credit cards that they were given during school and after graduation. They apply for auto loans. They increase their debt.

This trend continues on and on and on. In the end, we wind up owing so much more than we actually earn. We're neck deep in debt, feeling a bit cheated and so start yelling about earning livable wages, employers not paying enough, etc etc etc. The entire time, our original screw up was in believing that credit was the be all and end all that would launch us onto a path of success in life.

So here you go. In short, you don't need credit cards to build good credit. You don't need large loans to build it either. So how do you build it?

Simple. Put the utilities in your name and pay the bill each month. Get a telephone in your name, and again, pay the bill each month. Yes, you will have high deposits but high deposits is much better than extremely high interest rates that burden you and place you in that yoke. Pay for your purchases at the time of purchase, except for those monthly residual purchases. Gas, electric, telephone, cell phone, etc.

Save your money and purchase your car outright. It doesn't have to be brand new. It just has to be in good condition and get you from point a to point b safely. Pay your insurance on time every month. That builds your credit.

When you rent your home, you have to pay first and last as a deposit no matter how great your credit is. Pay your rent on time on a monthly basis, every month. That builds your credit.

Save your money up to put a large down payment on your first home. You've been paying your bills on time. You have decent credit and can get a decent home. Make sure to get a home that is within your means! Do not rely on credit to get you a home which is worth more than you can afford! Make those payments every single month. Make them on time, every month. That builds credit.

Really, you only need credit for two things. Emergency medical expenses, and your house. Unless you're a farmer in which case, that changes.

Our economy is failing. A large part of the reason for that is because so many people paid everything on credit, but now they can't pay the bills. They over extended and banks allowed them to. Banks can't pay their bills and need things like bail outs. Which cost us money in the long run. If we, as a nation, put the credit cards away and started living within our means, we all would be better off for it.

One more benefit to living on cash? Things like what recently happened with Target (credit card info stolen) won't have a large effect on you. Cash can't be hacked.