What’s YOUR Credit Rating?
Friday, October 16th, 2009By Author Linda Brady Traynham
My internet provider is fond of asking me that every time I log on and from time to time while cluttering up space I have better use for. My answer may surprise you: “I hope very much that my credit rating is lousy. It ought to be. I work at it.”
Goodness, that is at least unamerican, isn’t it? Terrible things happen when you have a bad credit rating, don’t they?
Remember that I’m as Contrarian as they come, and I think I’m on to something good, here. I had a head start, because I was told, after I was widowed, that I had “no credit rating.” Okay, I’ve got cash. No, I do not need or want a mortgage on the house I’m buying, and I refuse categorically to pay five percent more “because I’m a widow with no credit rating.” Let’s see…I’m losing 1.5% in taxable interest by paying cash, and you want me to pay you nine percent to use yours? Don’t think so.
Credit isn’t even a mixed blessing other than in very stable times when the economy is good and you want to start up or grow a business. Credit was never intended for personal use.
What’s wrong with it? First, credit is an open invitation to buy things which you cannot afford. If you could afford them, you would write checks or hand over cash. You know that!
Second, credit leads to the dreaded “monthlies,” bills that must be paid no matter what else happens unless you want to pay fines, have to talk to bill collectors, and risk having your wheels repossessed by the bank. Not paying bills leads to fines, increased interest rates, perhaps overdrawn bank accounts (more fines), and sleepless nights.
Credit cards today have precisely one use: buying things on line from firms which do not accept e-checks or PayPal. Those must be paid off in full every month, because at twenty percent per annum no matter how good a price you got on the bigscreen TV you wanted, the price went out of sight. Well…you could default on them, of course. One major card lost seven billion dollars that way last quarter.
What do you want credit FOR on this crisp fall day in 2009? If you don’t have a house with an upside down mortgage do you want to risk acquiring one? Yes, real estate prices are down spectacularly from five years ago, but we ain’t seen nuthin’ yet, baby. You hear a lot about all the defaults in sub-prime mortgages, and some know that a pile of ARMs are set to go up so dramatically that a lot of the signatories aren’t going to be able to make the payments on them…but if you noticed, the latest stats show that over a third of prime mortgages are at least thirty days in arrears now. The number of bank failures this year is staggering, and I wouldn’t invest in Citi or BOA if I were you, either. Tax revenues are down 17%, and a pretty good guess is that your friends at the Tax Assessor/Collector’s office (and the Feds) are going to raise rates nastily.
Put that way, and considering rising taxes, and upkeep…what do you want to buy real estate for? In particular, why do you want to take on a mortgage, interest, insurance, homeowners’ assocations (a pet peeve of mine), and irrational town councils? Lease a nice house and be happy. Buy a small house in the country and fix it up slowly, because that will be your refuge if we all have to plant Victory Gardens again, a pretty good bet. In a couple or three years…we’ll see about “investment” properties. Once the Greater Depression settles heavily on the land everything from houses, to acreage, to yachts will be available quite affordably IF you have what the owners want for them.
Buy a new vehicle? Whatever for? Why would you want to take on a five or six year committment to pay for a tinkertoy hunk of tin can that is small, uncomfortable, unsafe…and unpaid for? If you want another car buy a used one. Preferably a Jaguar from about 1988 to 1995. She’ll get 25 mpg, be good for at least another 150,000 miles, have lower insurance costs, and always be a Jaguar. A Mercedes Diesel would be a terrific choice; that, too, will get good mileage, burn diesel (which will be available readily long after gas is rationed, and diesel can be stored, which gas can’t), and…all together now, “It will always be a Mercedes!” An older model car will cost you a small fraction of what an undistinguished, unsafe, cramped, ugly current model will. You can get a beauty in good mechanical and physical shape for between two and ten thousand dollars.
Why should we send more money to Japan or Korea, and who wants anything much made in America other than a big Ford truck? My 1988 Chevy Silverado Extended Cab cost me $1600 bucks, has a terrific deep-throated roar, and call pull stuck tractors out of the mud while laden with a ton of feed. I’m probably more proud of it than the original owner was! By jingo, that thar’s a truck. It bears the scars of a thousand tasks well done. Don’t want no sissified pretend truck or an SUV here on the ranch. The Vroom-Vroom truck will outlast me.
“Well”…someone may bleat, “What about investments?” In the first place it is illegal to borrow money to fling at the stock market. Said market is quite likely at or near the top of what we call a “dead cat bounce,” and six months from now the chances are high you would regret anything you put in mutual funds. IF you really know what you’re doing (or have a really splendid financial advisor), and IF you are dabbling very, very carefully in oil, commodities, or precious metals, a cautious okay.
So we’re back to…what do you want credit for? We hear a lot about the “benefits” of repaying current obligations with “cheaper” dollars. Those dollars aren’t “cheaper,” they’re worth less. There is a big distinction, there. Far more to the point, most of us are not going to have more dollars to work with. We’re going to be on pensions and Social Security, or find hours or salaries cut, or be out of jobs. It’s all very well for the government (the cause of the problem) to talk about repaying loans for what we will laughingly call a trillion dollars with stuff they print a couple of years from now that will only buy, say, 75% as much. (I expect it to be worse than that, eventually, but for purposes of arithmetic…) That devaluation, or inflation, or default, however you think of it to yourself, is fine if you are the one printing money or collecting taxes and not bound by mythical budgetary constraints. If you’re Joe the Plumber a hundred thousand dollars “then” will only buy what $75,000 does now. Got that? Let’s say you’re a widow on Social Security, with $2,000 a month due you. At present, the state takes away 5% immediately as your non-voluntary contribution to Medicare. (No, you do not have to pay it. The government will be glad to keep your whole check.) Obama has announced that you are not going to have a COLA (Cost Of Living Allowance) increase for the next three years because “there is no inflation.” No, I don’t know where those who came up with that idea shop. In addition, the fees you pay for Medicare are going to increase 20%. Let’s keep it very simple and suppose you are on no medication. You are still going to lose $1440 a year off your SS. $24,000 – $1440 = $22,560. Divide that by four. If the dollar is worth 75% of what it is now in 2012, your gross adjusted income will then buy what $16,920 does today! You thought life was bad on less than two thousand a month, imagine it on what will be effectively $1410 monthly. “Pay debts back with cheaper dollars?” Right.
It doesn’t matter what your income is, and I hope it is far higher than mine. Unless you own a thriving business and Congressmen and Senators, this “cheaper dollars” nonsense isn’t going to do you the least bit of good.
Which is why I neither want credit, nor buy things or credit, nor have more funds than necessary parked in banks and other financial institutions. I’m busy turning mine into commodities and durable goods. It is frosting on the cake that others, having mortgaged their futures to houses, cars, and consumer purchases, are now devouring the accumulated wealth of the past. If you have a place to put them cattle are a great value and will increase greatly in value by next year–and I promise I’ll write an article on why soon. Crystal, china, silver, jewelry, furs, motor homes, bass boats, just about any dream you ever had is for sale now at a steep discount, used. IF you have prepared for all of the things which can go wrong, you can have Christmas early with my blessing. Since you probably haven’t, stockpile food, seeds, tobacco, alcohol, soap, bullets, and other things which will be superior tradegoods if we revert to a barter society. It could happen. It could happen easily before 2015, which does not mean I think you have that long.
Money today is rather like a gift card with an expiration date on it. We don’t know when the value of our fiat currency is set to expire or diminish, but we are certain it will happen. Don’t forget we can still have “Friday Surprises,” too. Don’t worry about losing the 1% your bank may be paying, pull a nice hunk out every Friday. If your bank is still there on Monday, you may put it back. It’s safer in a mason jar buried in your back yard.
One final point: every time you take your wealth and turn it into a tractor, a side of beef, or a case of cigarettes, you make life harder for the tax and spend crew. A thousand dollars left in the bank can turn into eight thousand dollars which are taxed, plus what the bank makes, some of which is redeposited in banks to be multiplied yet again. When you pay the butcher $400 for meat, sure, he spends it…but the magic fractional reserve fairy does not multiply it and send it forth to generate revenue for midnight basketball and importing Hamas “refugees.” Ask not what your country to do for you–and stop supporting those who are reducing all of us to poverty. Prepare for The Greater Depression, because it is coming.
Regards,
Linda Brady Traynham
Richard Marmo says:
October 18th, 2009
6:53 am
What’s my credit rating? I dunno…and frankly I’m not bothering to find out. In a similar manner as you, the only thing I use a debit/credit card for is online purchases/payments/automatic drafts where you don’t have a choice. I’ll also use a debit/credit card for Wal-Mart and other stores that insist on taking a check, turning it into an electronic debit and then handing the check you just wrote back to you, along with a credit slip you have to sign. And that’s only if I don’t want to hand them cash.
Considering the state of credit today, why do it any other way?
Richard
Linda Brady Traynham says:
October 18th, 2009
1:44 pm
A debit card is fine, since it takes money directly out of your bank account and is not a charge on future funds or earnings, as opposed to a credit card. However, debit and ATM cards carry a significant danger that predates “identity theft” by a very long time: sheer old carelessness. Dreadful things happen when we do not fill out our check registers AND update our balances EVERY time, whether we wrote a check, “pulsed,” or “swiped” the debit card through the machine. The money is gone whether we remember it or not. LBT
Emily says:
October 18th, 2009
1:45 pm
Are you serious?
Richard Marmo says:
October 19th, 2009
6:46 am
Emily,
Absolutely on both Linda’s comments and mine. You’d be amazed at the number of people who wind up $70 or $80 short in their checking account every month and can’t figure out where the money went. It went to all those ATM charges and overlooked debit card expenditures that they forgot to record.
If you’re going to use a debit and/or ATM card, you HAVE to train yourself to treat it just like a check and record the amount on the spot.
Even worse are automatic drafts on your checking account that some companies literally force you into accepting. Unless you keep enough money in the account to cover the automatic drafts under all circumstances, no matter how forgetful you are, the automatic draft will be paid while you get hit by the bank for an overdraft charge in addition to the amount of the draft.
Ain’t daily finances fun?
Richard
Steve says:
October 19th, 2009
1:31 pm
I haven’t even read the article yet and came to the comment section. I am striving valantly to gain a ZERO CREDIT SCORE. I have absolutly no use for borrowed money. I did it for to many years, it is a genuine waste of energy, work, and financial stability to owe any one for any thing, and I will no longer be a slave to any lender. NO MORE PERIOD.
unclecow says:
October 19th, 2009
3:39 pm
Credit cards are like many things – great for those who do not need them. With discipline and caution they can be helpful ways to keep detailed records of what has been spent. If they are used to “extend” one’s ability to buy more than one can afford, they become very bad ways to access poverty. Credit cards don’t make people poor, poor decisions do.
deafdrummer says:
October 19th, 2009
4:23 pm
Richard, it’s amazing what people do with their money… I use debit cards every now and then, but I try to get cash out so my purchases are not tracked and I don’t have to write in my registers all the time (though I have to mark the purchases on my spreadsheet). When I get home, the first thing I do is mark the information in my register AND on the computer. If I went somewhere and lost a quarter at the register, I’d remember to mark it and put that in my spreadsheet, 25 cents docked from the Misc. account. I track where EVERY penny goes.
There would be one reason to have credit cards, and that is to protect your savings and your resources, so you don’t have to touch them during emergencies. I pay the stuff off as fast as possible. I have a certain type of savings (it will cost you several OOO pellets if you want to know – don’t ask), and like the Indians overseas, I NEVER touch it unless I FREAKING HAVE TO! It is off limits for the rest of my life, as long as possible. If SHTF and you run out of cash and resources buying up all the stuff you can get, then you can use the cards as “The End of the World As We Know It” “escape cards.” This way, you can load up and get out of town, knowing there’s a strong possibility you might not survive the drive down to your hideout – then the bill wouldn’t matter. I know it’s not necessarily the best thing to do, but what are the companies going to do when they get the Tyler Durden disease and die?
Stephanie
Linda Brady Traynham says:
October 21st, 2009
1:48 pm
Dear Steve:
Thanks for the great response! I don’t think we can hit zero, judging from the junk that crosses the bottom of my screen. It looks as though you get 320 just for breathing. You are SO right: people have got to stop “owing their souls to the company store,” as Tennesse Ernie Ford sang about fifty years ago. The last quarter of a century was predicated on the supposition that real estate would always appreciate in value and it is safe to live on borrowed money. Some of us never believed it, but we’re suffering from the bad judgement of the many–and from what government does.
My focus is on becoming as self-sufficient as we can. For nearly three years I’ve had a rule: if you can’t eat it or protect yourself with it (in various ways), don’t buy it. No more bedding flowers out lavishly in the Spring for something that hurts this beauty-loving gardener. No, you don’t need anything that Dillard’s and Macy’s sell. Yes, you can take your mate out for a special anniversary or birthday dinner, but you don’t even look at fast food places. We’re excited about getting a real feed mill! We can grow and process our own corn and sugar cane and not have to worry about the ever-increasing price of sweet feed. For city folks a $22 bag of EAS protein powder from Sam’s (I have NO commercial interest in any firm or product) will sustain an adult for a month. Boringly, it is true, but complete nutrition. That’s steakburgers for two at Jack in the Box money, or a few video rentals. $22 is a cute T-shirt–or it could be over fifteen pounds of pork loins stashed in your freezer while the price is so low. Thanks for writing, and I hoped you enjoyed the article once you read it. Cordially, Linda Traynham
Linda Brady Traynham says:
October 21st, 2009
2:07 pm
Dear Uncle Cow:
Beautifully put. Credit cards are convenient when traveling, or when we discover we just wrote the last check out of the book, or as a way to manage money in specific circumstances SO LONG AS they are not treated as “income.” I agree wholeheartedly that poor decisions make people poor. The problem is that it isn’t just our individual bad decisions that hurt us, but the accumulated bad decisions of governments and others.
Chuckle…what kind of cow are you? We’re so crazy about our tinker toy Black Dexters, which are “small” only for cattle, and Irish. I got a call last night from the lady who sold us the Gurnsey, and no, she can NOT have Gertrude (Lilybelle to her) back.
Gertrude is feeding two sleek calves about 7 weeks old and donating two gallons of milk a day to us in return for lush pastures and a bucket of feed twice a day, and she is sweet and gregarious. She likes to hang out and chew her cud about ten feet away while we’re having our daily time on the terrace. Hey, there is more to life than Doom & Gloom (although we had better think about that consistently), and life here on the ranch is so joyous.
Gertrude and the goats mean that no matter how bad things get, so long as we can keep them safe we will never be without milk, butter, and cheese. In time the two little bull calves will be wrapped in white paper and put in the freezer. That will more than repay the thousand dollars Gertrude cost, and she should produce a calf a year for at least another decade. That’s another factor few consider, whether or not an investment will really continue to produce. Raising cattle to sell is a very precarious proposition, but everything we–all of us–can find to do that secures our food supply is going to pay off very, very well sooner or later. That’s why my constant advice is to find some way to purchase at least a few acres and an old motor home or trailer (which become your “emergency suitcase” and we hope temporary dwelling) and get at least a few chickens and a dairy goat. If one has relatives in the country, arrange now to store supplies there. If you have your rolling “house” and your share of foodstuffs you will all be safer. Perhaps several families could get together and buy a little land, preferably well out of a city. The world is becoming more dangerous every month, and NOW is when we have to think about the future.
Thanks for writing, and putting the matter very well.
Linda Traynham
Linda Brady Traynham says:
October 21st, 2009
2:30 pm
Dear Deaf Drummer:
Sounds like you hear the drummer in your head very well, and he has a good, steady paradiddle.
I won’t ask where you stash your goodies!
I do have one dismal thought, though: what if the ATM machine refuses to disgorge cash (or you haven’t arranged for more than the usual $300/day limit), the banks have closed for “holidays,” and stores refuse credit cards or credit card companies refuse to allow purchases of food, gasoline, and guns? The CC companies were considering precisely that last action about a year ago! They know that those who are buying food and gas, in particular, tend to be among their biggest credit risks. We’re still having “Friday surprises,” when a bank is closed down on a Friday and the customers don’t find out until at least Monday. One of my banks got “helpful” when I wrote two checks in one day, and refused to honor the third one. That was “atypical activity,” and they didn’t care that I had plenty of money to cover it. Their story was that someone might have stolen my checkbook! Nah, I just ran out of checks unexpectedly on the account I usually use that day. Banks do not HAVE to give your money back, and CC companies do not have to honor a request for cash, goods, or services. The bank offers NO guarantee that you will ever be allowed access to a safety deposit box if it closes.
Yes, there is always the chance that one will not make it to a hideout chosen in advance, but the risks increase disastrously for those who have to go buy supplies when the riots have started, the national guard is in the streets, the dollar has crashed, the hurricane has made landfall, or whatever caused the emergency. My two successful adult children think I’m crazy to live in the country and obsessed with what might happen, bless them. I did manage to get them to stock a month’s food, and gave them silver and other useful things. If I’m wrong, well, such are nice to have, but if I’m right I’ve done the best I can to give them a chance.
One of my most stern admonitions is to get out in time. Don’t stop to pick up the laundry or a birthday cake. In time of emergency everyone is going to be trying to shop, get cash, and fill the gas tank. The moment you learn that something untoward is happening, throw the real essentials into the car that should already have the trunk full and get out of town before the roads are a parking lot. If what sounds like an emergency blows over, fine (more than fine!), the worst that will happen is that you may feel a little foolish. We already know what happens to those who linger in New Orleans too long, and I’d rather take a little joshing than visit the Super Dome under those circumstances. A close friend who took Y2K very seriously is just now using the last of the supplies he stocked, and he lost nothing except a few cans of tomato sauce. The price of the staples he used continued to go up. There’s a good strong moral, there.
You pointed out some excellent issues, thank you, and it sounds to me as though your chances of reaching safety are far better than most. Thanks for writing.
Linda
Kevin says:
October 30th, 2009
8:59 am
Linda,
Ditto on credit. I have to ask about inflation though? I’ve seen prices drop on all sorts of things locally, food, lumber, steel, etc. Even chicken feed took a nice drop this year. Yes I know gold and silver is up, but that seems to be more a hedge against Friday surprizes.
A couple of suggestions to add to the commodities stash:
Lumber and metal stock. If you have the space it can be handy to stash such building supplies, they may not be easily transportable, but when folks need some 2×4s or angle iron you’ll be the best source.