"Maxed out"

[MaryMary]

""Maxed Out," a documentary that opens nationwide next week, examines the dark side of America's love affair with debt."

http://finance.yahoo.com/expert/article/moneyhappy/25516

"Unfortunately, Scurlock never directly addresses the personal-accountability aspect of debt in his film. I was hoping he would ask at least a few hard questions about the consumption choices that lead people into the red.

A lot of people we talked to said, ‘Gee looking back at the level of debt, there should be a Mercedes or a Ferrari in my driveway, but I have nothing to show for it,'" Scurlock says. "Most Americans are very optimistic. They think things will always get better from here, they'll make more money, they won't have any emergencies."

I read with interest comments to this article representing POV from various standpoint. IMO, many people still miss the responsibility part, blaming all banks and financial institutiuons for own mistakes.

[tylianna]

I have no debt... My husband has a car loan. I have NOTHING, no CC no loans, nothing.. Because of our lack of credit, we can't get a house! So, we are told to get a couple of credit cards to build up our credit. ???

[niftyneon99]

tylianna, that is good sound advice. Get a card or two, use them monthly (always pay them off fully each month -and don't max them out) and soon you will see your credit history begin and your score should be good (except for the length of your history, which will be a negative)

[kmmmom]

I have heard that if you go to a lender that does unconventional underwriting, you can get a home loan. That way you don't have to go in to debt to show a credit history. ( This is all a theory to me though since debt is my middle name.)

[MaryMary]

Credit is a tool and before using it people have to know how to and what are the concequences of not complying with terms.
either extremes, maxing it out or not having credit at all, are hurtful.

[MaryMary]

I have heard that if you go to a lender that does unconventional underwriting, you can get a home loan. That way you don't have to go in to debt to show a credit history. ( This is all a theory to me though since debt is my middle name.)

Unconventional underwriting will get you your loan, but not at the best rates.
No one has to go into debt to show credit history: get the card and pay it monthly in full, it wouldn't cost you a penny more then paying cash. All it required from the users side is to have a discipline to use your credit wisely.

[BzyBee]

YGPM tylianna...of course you can get a loan. Sounds like the lenders you have talked to only do automated underwriting....you need it manually underwritten. And you can get the best rates....you may need to pay some additional origination fees upfront. If you want a reference for a lender JLMK.

[MaryMary]

YGPM tylianna...of course you can get a loan. Sounds like the lenders you have talked to only do automated underwriting....you need it manually underwritten. And you can get the best rates....you may need to pay some additional origination fees upfront. If you want a reference for a lender JLMK.

You either pay upfront or they'd roll it into your loan as a higher rate. They also can pile it on the top of your borrowed amount. It cost you more one way or another then if you'd have a credit.

The sooner you'd get unsecured credit card and start making monthly purchases the sooner your credit history will start. Since no good offers might be available to you, ask someone with good credit to co-sign the application.

[BzyBee DH]

You either pay upfront or they'd roll it into your loan as a higher rate. They also can pile it on the top of your borrowed amount. It cost you more one way or another then if you'd have a credit. .

We're talking a couple of hundred dollars here.


Since no good offers might be available to you, ask someone with good credit to co-sign the application.

NO!

[BzyBee DH]

Quotes that I found interesting -

"Other than my mortgage, which is fixed for 30 years at a low interest rate, I don't do debt. No revolving credit card debt, no auto loans, no home equity borrowing. Would I like to bust out the back of my home and create a designer kitchen and family room? You bet. Am I going to sacrifice my children's college savings or retirement goals on the altar of my extreme makeover? No way. "

and

"Here's the other irony: Credit card companies market their products by claiming they offer you a world of choices -- take that dream vacation, buy the 60-inch television. But by steering completely clear of credit card debt and saving on a regular basis over time, I found myself with much richer options -- choices about how I would balance work with family, health, and friendship. That satisfaction is more enduring than anything I could have purchased with plastic."

[MaryMary]

Care to explain why not?

[susysnshn]

I'll answer one of them. Never, ever, ever, ever cosign a loan with someone. You can and usually will end up paying for it yourself, but only after they've fallen behind and trashed your credit.

And since we ought to be "do unto others" kind of people, if you should never, ever, ever, ever cosign a loan with someone, you should likewise never, ever, ever, ever ask someone to cosign a loan with you.

People who cosign for others should treat it as their own personal debt. Banks will. It also limits your own borrowing potential because YOU owe that money.

Finally, did you know that banks can choose who they hold responsible for debts? That's right. If you cosign and the bank feels they have a better chance of getting the money from you, they don't have to go after the original signer first. This assumes a worst case scenario, but that's what you should be assuming, too.

I know the OP never asked anyone to cosign anything for her. Someone just asked what was wrong with it.

[kurlisola]

Care to explain why not?

Don't you watch Judge Judy? lol!
Golden rules gleaned from Judy....never cosign for anyone; never buy a cell phone for anyone; never put a coworker on your cell phone plan; never leave your laptop laying around at a kegger; and never agree to go on television in front of Judy unless you want to be made a fool of-lol!

[MaryMary]

Do you suggest you cannot find a soul among your surrounding (close friend, relative, religious leader) you can trust or have trusted? I skipped the suggestion of careful choosing that someone, thought that is too obvious...

Years ago we had the same approach: never owe anyone. all we had were checking and saving accounts, never even use that debit card, never even borrowed any money to start the business. We bumped into the same situation as tylianna when we were looking to buy a house. Banks said "no" when I asked for the best rates I've seen, offered not such a good deal just because we didn't have any credit history. DH asked a friend who he had known for years and years to co-sign a credit card, so he did. In a year or so we asked his name to be removed, that was all. A few years after we were able to return "good karma" (LOL) by co-singing a mortgage of another good friend of ours. He did exactely what we had: deleted our name from borrowing agreement and deeds a year later.
Since the banks do not know you personally, they rely on your credit files. If you decide to lend money to a friend or realtive, based on your experience with them you should decide if this person is reponsible enough not to let you down. Dp not afraid to say "no" if you think they are not trustworthy. I do not suggest to be gullable or guilt ladden when refusing to give money for your casino addicted BIL (for example). Exsercise healthy common sense, make your decision and stick with it, try not to care what they'd think about you if you'd refuse.
As for just couple hundred dollars extra for manual underwriting if you do not have credit history.. Not sure that would be it in the current enviroment of record foreclosure rates. May be it used to be, but not now.

[berlinsmommy]

I guess I have a HIGHLY unusual family when it comes to money. My dad is a banker so we all had savings accounts from the time we were very small. We had chores and got allowance and budgeted out money. My parents lived frugally, mom couponed, and they did a lot of major things like car repairs and reroofing our house on their own to save money. My parents had a Master Charge and later a few other store cards and credit cards and used them sparingly to get discounts and always paid them off.

Occasionally there have been situations where things like cosigning and lending each other money makes sense because we trust each other. Here are a few:

When my brother graduated from college, he was 22, had a few credit cards that he used occasionally (and paid in full every month). He was frugal and lived near campus and did not own a car. After graduation, he got a great job (six figures) but needed to move (1000+ miles away) and needed a car ASAP. Because he had not even gotten his first paycheck but had good credit, he qualified for an auto loan-at 12%!!! By adding my dad as a cosigner he qualified for a loan at <6%, so dad cosigned because he was making a prudent decision (mid level Honda Accord, no other debt) but due to the special circumstances he needed a little help. That was almost 8 yrs ago, my brother always made the payments and it is paid off.

When DH graduated from college we needed a little help too. DH's company paid for the relocation but it would be 4 weeks before he got a check due to the timing. We had to pay double rent (last month on old lease and first month at new apartment) plus a security deposit, utility deposits, plus a few other little things associated with the move. We were poor college students and didn't have money set aside for stuff like that. I also didn't want to charge it as it was too much to pay off in 30 days. My brother lent us about $3k to get us through the move and we paid him back in a little over 2 months.

There have been several other similar incidents, but you get the point. Although in general, I'd say never cosign and never lend money unless you are willing to kiss it goodbye, within my family there are a few exceptions for special circumstances, but since we are a very financially responsible family to begin with those circumstances are few and far between. DH's family is another story, I wouldn't lend them a dime. His sister recently "borrowed" $5k from her grandmother (I use the term loosely as grandma will die before seeing the money back) and she and her DH went to Vegas!!!

[BzyBee]

Do you suggest you cannot find a soul among your surrounding (close friend, relative, religious leader) you can trust or have trusted? I skipped the suggestion of careful choosing that someone, thought that is too obvious...


Not at all a matter of trust. We all know that well intentioned, trustworthy, reliable, responsible people can fall on hard times. How many members here have had a husband in an unexpected accident, a job loss, a divorce, a car accident...too many bad things happen to good people....even friends, family and religious leaders. No, I would never co-sign for anyone under any circumstance. I would never ask either.

We have been asked and said no. In one instance we gifted the money rather than co-sign. Other times just a flat out 'no'. If the person is too much risk for the bank...why should I think it reasonable for me to take on that same risk? I am not a bank, I do not loan money, I do not sign on loans that I am not willing and able to pay for. In general, it is unwise. Just because it sometimes works does not lower the risk level....it is very high...as many as 75% of co-signed loans are not paid off by the 1st borrower.

[FantasyIsland]

deleted our name from borrowing agreement and deeds a year later.



Not in any state of which I'm aware can one person simply "delete" another's from a mortgage deed and/or real property deed. Imagine: Ex-DH wants me to not have any interest/say/rights to the house which I was paying mortgage on with my job. So he goes to the bank and says: delete her name. As if. NOT going to happen. In order to "remove" someone's name from a "borrowing agreement" and/or deed, that property has to be legally transferred. All parties have to "sell" it to the new parties. This requires expense: First, the mortagor has to agree to an early payoff of the original mortgage loan: second, the deed has to be re-written - and this DOES involve an attorney, even if only the bank's attorney: third, the title to the property must be "run down" - this means it is checked for any liens or other encumbrances since the date the property was first purchased. Title insurance is required by every mortgagor and it is paid once - when purchasing property - even if you are purchasing it from yourself.

Fan

[BzyBee]

That is what I was thinking too....it would require a re-fi (at least)...if the lender is willing to let you do it all.

[BzyBee DH]

To add my $.02 -

If there is a co-signer on a mortgage - The "other" person with you is attached to the house. If something happens to them and they get into financial trouble, creditors can come after "your" house. YMMV on state laws, etc.

A cosigner will in most cases also be responsible for any late charges, penalties and legal fees associated with a default. The lender can:

Sue you and get a judgment against you
Make you disclose your assets, and
In extreme cases force the sale of property you own to pay the debt

What are the chances the borrower will default? Some studies of certain types of lenders show that as many as three out of four cosigners are asked to repay the loan.

What if you, as a cosigner, can't or won't pay the debt? The creditor may sue you, and your wages could be garnished. Your credit record could be damaged. Also, the lender can collect from you immediately, without pursuing the borrower first, if the borrower misses a payment.

Also, consider whether you plan to apply for a loan or credit card. The cosigned loan will count as your own debt when your applications are considered by credit card issuers or lenders. Since a co-signer is legally obligated to pay the debt if the borrower defaults, it counts the same as their own loans on a credit report and is factored into their debt-to-earnings ratio.

In fact, in most states, if you cosign a loan and the borrower misses a payment, the lender can collect from you immediately, without pursuing the borrower first.

[TammyH]

I have no debt... My husband has a car loan. I have NOTHING, no CC no loans, nothing.. Because of our lack of credit, we can't get a house! So, we are told to get a couple of credit cards to build up our credit. ???


There are loans out there for first time buyers with no credit without the high interest rate. I am a Realtor in KY and the majority of my work is with first time homebuyers. Its the part I love....helping someone get their first home. Like someone else said you just need the right person to help you. I help my clients from beginning searching for the loan til .... closing, and then keep in contact a few times a year. If you guys really want any info e-mail me I can get you some pamplets on different loans and mail them to you.

Tammy

[MaryMary]

Not in any state of which I'm aware can one person simply "delete" another's from a mortgage deed and/or real property deed. Imagine: Ex-DH wants me to not have any interest/say/rights to the house which I was paying mortgage on with my job. So he goes to the bank and says: delete her name. As if. NOT going to happen. In order to "remove" someone's name from a "borrowing agreement" and/or deed, that property has to be legally transferred. All parties have to "sell" it to the new parties. This requires expense: First, the mortagor has to agree to an early payoff of the original mortgage loan: second, the deed has to be re-written - and this DOES involve an attorney, even if only the bank's attorney: third, the title to the property must be "run down" - this means it is checked for any liens or other encumbrances since the date the property was first purchased. Title insurance is required by every mortgagor and it is paid once - when purchasing property - even if you are purchasing it from yourself.

Fan

Indeed, they did a refi.
but the process you described is not as complicated. It required us signing a release, giving up all rights on this property. They (our friends) did the rest of paperwork. AFAIK without any extra costs AND without increasing their borrowed amount.

[MaryMary]

Not at all a matter of trust. We all know that well intentioned, trustworthy, reliable, responsible people can fall on hard times. How many members here have had a husband in an unexpected accident, a job loss, a divorce, a car accident...too many bad things happen to good people....even friends, family and religious leaders. No, I would never co-sign for anyone under any circumstance. I would never ask either.



People we co-signed are well educated, including about money, but self employed and had not been in this country long enough to establish own credit history. I've seen the occurances in this family when hard times striked. They were able to pinch pennies so hard, even to sacrifice some own needs in order to pay debts. They have treated debts to friends and family with much better honor then to the banks, even to the point they need to borrow by higher rate to pay people.
When we came to this country I didn't know a lot what I should have. It doesn't mean I want people to get through the same as we had because lack of a particular knowledge, wouldn't share what they suppose to know. Yes, everyone are different. We would never co-sign just for anyone, but for very selective people.
do you know that only in US default on loans is not a criminal offence?

[tylianna]

Wow, I was just searching through my past posts, and I totally forgot about this one!

I currently have 4 credit cards.

JC PENNEY (only use for sales that require JC penney card like $10 off coupons)

PAYPAL BUYER CREDIT(my FIRST credit card!!!!) this I use to track my online spending and to build up credit, since this one I pay double the monthly payment and/or pay off

ORCHARDBANK VISA (the lowest interest rate I've ever been offered, but, they have an annual fee, so a month before my annual fee, I will call them to get rid of annual fee, or CLOSE the account)

ABC WAREHOUSE (a stupid mistake on my part, they offer 90 days no interest, but we are paying it off before the 90 days, and I will close that account)

So in reality I have 3 cards that I will keep. One may be closed in the next 8 months.

In regards to my OP. We are looking at buying a house this summer! Amazingly I got approved w/o my DH's name in the loan, but that is only because he had a car loan that was OLD, and had 2 small credit cards that were almost maxxed out. And since he goes to school, and only works a few hours a week, they considered his debt/income ratio too high.

I just have to establish a payment history and pay down 2 of my cards that show high balances (the ABC one I am closing and my Paypal)

Other than that, I am excited!!!!!

Since I am a server at a restaurant, there are ways to "fudge" your income. I have always played by the rules and claimed 100% of my tips. (shame on those who dont!) So, my paychecks and w2's tell the truth on how much I make. I feel sorry for the girls who get by claiming 10% of their sales, and they brag that they made 15-25% at times. What about when they retire and need to say how much they have made, and they don't qualify for the maximum Social Security benefits...?
Anyways, I even had a lady last year, who was a realtor, say that since I am a server, and knows I probably make more than I claim.... (shady, right?)

So wish us luck in getting our dream house!

[MaryMary]

this summer will a great time to buy a house, buyers market out there..
My friends were able to buy a house for $450K with original asking price $670K a year ago.
Good luck!

[faeryedark]

I have no debt... My husband has a car loan. I have NOTHING, no CC no loans, nothing.. Because of our lack of credit, we can't get a house! So, we are told to get a couple of credit cards to build up our credit. ???
We're in the same boat...can't get a loan because hubby has never had credit. Mine's fine BUT I'm not the major bread winner. We own our car outright, don't have credit cards, and are 3 months AHEAD on our rent...one of my closest friends has filed bankruptcy once (thinking about it again) got a pool last year she's never paid on, has 15!! credit cards (uses some to make payments on others) has 2 car loans, and is STILL being offered credit. All we'd like is amodest home loan around $75,000-$100,000 to by one side of duplex 3 bd) in town. Fine they say, hubby needs to get a credit card and it keep in good standing for 9 mos. We don't WANT a credit card ARGHH!!!

[summermay]

My son just moved out on his own, He has his own checking and savings account and used a debit card. He changed banks because of location and to get $ for changing banks ($50 I think) and also to get the new banks credit card. They denied him because he doesn't have any credit. How is he suppose to establish credit if he can't get a card? Just seems stupid to me. I told him to try and get any card he could charge a few things, gas, groceries, but ALWAYS pay it off in full every month. Also told him he didn't need a very high credit limit to start. Hopefully he will find something soon.

Oh and long ago I had to get a credit card because they wanted to see one to write a check. Remember those days? :biggrin:

[MaryMary]

With all due respect, credit and credit cards require brains to use. Unfortunately banks do not send it out along with that plastic...LOL
On the contrary, banks want you to pay min or just above, always carry balances and generate interest for them. But no bank have a rule prohibiting to pay all CC balances in full every month and do not generate any extra fees and interest, kwim?
You want to borrow money you gotta play by their rules, especially now when all guidelines have been tighten a lot.. Do apply for a credit card. If you afraid of overspending leave it home and use only 1-2 days per month, but make sure you send total payment every single month..

If you paid attention to dates on this topic tylianna posted "no CC cards not able to get loan" almost exact 1 year ago. Now she has a couple CC AND approved for a loan.

[shelleyf]

Good advice

[cdarrow26]

We're in the same boat...can't get a loan because hubby has never had credit. Mine's fine BUT I'm not the major bread winner. We own our car outright, don't have credit cards, and are 3 months AHEAD on our rent...one of my closest friends has filed bankruptcy once (thinking about it again) got a pool last year she's never paid on, has 15!! credit cards (uses some to make payments on others) has 2 car loans, and is STILL being offered credit. All we'd like is amodest home loan around $75,000-$100,000 to by one side of duplex 3 bd) in town. Fine they say, hubby needs to get a credit card and it keep in good standing for 9 mos. We don't WANT a credit card ARGHH!!!

Have you looked at FHA loans? They typically only require that one has a 12 month history of payments on "something" in their name. It can be a cell phone, utility bill, pretty much anything. If your husband does not have this yet, you might want to consider putting the electic bill, etc in his name and in 12 months you should be good to go as long as the rest of your credit is fairly good.

[faeryedark]

Have you looked at FHA loans? They typically only require that one has a 12 month history of payments on "something" in their name. It can be a cell phone, utility bill, pretty much anything. If your husband does not have this yet, you might want to consider putting the electic bill, etc in his name and in 12 months you should be good to go as long as the rest of your credit is fairly good.
Right now, with things the way they are (and a personal situation) we're just gonna sit tight and throw as much as we can in our savings.

[Nishu]

Hey thanks for bringing this up. I watched it on netflix a couple days ago. It was a real eye opener.

[ladyeeyore7]

Well let me give you an old fool's advice. My hubby is self-employed as a legal investigator/process server. My BIL is a collections attorney. We make part of our living on debts gone bad finding and serving co-signers. I have seen my hubby come home almost in tears because he had to serve the nicest people papers to garnish their paycheck. He said that eventually the lawyer would be taking their home because they had co-signed for someone who was tragically disabled in a car accident and had no means of repayment. The person who was disabled filed for bankruptcy and was cleared but the co-signer is still held responsible. Of course there is always discussion about whether that is legal or not. The truth of the matter is, and we see this every day, whether it's legal or not if it goes thru the court and they rule against you the fight to prove it's illegal can sometimes cost you more money than the original loan. Another example of this was when my brother asked my parents to co-sign a car loan. My parents decided instead to put the loan and car in their own name. (I didn't totally understand the logic in this but oh well). About 2 years later the SIL filed for divorce (my brother didn't know until he came home to an empty house) and the court awarded the still-financed car in my parents name to her stating that since she and my brother made all the car payments it was obvious who's car it was. My parents talked to their lawyer who advised them it would cost them more to fight it than to pay off the car. I guess you could say the moral to the story is regardless of how responsible someone is financially not everything is in their control. If you co-sign for someone be sure you can afford their payments!

[joshmamabear]

Since no good offers might be available to you, ask someone with good credit to co-sign the application.someone who co-signs an application w/o reading the entire microscopic fine prints may find out sooner or later they are held responsible for someone else's debt.

It is NOT smart to co-sign anything that involves debt or you may find creditors running after you in case the main signor defaults.

I'd rather tell someone who asks me to co-sign to get their own secured CC and stick to spending within 25 to 30 percent of their line of credit. then make sure to pay the full balance each month. they can build their credit history this way w/o asking favors to anyone.