Friday, September 30, 2011

Credit Rating = 0

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We Are Doomed


Times are bad and most folks that I talk to don’t seem to think that it will be getting any better any time soon. Maybe not even in this generation. They may be right.

I believe that the reason for this is that the American culture no longer seems to be proactive in the long term and that somewhere along the way we became reactionary in the short term. We want instant gratification and wealth, without the long term commitment. Financial institutions are not planning or investing in the long haul. They don’t want to invest, because they have lost their shirts in the past when presidents and CEOs made really bad decisions that almost put them out of business.

Let me give you a little personal example:

We are doing some remodeling in our house and are paying a contractor to do it. It is an ongoing process that has taken about three months. As is usual, the cost of the estimate keeps going up and we are a bit over budget.

So I went down to the Credit Union where I bank and asked them to if I could increase my line of credit limit from $1,000 to $5,000 to help cover some of the cost.

Before I go any further, I need to give you a little background here.

My credit score is over 780, which is in the top 5th of all credit scores. Our combined household credit card debt is about $2,000, with a max credit limit of around $25,000. Unlike most, we are not upside down on our mortgage and have about half of the mortgage paid off since we put a huge amount down on our house.

My wife and I have been steadily employed for over 10 years. I have been at the same employer for the past 20 years. I have never declared bankruptcy or not paid a debt. My wife declared bankruptcy once, over 10 years ago before we were married. I already have a $1,000 line of credit that I owe nothing on, and have had it for over 5 years. When I have used it, it was paid off with a direct deposit from my employer. Of the three vehicles we own, only one has an outstanding loan balance, the other two we own outright.

Based on this financial background, the credit union denied my request to increase my line of credit by $4,000.

However, they DID tell me that I was eligible for a ‘pre-approved’ auto loan to the tune of $30,000, if I wanted to buy a new car!

Now, I might not be a financial wiz, but this is just F’ed-up.

If banks and credit unions are not willing to take risk (and a good risk at that) to get the economy moving again, but are willing to fork over $30,000 for a car I don’t need, only because they believe that the loan would be secure, because they can always repossess the car, means that there are serious problems with our financial institutions and cultural norms.

I don’t ‘need’ this extra $4,000 in credit. I have other ways I can pay for the contractor. But if I can’t get this sort of credit based on my financial history, then who can? I am assuming no one. Hence, we have a stagnant economy that won’t be moving anytime soon.

The wife and I have a very large piggy bank at home that we put all our loose change in. I suggest that you ALL get one. It might be your most secure investment in the future.