I've never used credit. Not once in my entire life. I always pay cash.
Last winter, I was required to have my credit rating checked with regard to a job I was applying for. "Uh, Ms. Stillwater," said the human resources guy, "there's something wrong here. You have NO credit rating." That is a good thing, right? Apparently not.
Apparently it's better to have BAD credit than NO credit. People with bad credit at least play the game. "Ms. Stillwater," said the HR guy, "you are not playing by the rules." He had never seen anything like this before. Ever. NO credit rating? At all? What's with that? Was I a Communist or, worse yet, an anarchist? Maybe I was a terrorist? The HR guy decided there was something not-normal about me. "How can someone with NO CREDIT be trusted in such a high-security job?" The guy actually TOLD me this!
Apparently, in America a BAD credit rating is better than no rating at all. What kind of statement does that make about us?
Apparently living on credit is the way that the American middle class survives. For the lower classes, survival depends on below-code housing, used clothing stores, free clinics, canned food outlets, public transportation and sometimes homeless shelters and food banks -- but for the American middle class, survival depends on MasterCard and Visa. No savings to fall back on? A $50,000 debt? The house could be foreclosed upon at any minute and the car repossessed.
These people are living life on the edge just as surely as those of us who get our wardrobes out of the free box.
I understand HOW the American middle class balances their budgets by paying off one credit card debt by borrowing off of another one and other such tricks. This I understand. I have friends who talk about this kind of stuff.
But what I don't understand is WHY they do it. I can see going into debt or refinancing the house for a major emergency such as a life-threatening disease but to constantly risk one's future and the future of one's family by trudging through a bottomless swamp of quicksand-like debt -- to constantly put one's very life in danger -- because of the latest new car or something on the shopping channel or $100-a-pop LINGERIE? C'mon.
PS: Someone just e-mailed me that I was being too hard on people who use credit. "We all use credit because we have no choice," he said. "Credit is a tool. A very good tool if it is based on the proper assessment and employment security. Of course it can be abused. But people who have to live in the system are not to blame. We do our best." He pointed out that it's almost impossible to buy a home or send your kids through college without using credit.
Point well taken -- but.... I'm talking about people who go into eternal debt for frivolities. Like the Bush bureaucrats who sent America into hopeless debt -- that we will never be able to pay off -- in order to buy a frivolous "war".
Here's another good example of putting one's family in danger: People who purchase those new McMansions use a scary new pay-on-the-interest-only pyramid scheme called "Option ARM" to finance them. NOBODY needs that many rooms in their house if it ends up putting your family out on the street!
In his article, "The Neutron Bomb in Housing," John Case explained the extreme dangers of Option ARM. "Just out of curiosity, you stop into one of the Mall real estate offices. ....The friendly agent takes one look at your preliminary application. Then, she notices exactly which half-million dollar home photo you had been staring at while waiting, and says 'So, when do you want to move in?'"
"You're hooked," Case continues. "You're in the dream house.... Then, 29 months later, the bill for not reading the fine print...comes due. The interest ADDED to you mortgage principle from paying the minimum is now $50,000. The lender has exercised their right to 'reset' your loan. Your new payment is $4,100.00 per month." $4,100 a MONTH? Oops.
PPS: My neighbor just got EIGHT packages delivered to her from the Home Shopping Network. And she averages the delivery of five packages a DAY from HSN. UPS drivers know her address by heart. How does she DO it! On a clerk's salary? She must be in debt up to her neck. And WHY does she do it?