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naturepunk:

I think I left the teller at the bank genuinely disturbed when I told him that “If I can’t afford it, I just don’t buy it.” 
“What about a car? Do you drive a car?” he inquired, his voice toning on the edge of fear.  
I told him, “Yeah, I have a vehicle. I bought it used for under $3,000.” 
He looked physically pained. “What about if you want to buy some kind of new appliance? Or furniture?” he persisted.
I stared at him blankly. “My couch was $5.00 at Goodwill. Like…I just buy shit cheap or I don’t buy it at all. The only thing in my life that I make payments on is my house, my bills, and my insurance, and that’s split five ways because I have housemates.” 
The young man looked horrified? Appalled? And somehow also awed? 
This guy couldn’t have been much older than me. But it seemed that he’d never even considered the option before of saving up for something to purchase it outright instead of using a credit card.
Am I the only person in my general age group (just turned 26) who’s never owned a credit card, and who has forgone basic comforts in order to save up for items so you don’t owe money to anyone, like, ever? 

If you’re living in the US without a credit card at 26, you’re playing with danger.

No credit is viewed as the same as bad credit. Which means you could be denied if you ever do need to rent an apartment or a car. Hospitals and clinics are also less likely to allow payment plan programs for people without good credit.

The best thing you could do at this point is apply for a credit card you’re eligible for and pay a few things (I do gas and groceries myself) with it each month. As long as you keep it to zero balance each month there is no interest and there will be proof of you not having debt (instead of just the absence of debt).

what.

This is legit how it works.  The system requires records on you, or else.  So you need a credit card and worse, you need to have a record of using it, even if you pay it off every single month.  Unfortunately, the formulas used to determine credit score are secret, so we also have people suggesting that your credit rating is helped if every so often you do pay a bit of interest.  The whole thing is a complete mess.  If you don’t have a credit rating/history, then any loans you manage to get will be at extremely high interest and will require much more effort than they really should.

what

yeaah let me just go get a card that i can’t pay off because capitalism is shit, even if i literally only buy a pack of gum
that’d go well

If you pay it off in full every month there is no interest.  Do what OP is doing but put some of that on your credit card and pay it off every month, and soon you will have a very good credit rating.

you skipped right the fuck over the “can’t pay it off” part huh

like credit cards are just not a viable thing if you’re poor and have shit income

And I’m saying to literally not put anything on it if you can’t buy it in cash. And I’m aware that they fuck over poor people, but yeah, that’s the system that’s in place. This is advice for navigating it, which is how to obtain good credit which helps a lot.

Right like don’t make minimum payments, put your gas on your credit card then that same day pay the credit card company online then don’t worry about it for another month. It’s an absolutely shit system, but in the event of an emergency it’s good to have.

I have had to explain this to a lot of people in my life, but it’s true- no credit is the same as (or worse than!!!) bad credit. What having (and using) the card actually shows is that you are capable of (and actually follow through on) making regular payments: ie, it is proof of having a steady income (even if you do not actually have a steady income). It is showing you reliably can pay for things you purchase (you do the same thing with cash but there’s no record), and that if you borrow money you’re good for it when it comes time to repay, which is what your credit score is all about.

Think of it this way. You have a credit card, which is your credit tracking device. You use the card to tell someone “I will pay for this thing with borrowed money.” They agree to allow you to pay with borrowed money. You then turn around to your credit card company and say “Thank you for allowing me to borrow your money, I will now pay you back with my own money.” (which, if you repay them promptly enough, you can repay them the exact same amount you borrowed, rather than paying them more than you borrowed [which is what interest is])

The credit card company then recognizes that you successfully borrowed their money AND returned it safely, and they pass that information along to credit tracking companies. Each time you do this, you gain credibility. If you do this enough times, you are considered a credible borrower of money, so that if you ever are in a situation where you need to borrow a large sum of money (for example, a mortgage or a car or a hospital bill or whatever), companies with money will look at how well you have returned money in the past, and say Ah yes, this person repays their debts well, so we can lend them our money.

So like, do what the above folks are recommending. Get a credit card and use it to reasonably purchase things you already have to buy- put a batch of groceries on the card. Go home (or wherever you can use the internet), pay it off as if you had paid cash in the store for it. There is no extra fee or interest for doing this, and you are leveling up your credibility in case of emergency later on in life.

More shit in adult life they never tell you about in school

As someone who’s credit history was wiped to zero after an ex stole her identity.

Having no credit is significantly worse than having bad credit. I’ve been fortunate as of late and nothing bad has happened to me, and I’m set to inherit a house and the like. But, if say the furnace dies, or the hot water heater, or I get sick again (since my insurance company jacked my premiums to $1300/mo), I’m proper fucked.

One of the big suggestions my financial guy (I have some stocks and bonds, planning for retirement) suggested was, getting a secured credit card. Basically, it works like a normal credit card, but you put your own money down as a collateral/financing base (generally between $200-500), the financing bank/institution then puts their backing behind you. Secured cards have a near 100% approval rate for those of us with zero credit, whereas normal bank backed cards you are less likely to be approved.

I applied for one and got denied because I had low income…..

Shit I wish had been explained to me 10 years ago.

simple way to build credit: set up your monthly charges– cell, internet, Netflix, insurance– to be paid automatically on your credit card. Instead of paying each bill separately throughout the month, you pay off your one credit card bill.

My son just turned 18 (yesterday), we got him a credit card in his name that we are co-signers on.  He’ll use it to get gas for the car we share and we’ll pay the bill each month.  This way he can get a credit score.  

If you have low income and can’t get a credit card on your own, see if you can get a co-signer.  I co-signed on my sister’s first credit card, her first car loan, and her first 2 apartments.

All this.  I have credit cards that I use as a 1-month delay-of-payment: I save up, buy it on my credit card (and get airline miles for the purchase!) and then pay for it at the end of the next month with the cash I’d saved beforehand.  Ditto reoccurring fees – my monthly mobile and health care bills gets paid that way, automatically, so I never forget.  

It takes a little bit of money management, in that you have to make sure the money STAYS PUT for that month, so you have it when needed, but it’s a way to play their game to your own benefit.  You use their backing, but don’t pay them any interest on it.

(start with whatever POS card you can, then work your way up to one that offers rewards.  they will eventually try to get you to increase your credit limits/offer you higher-term cards.  Just Say No)

All of the “yes, get a fucking credit card and build your score” advice is good, as are the various plans to use it without incurring any hit to your actual cash flow, but I will offer one counterpoint to the lattermost bit of advice, and explain why you *want* to increase your credit limit.

One of the factors that goes into your score (it’s one of the biggest, depending on credit agency doing the reporting) is your debt-to-credit ratio; that is, if you have $500 in available credit, and a $100 balance (because you pay your electric and cell phone bills with it, for instance), your debt-to-credit ratio is 20% (100/500).  If you talk to your credit company after you’ve been with them a while and say, “I’d like to see about increasing my credit limit,” and they see you’ve been on time with everything, they might bump you up tp $600, $750, or maybe even $1000….  if you keep that $100 monthly balance because your bills are consistent, will give you a ratio of 16.6%, 13.3%, or 10% – which makes your credit score go up, which means you can ask your credit card compaany to lower your interest rate, just in case you can’t pay your bill in full some month due to an emergency expense or whatever, so it’ll cost you less extra money if you have to do that.

But don’t take my word for it (yes, I work at a credit union, but I fix computers for a living) – here’s Equifax’ own explanation of how they calculate it: https://www.equifax.com/personal/education/credit/score/how-is-credit-score-calculated

There are a shitload of things that look at your credit score now that don’t necessarily have anything, overtly or obviously, to do with your ability to repay your debts.  renting an apartment, especially from a management company rather than a local landlord – they’ll check it to see if you’re gonna be on time and pay in full.  jobs in some sectors of the market – if you look like you’re hustling to make ends meet, that could be seen as leaving you vulnerable for bribes or potentially doing shady shit at work (yes, this is shitty, but yes, it’s the truth).

plus, having a strong credit history means you can get better terms when you buy a car or house or anything else of that nature – sparkling credit will literally cut your interest rate down by 60% or more compared to someone with bad credit… if that latter person can even get the loan at all.

This is all great advice and I’m grateful that you’ve all taken the time to explain this and I recognize that this is just how things work and that we have to deal but holy hell this whole thing just comes across as some dystopian nightmare bullshit wtf

To be totally fair: there are some ways around this. 

One is quite literally never ever ever buying into the system of credit. A credit rating is basically a quantified record and reputation that says “how likely is this person to make good any instance of Not Paid In Full Up Front?” 

That means that if you go to the hospital? You pay full in cash right there. Insurance is in and of itself a way of being in the credit system – it’s designed to make sure you’re covered if you suddenly don’t have the money you need Right Then and Right There. As the one poster above noted, it means no instalment plans post-facto: those are another system of credit, where whoever’s letting you make instalments has already given you the service the money pays for, but is TRUSTING that you’ll pay up in increments over a longer period of time. It’s literally credit. That’s what credit means. 

It means never renting, because the way rent-laws work (designed, mind, so that landlords CAN’T just turf people out of their rental accommodation on no notice and leave them and all their belongings in the street because they don’t have The Full Amount on the first of the month) to rent you automatically buy into that system of credit. So the landlord wants, for good reason, to be reasonably sure that (since evicting you for non-payment would almost certainly going to be an involved process that extends through two months and thus cost the landlord two months’ loss of rent) you can keep paying that rent and they won’t end up with two months’ income Disappearing. 

(And yeah sometimes the landlord is some big faceless corporation that could swallow the loss without blinking – but a lot of the time it’s not.) 

It means buying a house in full, cash up front. It means replacing that house, in full, cash up front, yourself, should disaster befall it (like a fire or a flood or a hurricane). 

It’s something that can be done, but it means literally existing with zero safety net of any kind, ever. Most people are not super keen on that. Most people would rather have margins; we’ve spent a lot of effort making society so that we do have margins, both in the formal welfare net sense and in this more mercenary sense. 

Another way around it is to have someone who has good credit already who’s willing to cosign any of these things for you – someone who is willing to step in and lend you their reputation, effectively, by saying that if you fuck off without paying, they’ll put up the money. This can be a really great option if you have someone you trust and with whom you have a relationship that can and will withstand the potential strain of the finance-related stress. 

It can also destroy relationships, leave you massively open to control and mistreatment by the person cosigning and, well, it can be pretty hard to find someone willing to cosign just out of the goodness of their heart especially as you get into bigger risk areas. 

(So often it’ll be: okay son, I’ll cosign, but if you ever sell that car I get the money. Or okay sister, I’ll cosign, but I say who gets to live in the house. Etc. Sometimes that’s fine. Sometimes it’s poison.) 

So it’s a kind of weigh-your-options thing.