Mitigate Effects Of Credit With Tangible Money
If you have no credit history but you have a job, buying an inexpensive used car should still be doable with only a marginally higher interest rate on the car. This can be offset with a cosigner, but it probably isn't that big of a deal if you purchase a car that you can pay off in under a year. The cost of insurance for a car is affected by your credit score in many locations, so regardless you should also consider selling your other car rather than maintaining and insuring it while it's not your primary mode of transportation. The main thing to consider is that the terms of the credit will not be advantageous, so you should pay the full balance on any credit cards each month to not incur high interest expenses. A credit card through a credit union is advantageous because you can often negotiate a lower rate after you've established the credit with them for a while (instead of closing the card and opening a new credit card account with a lower rate--this impacts your credit score negatively because the average age of open accounts is a significant part of the score. This advice is about the same except that it will take longer for negative marks like missed payments to be removed from your report, so expect 7 years to fully recover from the bad credit. Again, minimizing how long you have money borrowed for will be the biggest benefit. A note about cosigners: we discourage people from cosigning on other people's loans. It can turn out badly and hurt a relationship. If someone takes that risk and cosigns for you, make every payment on time and show them you appreciate what they have done for you. Genius answer: Don't spend more than you make. Pay off your outstanding debts. Put plenty away towards savings so that you don't need to rely on credit more than necessary. Guaranteed to work every time.  Answer more tailored to your question: What you're asking for is not realistic, practical, logical, or reasonable. You're asking banks to take a risk on you, knowing based on your credit history that you're bad at managing debt and funds, solely based on how much cash you happen to have on hand at the moment you ask for credit or a loan or based on your salary which isn't guaranteed (except in cases like professional athletes where long-term contracts are in play).  You can qualify for lower rates for mortgages with a larger down-payment, but you're still going to get higher rate offers than someone with good credit.  If you plan on having enough cash around that you think banks would consider making you credit worthy, why bother using credit at all and not just pay for things with cash?  The reason banks offer credit or low interest on loans is because people have proven themselves to be trustworthy of repaying that debt. Based on the information you have provided, the bank wouldn't consider you trustworthy yet. Even if you have $100,000 in cash, they don't know that you're not just going to spend it tomorrow and not have the ability to repay a long-term loan. You could use that $100,000 to buy something and then use that as collateral, but the banks will still consider you a default risk until you've established a credit history to prove them otherwise. "Right now you are standing at a fork in the road.  If I could tell my younger self who blasted past that fork without noticing it what to do, I would say:  Research ""Financial Independence"" and ""Early Retirement"" and ""frugal living"".  If you do it right you can be financially independent in 5-15 years depending on your comfort level with frugal living. Many people celebrate graduation by financing a new car.  It's like a quadruple whammy.  New car brings sticker shock.  Financing is paying to use someone else's money.  Buying a car period is buying into the commuter lifestyle.  And the cash flow could have gone to reducing debt or building savings.  One blog I read advises that this step adds ten years to the time you have to work before you become financially independent."
Although I do not know about US Institutions; In India Banks have adopted a mix of features that mitigate the risk. Some ways that are used are; That might happen if this incident leads to a deflationary demand for consumer credit instruments in the US to approaching Third World penetration levels. Ironic, as the consumer credit industry is spending gigadollars trying to spark the same consumer credit frenzy in those countries.  The demographics are already primed for turning away from consumer credit, as the Millennials are already increasingly predisposed against credit as they age. "Those are just a form of ""rent tax"" on real economy - that is, people that work in those non-productive sectors of economy are just using the fruits of labor of all the others.   But only the real economy actually matters - and having a few extra zeroes in the bank accounts of the rich don't really affect it as long as those money stay there.  Money that are not exchanged for real world goods and services don't really exist for the real economy." "Nobel laureate economist, Paul Krugman, wrote a piece many moons ago about economic expansion and money supply.  As an illustration of how money supply affects the economy, he used the example of a baby-sitting co-op.  While simplistic, it provides an easy to grasp notion of how printing money and restricting it (e.g. by pegging the currency to gold reserves) can affect the economy. Here is an excerpt from his webpage ( http://web.mit.edu/krugman/www/howfast.html ): ""With the decline of the traditional extended family, in which relatives were available to take care of children at need, many parents in the United States have sought alternative arrangements. A popular scheme is the baby-sitting coop, in which a group of parents agree to help each other out on a reciprocal basis, with each parent serving both as baby-sitter and baby-sittee. Any such coop requires rules that ensure that all members do their fair share. One natural answer, at least to people accustomed to a market economy, is to use some kind of token or marker system: parents ""earn"" tokens by babysitting, then in turn hand over these tokens when their own children are minded by others. For example, a recently formed coop in Western Massachusetts uses Popsicle sticks, each representing one hour of babysitting. When a new parent enters the coop, he or she receives an initial allocation of ten sticks.  This system is self-regulating, in the sense that it automatically ensures that over any length of time a parent will put in more or less the same amount of time that he or she receives. It turns out, however, that establishing such a token system is not enough to make a coop work properly. It is also necessary to get the number of tokens per member more or less right. To see why, suppose that there were very few tokens in circulation. Parents will want on average to hold some reserve of tokens - enough to deal with the possibility that they may want to go out a few times before they have a chance to babysit themselves and earn more tokens. Any individual parent can, of course, try to accumulate more tokens by babysitting more and going out less. But what happens if almost everyone is trying to accumulate tokens - as they will be if there are very few in circulation? One parent's decision to go out is another's opportunity to babysit. So if everyone in the coop is trying to add to his or her reserve of tokens, there will be very few opportunities to babysit. This in turn will make people even more reluctant to go out, and use up their precious token reserves; and the level of activity in the coop may decline to a disappointingly low level.  The solution to this problem is, of course, simply to issue more Popsicle sticks. But not too many - because an excess of popsicle sticks can pose an equally severe problem. Suppose that almost everyone in the coop has more sticks than they need; then they will be eager to go out, but reluctant to babysit. It will therefore become hard to find babysitters - and since opportunities to use popsicle sticks will become rare, people will become even less willing to spend time and effort earning them. Too many tokens in circulation, then, can be just as destructive as too few."" -- Paul Krugman, 1997 (accessed webpage 2010)." "Most of your money doesn't exist as physical cash, but simply as numbers in a ledger. At any given time, banks expect their clients to withdraw a certain percentage of their balances... For instance, checking accounts are frequently drawn down to zero, savings accounts might be emptied once our twice a year, CDs are almost never withdrawn, etc. To cover those withdrawals, banks keep a certain amount of physical cash on hand, and an additional amount remains on the ledgers. The rest gets loaned out to their customers for use in buying homes, cars, credit cards,etc. Anything they can't loan out directly gets deposited with the federal reserve or loaned directly to other institutions who need it. However, those last two options tend to be short term (ie overnight) loans. With debit cards functioning 24/7, you could get cash at an atm or make a purchase anytime of the day our night. The weekend has nothing to do with it. Which is a long way of saying ""No, they do it all the time, not just on weekends"" ;)" What you are seeing is the effects of inflation. As money becomes less valuable it takes more of it to buy physical things, be they commodities, shares in a company's stock, and peoples time (salaries).  Just about the only thing that doesn't track inflation to some degree is cash itself or money in an account since that is itself what is being devalued.  So the point of all this is, buying anything (a house, gold, stocks) that doesn't depreciate (a car) is something of a hedge against inflation. However, don't be tricked (as many are) into thinking that house just made you a tidy sum just because it went up in value so much over x years. Remember 1) All the other houses and things you'd spend the money on are a lot more expensive now too; and 2) You put a lot more money into a house than the mortgage payment (taxes, insurance, maintenance, etc.) I'm with the others though. Don't get caught up in the gold bubble. Doing so now is just speculation and has a lot of risk associated with it. It's so wonderful.  Through the magic of fractional reserve banking, a bank the vast majority of the time is loaning out money they created from thin air.  And if you don't pay the obligation, they get a yacht, personal jet, or racehorse in return!  Now, of course having to repossess something might be undesirable in an accounting context, but it still beggars belief that basically the entire economy and money supply of the developed world is based on obligations backed by nothing, by private parties, created out of thin air. Well, it is a negative point of view, but nobody in the history of money has ever loaned money because they like you.  I suppose you could paint it as an honest point of view. All money lending is for profit.  If you have a high score, you are very likely to repay your loan because you are lower risk.  We always hear lower risk... but the risk is that they won't make money off of you. I think that just like we buy previously owned vehicles cars instead of used cars, and we banks call them service fees instead of junk fees, our credit score discusses our credit worthiness instead of profitability But none of that means you can't benefit from it.  It isn't a fear tactic, it is a way to judge each other.  You probably pay interest and fees to keep it high, but that is price of lending. I think the questioner has a negative view of credit (which I suppose is fine and is their right, I will defend their right to an opinion) but the way we do and judge credit is neither evil or benevolent. I could certainly agree that more transparency would be good, but only for honest folks.  If the credit bureaus made it public how they judged us, there would be a new industry for people who want to game the system. Update Since it always will cost to use credit, and using credit is the only way to prove your a low credit risk, it will therefore always cost money to raise your credit score. However the return on investment is exemplified in this question:  a person with no credit was able to get a loan, but at serious out of pocket cost.  Later, after establishing credit at a price of real money, he was able to secure a nearly identical loan for considerably less cost (in terms of interest paid) because he had proven himself worthy.  When I say proven, I mean paid interest. There is nothing wrong with questioning the system, change only occurs when people question the status quo.  And for sure our current system is not perfect, but like many employed systems while it is terrible but there is nothing better. glass steall is one.  getting rid of glass stegall meant commercial banks could create iou money irresponsibly through loaning and sell the loan to wall street speculators.  This drives up assets to bubble prices.  Inflation for all. "As others have pointed out, it sounds like the problem isn't the accessibility of your money, the problem is willpower. So, address that instead. How?  Willpower is both a finite resource AND a resource that can be increased -- like muscle strength.  Since willpower is finite, break down the problem into as many pieces as possible, then address only one of those pieces at a time. ""Be more sensible with my money"" is nebulous, vague, and large; there's no place to start.  So break it apart: first thing is the one example in your question -- you go out on payday with friends/coworkers, intending to only buy a couple of beers (alcohol lowers willpower), and end up blowing through far more. So, what about making a rule to not go out on payday?  Nice idea, but that might still be too hard to do -- if you have a habit of going out with them on payday, then this has become your community, and you will feel the loneliness of not going out with them, as well as the social pressure from them to do as you've always done.  So, set up a different habit for that night, one that both involves the obligation of going there instead, and other people who will expect you to be there. Some examples would be a sport that happens to practice or compete on payday nights, or some charity that happens to need you at that time.  Once you've broken that habit (and exulted in the resulting fattening of your wallet), look for other, similar leaks. I'm going to guess that all your money gets spent on going out to pubs (as opposed, say, to buying bric-a-brac you don't need). If so, then you need to face that you've adopted a pub-going culture, and that your community has shrunk to just those kind of people. It may seem like you have a lot of people in your life, but if all it takes to lose connection to all of them is to stop going to pubs, then you really don't. Your human connections, essential for an enjoyable life, are too fragile, too singly focused. So if that's the problem, branch out. Diversify the communities you're part of. I've already mentioned sport; church is another good one -- I mean a living church, the kind where the people are always doing stuff together and it's fun to go to, not the other kind where everyone sits in a pew for an hour a week and rushes the exits as soon as possible. Other possibilities are reaching out to neighbors or becoming politically involved.  Hmmm... I started writing about willpower but I'm ending up at community. At your core, do you feel like if you didn't spend this way, that you wouldn't have any friends?" "In double-entry bookkeeping, no transaction is ever negative. You only deal in positive numbers. We ""simulate"" negative numbers by calling numbers debits and credits, where one is the negative of the other. Only a balance can be negative. In this case, Income is a credit account. That means that things that increase your balance are credits and things that reduce your balance are debits. So a gift from grandma is a credit. It's a positive number, and you write it in the credit column. You pretty much never subtract from Income except to correct a mistake. Assets, like a checking account, are debit accounts. Increases are debits and decreases are credits. You routinely have both debits and credits on a checking account, i.e. you put money in and you take money out. Every transaction affects (at least) two accounts: one with a debit and one with a credit. So in this case, the gift from grandma credits income and debits checking. Buying food credits checking and debits expenses." The government multiplier effect is zero sum.  You will see a multiplier in the short term, but taxpayers will have to pare back spending in the future to service the debt, reversing the initial multiplier.  The funding burden for education and infrastructure spending should fall more heavily on those actually using it - more tuition fees, toll roads, etc. My bank will let me download credit card transactions directly into a personal finance program, and by assigning categories to stores I can get at least a rough overview of that sidd of things, and then adjust categories/splits when needed. Ditto checks. Most of my spending is covered by those. Doesn't help with cash transactions, though; if I want to capture those accurately I need to save receipts. There are ocr products which claim to help capture those; haven't tried them. Currently, since my spending is fairly stable, I'm mostly leaving those as unknown; that wouldn't work for you. There is very little effect whatsoever of having a joint bank account--positive or negative. Positive effects: It would be very easy to send your mother money...she can just take it out of the account.  If you passed away she could get the money without having to use the legal system (or vice versa). This latter effect is why I have a bunch of joint accounts with my wife...if either of us died I wouldn't want getting access to our money to be an additional hassle. Negative effects: She is able to access money in that account without your consen, which you have pointed out is not going to happen.  The case I'm thinking of would be something like a tax lien against her.  A government agency might choose to pull money out of that joint account.  That would be a downside for you. If we were discussing credit cards, a loan, or a line of credit, there would be a number of legal and credit-rating effects from joint ownership.  Not so much with checking accounts. edited you's to they's and I's =)  Further, I'm not ballsy enough to go all out on this. I actually am slightly in debt buying silver. But in a hyper-inflation event credit is cheap to pay off. If one was confident enough they could hypothetically go into silver on large margin and pay it off quite easily after the hyperinflation occured. Much like what the government is doing with it's debt. At that point you are betting the government will continue doing what it is for a long while though. Just a thought.