Slaves to Debt: Part 2
I didn't intend to write a follow up to my original post about being a slave to debt, but then something came up this weekend that forced my hand. As is often the case, we were sitting around the campfire on a camping trip in Northern Michigan and we got talking about money.
At one point our friend asked us if we were using the Credit Karma App. I think this topic came up because we were talking about our mortgage and I was trying to figure out if I was close enough to have my PMI (private mortgage insurance) removed yet.
I explained that we weren't using the App and she suggested you we should take a look because it has some really interesting information.
I was hesitant at first, I think a lot of people are because it kind of feels like you are giving away a lot of personal information. I think there is also that widely held belief that pulling your credit information like that will lower your credit score.
By this point, I had a little bit of liquid courage in me, so I figured why not and I signed up for the app so I could see what she was talking about. We all waited patiently as I finished entering my info and the app started doing the work behind the scenes to pull in my info.
More specifically, we were waiting for the credit scores to pull in from two of the major bureau's out there.
I will be honest, I was a bit surprised to find that my scores were actually just a hair lower than our friends. I got digging into the app and I found some things that really disturbed me.
First, let me get this out of the way, the app is pretty cool. Assuming it doesn't have a negative impact on my credit score, it does provide some really useful information about any outstanding balances or loans you have all in one neat little dashboard.
The thing that really got me thinking was a metric they measure called "Credit Utilization". I am currently sitting at 35% utilization. The app recommended that if I wanted to increase my credit scores that I should try to get that number lower.
Here is the problem with that. Since my only debt besides our mortgage is our credit cards, the only way to get that number lower would be either:
- Increase the spending limit on those credit cards
or
- Keep less of a balance on those cards
Do you understand why I find this so troubling? After my wife and I struggled early in our relationship with debt from credit cards, we agreed that we would no longer have cards with insanely high limits. We capped the limits on our two cards at anywhere from $750 to $5000. This ensured that we should never find ourselves in the massive hole we were previously in when we had cards with $10,000+ limits.
Basically, they are saying to raise our credit score, we need to open ourselves up to the same pitfalls that got us in trouble in the first place. While we have the funds and the discipline to avoid the same mistakes, many people do not.
Don't get me wrong, if my card only has a $5000 limit and I currently have $3500 charged to that card does that look bad? Yeah, I guess so, but you know what... I pay that balance off in full every month. If I wasn't able to, we wouldn't be charging anything to that card. We don't put anything on our credit cards that we don't already have the cash to pay for. We simply choose to use cards because it is more convenient and we earn points for using the card.
With 850 being the highest credit score you can have, I'd love to see my score inch a little closer to that number (not to brag, but it already isn't far off). However, if it comes at the cost of being what I deem fiscally responsible then nope, I'm not going to do it.
Like I said, I think this example makes it pretty clear how broken the system is and how easily people can fall into the trap of being slaves to debt.
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It's sickening how the system works (its the same here). I know most people living around me have 5-10 cards each with a ton of debt on each. I can't do with it and won't play the game. My credit score is probably quite bad as a consequence. Pay with CASH! is the answer.
Yeah, it is horrible. It is pretty clear the system is rigged and out to get even the most innocent of people. It will be nice when we can just use crypto for everything!
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I use Credit Karma and my score is pretty good, but it recommended I use less of my available credit, but I have no desire to raise the limit on my card. I guess they assume that if the card will give you a higher limit then you are a low risk. I just use the one card and pay it off every month as it gets expensive otherwise.
I started using the service after getting letters about opening a bank account that I had no knowledge of. I reported that to the bank, but wanted to be sure it was not hurting my credit score.
Sounds like that was a smart move on your part. Sounds like you have the same issue I do with it. I really dislike that the suggestion is to increase your credit or open more accounts. That just feels really backward to me!
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I try to keep my finances simple. I'm not applying for more credit, so I hope my score is not an issue anyway. Just need to watch out for fraudsters.
Great point!
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Yeah, I've been dinged for credit utilization before too. It seems like a stupid metric if you are always paying your balances off every month. I would say just apply for a new card and cut in half but even that isn't a solution as this is a per account metric...
Yeah, exactly this. It just seems very counter-intuitive to me and downright dangerous...
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Yea I think it is also an issue. I don't exactly want a huge ceiling on credit card incase anything bad happens. It just needs to be enough for me to use normally.
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I agree with that to a point. My wife and I had the discussion when our limits were even lower than they are now. "What if an emergency came up and we needed to use our credit card?". Like say you are travelling and your car breaks down. You get it to a shop, but to get it fixed and drive home it costs more than the $750 our limit at the time was at. Those are the kinds of things that prompted us to slightly increase our limits.
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Nothing exemplifies Consumerism more that getting frequent Credit Card offers basically stating, "Congratulations, you qualify for more debt!"
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Yeah, no doubt. I usually throw them away as soon as I get them. I feel like I should sign up for at least one more at some point just to maximize some of the rewards. Especially since I just pay it off each month anyway.
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Very informative post. I think credit Karma is useful. As far as your PMI, this might be a good time to get rid of it because house prices are way up.
We had to fill out some papers, but we were able to get it removed.
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very true. we live in a debt slave system. they don't even need to collect taxes as they can print as much as they want, it is just to stop us from attaining any type of freedom from the system.
the other part is we are being enclosed too, just people didn't figure this out yet.