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I thought some of you might be in the know on this.

One of my biggest financial mistakes was buying my truck in cash. I've
been told having an auto lone is one of the biggest boosts you can make
before buying a house. Would buying a computer on a computer loan
give you the same kind of boost? I played with a dual core mac mini the
other day in an Apple store and it's the first time my powerbook felt slow.

James,

The most important thing about establishing good credit is paying your bills on time. Having a major credit card is a good way to do that, but it's better to buy something with the card once you already have the cash in hand to pay it off when the credit card bill comes due. All your utility bills, if they are in your name help establish your good/bad credit too. A car payment is certainly more valuable than a computer payment on a credit card, but it won't hurt. Honestly, the best thing to do is use a credit card as cash once you already have the cash to pay the bill. That's good wisdom. Establishing the habit of buying things on the credit card and making payments may temporarily satisfy an impulsive personality, but it can be the start of economic disaster in the long run.

Good financial habits are easy to develop, bad ones are incredibly difficult to stop. They lead to an evil thing known as "credit card debt".

Credit card debt has reached epidemic proportions in this country. Don't join the ranks unless forced to do so. Ask yourself the all-important questions, like:
1. Is what I'm buying an absolute necessity?
2. Can I wait for this until I can save for it?
3. Will this make me money, and if so, how long until it pays for itself?
4. Can I afford to spend this money on this, or should I be saving the money for more important things down the road, like a house or a car?

There's a host of questions you can ask yourself about this stuff. For you James, I would suggest getting some Larry Burkett materials, read them and develop a financial life strategy, then see how a laptop fits into the mix. If it's going to be your one tool for a job such as web development, then yes, it's worth it if you're daily using it to bring home the bacon. Only you can know the answer to that.

Sorry so long-winded....

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No problem. Thanks Don.

I use my card as you describe, almost as a debit card. I keep a balance on
it because I've heard card companies are more apt to treat you to benefits
that way, but I can pay it off in a month if need be.

I don't know that I could realistically call it a business-related purchase,
especially since each site I finish is one closer to being my last. But at
$760, a screaming machine is attractive. I wouldn't do it it if wouldn't be
a good boost to my credit score.

Buying a vehicle and paying in cash is not necessarily a bad thing...It is not good in terms of building credit but can be a good way to avoid debt.

In general buying a vehicle is never a good investment in that all vehicles depreciate immediately as soon as you drive them away. While they are the second most expensive thing that most will buy in their lifetime (after houses) they only cost money so there are some financial analysts that advise buying used vehicles instead of new as one way of avoiding some of the loss.

As far as building credit is concerned all of Don's input is right on and Larry Burketts books are very good.

A few things to consider if you are trying to build up credit here are a few suggestions:

1. Without taking on some kind of debt and establishing a history of paying on time, you will have no credit history.
2. The most favorable credit view is to see fewer (under 6) credit cards rather than more and the amount owed on each being under 30 percent of the amount of the credit limit for each card.
3. If you pay off a number of credit cards do not cancel them all as it can negatively impact your credit rating. Example- if you have 5 credit cards with a limit of $1500 per credit card and you then pay off and cancel all of the credit cards but one, your available credit will be $1500 wheras you used to have $7500 in credit. This is not what the recommendation was in the past but is currently the criteria that Fair Issac Corp uses, the people that publish "FICO" credit scores.
4. In addition to creating a financial plan that you can stick by, the most important thing is to re-evaluate every purchase as to whether it is needed now...every thing you can put off helps you to avoid the trap of credit card debt.

One last thing...regarding buying a computer... computers only get faster and the prices only go down. When people ask me when and if they should buy a new computer my answer is when you really need it. The job of the chip manufacturers is to make new chips that make last years machine look like a dinosaur while software manufacturers goal is to create new versions that provide lots of new features based on the newer chips being so much more capable.

If your existing machine is not a complete creeper, it will always benefit you to wait.

I read something about this just last week, maybe consumer reports or AARP . They said that bank cards are good, like visa and mc but store cards are not, like sears, penneys, etc., for establishing good credit ratings. They also said that it's better to maintain some balance on the bank card, rather than paying it off in full each month.

The system is screwy. When I was "up and coming", it was the height of money management not to have a pile of bills, and to pay everything off as soon as possible. Today, the more debt you have (within limits), the more you can get. It's messing up a lot of people.

I'm half retired now and can't wait to be fully retired, so I can sit on the front porch and just watch the world go by. Spend a lifetime learning the rules, and then they change them. Generation gap????

Ron

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OLD MAN formerly (and formally) known as:

Ron Wisdom

Somewhere in the middle of Arkansas......

James,

As a retired banker I might can shed some light on this situation and give you some advice. Good credit is good, bad credit is bad, these are givens in the lending business.

I would like to recommend that you make a decision to do business with a local bank. The new waive in the industry is almost like "punch list" lending. In other words, they have a window or a box and every person that wants to borrow money from them have to fit either perfectly or as close as possble inside either the window or box. I have seen more banks get into trouble lending on financial statements and statistics vs. lending money to people. Certainly a good banker does not ignore statistical information about the borrower, however, who the borrower is is important to most what I call good bankers, it always was to me.

Credit history tells a story about the person in a sense, and you just have a little different story. This is much easier told to a person and not a computerized punch list looking for the right formulas. You have a credit card, I assume you try and pay your bills on time, you like trading in cash, not getting to far in debt or having any consumer debt so to speak. These are all great things and something that is a positive rather than a negative. I have heard it many times over the years, "you don't have enough credit", and what a bunch of bunk for the most part.

Find yourself a good local banker, not the national chain types like the Borg of Banking. These local guys make their own decisions, that is important. Then tell your story. Your paid for truck is an asset with equity, the home after down payment is an asset with plenty of equity. So don't let anyone tell you that saving money, and buying a truck out right is a bad thing.

Mike
White Oak, Texas

I don't know why having some balance on a credit card is a good thing, why would you want to pay any interest to the credit card companies, they are making enough money already without our help.

We use our credit card for as much general purchasing that we can and than pay it off in full every single month. We are set up on a line of credit based on the value of our house and get charged a daily interest rate, so the lower the line of credit (closer to zero) the lower the interest rate. If I payed cash for my daily purchases, the credit goes up, I pay more interest.

It's deffinatly a fine line we ride, but the key to a healthy financial record is discepline. If you can't be disciplined, like the afformentions in Don's post, Credit cards can get you into trouble.

One thing I use to think, and sometimes still do is this...
"That item is such a great deal right now, I should buy it, and see how much I would be saving" when reality is that I would NOT have bought it at regular price or even a small discount, so how is spending going to save me anything. That's the question I would challenge you with James.Rod True38928.1064930556

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Agreed, it won't save you anything. Now. But the better my credit looks,
the lower my interest rates will progressively be. This summer one of my
goals has been to look into various options, so I'm just scouting some
things out.

Each of you has made valid points.

Although I am NOT a financial wizard when pitted against retired bankers or financial gurus, I have found that being informed is the consumers best line of defense. Common sense helps too.....

The credit card companies WANT you to carry a balance.

1. With a balance you become an ASSET to them in the form of interest income. That is why they all have that little caveat about annual fees.

2. Each purchase you make gives the card company get a percentage from the retailer for that "swipe of the card".

2. Steady, regular charges with equally balanced payments shows the lending world that you are disciplined. OK...that's to the consumers benefit.

Now, buying a computer on a credit card. I have noticed that companies selling computers do not hold their own credit cards. They have usually contracted or "sold" the right to a credit card company like HSBC (Retail Services) or CitiCorp to handle the financing and collection of monies. Those credit companies appear just as powerful in the making or breaking credit ratings. IMHO

It has long been established that cars are half depreciated when you drive them off the lot. I believe it is fair to say that today's computer "A" deal was planned and penned by sales and marketing last year just when the plans for production of the second generation chip and computer "B" were slated. Although that isn't exactly how it happens, you get the gist.

I purchased a car at 0%, placed the total amount of the payments into a local bank at 2% interest and have the bank make the automatic monthly payments. So, each person works with what they have to get what they need.

One should consider need, cost, and long term effects of their decision when it comes to spending money.

Thanks everyone. I'm leaving for a week long vacation this morning but
wanted to jump back in for a second. I really appreciate the concern and
advice. What my question was really about wasn't so much spending
habits, but specifically if a computer loan has the same effect on my
credit score as an auto loan. I think I have some good advice to go on
here though. Thanks again, everyone!

James, credit is rated and looked upon differently. For instance, Medical Bills, being past due generally do not have the same negative impact as being behind on car payments which is generally debt to a lending instituation like a bank or GMAC or FMCC, etc. Purchasing a computer on a credit card will apply only to how your lender views credit card. If the Store has a loan company like Household Finance or one of the other consumer type loan companies, these types of borrowings are generally viewed slightly less in merit vs. a National or State Bank or one of the national credit companies tied to automobile manufacturers. This is due in part to the regulatory controls placed on Banks that are not imposed on private lending institutions, likewise, credit reporting and accuracy can be in question more so with certain types of lenders as well. So, proper handling of a Credit Card does positively affect your credit score. I would say that on a scale of value that the higher ticket, longer term, more structured fixed payment amount, item like an automobile loans credit history has more significance in making a credit decision vs. a credit card, Loan Company or other revolving line of credt to most institutions, but both are good.

My point still remains, stay out of debt as you have in the past. Go tell your story and explain your views and situations to a banker when you decide to move on a home loan and I am sure you will find little resistance. Web type lenders and other online types will lean more towards formula lending and their procedures in obtaining or listening to someones story is limited, thus you have to fill your credit history with what they want to see to tell yours.

Hope this has been helpful, good luck

Mike
White Oak, Texas

Hope this