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re: As crazy as Dave Ramsey can be about credit cards and FICO scores ...
Posted on 6/13/18 at 11:53 am to Double Oh
Posted on 6/13/18 at 11:53 am to Double Oh
quote:
The only good debt Ramsey approves of is a mortgage
At the individual, "consumer" level, it is difficult to argue otherwise. I mean, I get leveraging $1 million into $3 million of income-producing real estate, if the ROI is attractive, that's $2 million of "good debt" right there. I'm not going to argue with the science or math of that.
But, the anti-Ramsey faction of the Money Board seem hell-bent to die on the car loan hill. Dave has a lot of dubious recommendations, of which I listed a couple earlier - eschewing 401K matching until you have the emergency fund done (okay, maybe I concur on that one) AND until you complete the snowball (which is definitely in the key of crazy).
He makes some dubious assumptions (that may well be outdated) about presumptive yields on investment products, there is a lot of sketchiness around the edges of his ELP network, etc., just to name a few.
However, having said all of that - the core of the Baby Steps is sound as a pound. Save, avoid consumer debt, budget, plan for the financial future. That's as crazy as looking both ways before crossing the street, or staying in school/staying off drugs. THAT crazy.
This post was edited on 6/13/18 at 11:55 am
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Posted on 6/13/18 at 12:38 pm to ItNeverRains
quote:
I borrowed 620k for 30 years at 3.75% in 2016. My house has appreciated 400k in 2 years since locking up 620k at 3.75%. I've paid about 24k in interest since loan, not factoring in what i've written off in taxes. So lets say lender gave me the ability to increase my net worth by 375k since inception.
Dave Ramsey and I have very different definitions of the word "slavery
Debt always looks like a great tool when things are working perfectly, just a small unexpected change in a person's financial equation can make what was once a great tool a huge burden.
Posted on 6/13/18 at 12:43 pm to Paul Allen
quote:
What’s your definition of living paycheck to paycheck?
When after the bills they have less than $200 for the month. And thats not counting any emergencies that come up like need new tires, need a new washing machine, etc, etc.
Posted on 6/13/18 at 4:24 pm to EA6B
quote:
Debt always looks like a great tool when things are working perfectly, just a small unexpected change in a person's financial equation can make what was once a great tool a huge burden.
no doubt. sustained job loss or medical debts not covered or a disability to you or others can shake you to your core. it is why i manage my NON income producing debt very carefully.
Posted on 6/13/18 at 5:24 pm to buckeye_vol
quote:
And since my wife has limited credit history, all I had to do to bump her score like 30 points was add her as an authorized user on my account as if she had the card for 10+ years and was the one paying it on time and ensuring my credit utilization was low.
Especially when someone is right on the line of what gets a better rate, gaming the system isn't so hard, is it? I'm guessing that 30 point jump made a difference for you all? Yet your wife was no more (or less) reliable in paying debt, was she? It's a game.
A banker that I've slowly been getting to know (waiting to see how much love he's prepared to show me) mentioned that in his area, they'll look at a graph showing the FICO scores over a period of time. FICO isn't the primary thing they're looking at anyway, but he said they do look favorably on consistency (in the higher range), or someone who has rebuilt a lower score over time. But for what he does, income and assets are key. With that, and if he can convince me that I'll be a name and not just a number, maybe we'll do something.
Posted on 6/13/18 at 5:35 pm to Fat Bastard
quote:
no doubt. sustained job loss or medical debts not covered or a disability to you or others can shake you to your core. it is why i manage my NON income producing debt very carefully.
Funny how ol' Murphy will be waiting for you after work, sitting in your favorite chair, with his feet propped up on your coffee table, JUST when you least need to see his azz, huh?!
Being willing to take on debt for income producing properties has worked out well for me. But in these debt is good/debt is bad threads, I'm really on the fence. The guy who bought his house a few years ago and the house has gone up in value, well, that's great. But the country was full of guys who did the same thing around 2006 and lost their jobs in 2008-09. When things are going well, you think you're OK. But when things turn sideways, that's when you learn that the borrower is slave to the lender, huh?
Say FB, you've been in the game for awhile. How many builders and developers do you know who've gone bankrupt at least once? I'm a risk taker by nature. But over the years, and seeing once successful people losing everything because of over leverage, like you, I've learned to be very careful.
Posted on 6/14/18 at 12:45 am to Jag_Warrior
quote:Yes but then we were going to get a higher rate since we had to take the median of her lower score (why not median of median) initially gone with FHA (during the pre-approval in 2017 before extra income in 2018), so we could get to the optimum debt ratio.
Especially when someone is right on the line of what gets a better rate, gaming the system isn't so hard, is it? I'm guessing that 30 point jump made a difference for you all? Yet your wife was no more (or less) reliable in paying debt, was she? It's a game.
Plus we couldn’t count my side consulting work which grew exponentially this year and is will be more than she makes, there sass a technicality in my loan payment plan, which calculated the debt for my student loans as hundreds more a month then I’ll ever pay (10s of thousands of more overall), and payroll deductions on my W2 made it seem like I was making $15,000 less a year.
And since I was ignorant of the process I thought we had to pay at least 20% down for a conventional loan, or go FHA. Luckily I got annoyed by the fact that the FHA puts a premium for PMI back into the loan, snd in your opinion the down payment wasn’t really what it says.
So my loan guy and I went back through and looked at conventional, caught the underreported income, added that we could out a larger down payment, and the student loan payment could be calculated correctly and all of sudden we don’t need my wife’s income and her credit score, and have better loan rate (luckily the lock was still in), and I have much much equity in the house from the beginning.
Nothing changed at all during the process other than a little bit more of a down payment which I would have gladly have looked at earlier.
Now I’m annoyed by this crony capitalism thing called Title Insurance, as if the technology of the 21st century makes some agencies hand picked by the government necessary to overcharge for something instead of a free market using a less costly option (clockchain seems prefect for this). And to find out, if I sold my house the next day, an entirely new overpriced title insurance whatever would be required.
Posted on 6/14/18 at 6:29 am to EA6B
quote:
Debt always looks like a great tool when things are working perfectly, just a small unexpected change in a person's financial equation can make what was once a great tool a huge burden.
If my financial world exploded tomorrow I’m not sure what I’d do with a 1.275M dollar house I owe 600k on in arguably the hottest real estate market in the US, certainly the south. You factor in all the parameters. You’re scenario is exactly the people I think should follow Ramsey. Shortsighted folks. Now certainly for business ventures debt can be a lot less predictable. But anyone who avoided a 30 year loan in my market (ground zero for Dave Ramsey) has lost tens of hundreds of thousands of dollars. Every single person.
Just so we are truthful Dave Ramsey does not advocate for a mortgage over 15 year term without 20% down.
This post was edited on 6/14/18 at 6:31 am
Posted on 6/14/18 at 11:12 am to ItNeverRains
quote:
But anyone who avoided a 30 year loan in my market (ground zero for Dave Ramsey) has lost tens of hundreds of thousands of dollars. Every single person.
I'm not sure that I understand this statement. Do you mean if a person avoided buying because a 30 year was all they qualified for, or do you mean if a person chose a 15 year vs. the 30 year?
Posted on 6/14/18 at 1:12 pm to ItNeverRains
quote:
If my financial world exploded tomorrow I’m not sure what I’d do with a 1.275M dollar house I owe 600k on in arguably the hottest real estate market in the US, certainly the south. You factor in all the parameters. You’re scenario is exactly the people I think should follow Ramsey. Shortsighted folks.
So you think your market is somehow immune to economic downturns? Having owned 8 houses over 40 years in various locations during several economic cycles, I am not short sighted, I just have enough experience to know that there is risk in any leveraged transaction no matter how good it looks at a given point in time. There have been real estate markets that were on fire for decades and then a recession hits and equity just evaporates.
Posted on 6/14/18 at 8:23 pm to Jag_Warrior
quote:
How many builders and developers do you know who've gone bankrupt at least once?
saw many people lose their arse, developers, flippers, etc. saw huge developments go under during housing crash. unattended and went to shite. it happened all over the country. many flippers had to switch to buy and hold so they did not lose their arse.
People way better off than us went broke. A doctor who had no disability insurance got injured and used up all his money and went into foreclosure. A DOCTOR! you would expect him to be way better off than us. it is why i have many levels of redundancy for peace of mind. It has taken me way too long to get where i am . i do not plan on starting over due to stupid decisions.
Posted on 6/15/18 at 7:53 am to Will Cover
Lenders don't know your score dropped unless they are checking it every month. Don't fret a 725 over a 805. Both are great and will get you about anything you want.
I mean sure it is worth keeping an eye on for the sake of accurate reporting/fraud detection but other than that it really isn't that big a deal.
I mean sure it is worth keeping an eye on for the sake of accurate reporting/fraud detection but other than that it really isn't that big a deal.
Posted on 6/15/18 at 10:12 am to EA6B
quote:
So you think your market is somehow immune to economic downturns? Having owned 8 houses over 40 years in various locations during several economic cycles, I am not short sighted, I just have enough experience to know that there is risk in any leveraged transaction no matter how good it looks at a given point in time. There have been real estate markets that were on fire for decades and then a recession hits and equity just evaporates.
My only measuring stick being the last crash in 2008, Our values dropped less than 20%, 10% in many communities throughout Franklin. With over 50% equity, I feel I’m good to weather any storm.
If I lose more than 50% equity in an unarguable top 10 market in the US, walking away is the least of my worries. Let’s be honest, at that point we are all fricked.
Posted on 6/15/18 at 10:25 am to ItNeverRains
quote:
If I lose more than 50% equity in an unarguable top 10 market in the US, walking away is the least of my worries. Let’s be honest, at that point we are all fricked.
Yeah. This is my perspective on my house.
To the OP, I worked at a mega bank in the credit department
banks often will report minimum amount of information to the credit reporting agencies, especially on those that they view as a great customer. The reason is they would prefer you to come to them for more $$, as opposed to their competitors. This results in some odd things happening in credit scores.
Posted on 6/15/18 at 10:32 am to ItNeverRains
quote:
My only measuring stick being the last crash in 2008, Our values dropped less than 20%, 10% in many communities throughout Franklin. With over 50% equity, I feel I’m good to weather any storm. If I lose more than 50% equity in an unarguable top 10 market in the US, walking away is the least of my worries. Let’s be honest, at that point we are all fricked.
The only time I care what my house is worth is when I buy it and when I sell it. If it drops 50% in between and I don't have any problem servicing the debt, if any, then big whoop.
Posted on 6/15/18 at 11:05 am to ConfusedHawgInMO
quote:
The only time I care what my house is worth is when I buy it and when I sell it. If it drops 50% in between and I don't have any problem servicing the debt, if any, then big whoop.
I get that, but that wasn't the scenario in the question I answered.
Posted on 6/15/18 at 11:39 am to ItNeverRains
quote:
I get that, but that wasn't the scenario in the question I answered.
Understood. I'm just throwing out random thoughts.
Posted on 6/18/18 at 12:06 am to Volvagia
quote:
It is a risk assessment of your ability to handle access to credit.
It is telling how few understand this
FICO scores have almost zero to do with income or wealth nor were they ever intended to, they simply assess will you repay the loan by using a model to determine the answer.
Posted on 6/18/18 at 10:19 am to Tiguar
quote:
Because the banks want to keep you in the system and punish you for being out of it. Andrew Jackson had it right.
This.
Posted on 6/18/18 at 12:07 pm to Will Cover
quote:
My credit score dropped 26 points since last month
quote:
I have zero debt and have never been delinquent to any company that I have done business with.
Same thing happened to me. I have a mortgage payment though. Never been late on any payment during my entire 22+ year credit history. I have a credit card I use for purchases, but pay it off in full every month. My credit score went from 831 one month down to 805. I really don't understand why? It really doesn't make any damn sense to me.
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