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Old 08-25-2011, 11:46 AM   #61
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Originally Posted by ERD50 View Post
I doubt there is much savings in a 1 or 2 YO car.
Maybe it's different in Canada.

Up here, when we buy a new car, the dealership and government pile on thousands of dollars in extra fees and taxes that you don't have to pay when buying used. Things like delivery, dealer prep, admin fee, Scotchguarding, rustproofing, undercoating, "gas guzzler" tax, air conditioning tax, extended warranties, and whatever else they can slip on the invoice before they start piling on federal and provincial sales taxes.

When buying used, you still pay the federal sales tax, but not the provincial sales tax (at least not with a private sale). And you skip all those other nonsense charges. That's thousands and thousands of dollars.

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The score is more than for borrowing money [...] credit scores can affect [...] your chance to get a 2% reward credit card.
A credit card isn't "borrowing money?"
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Old 08-25-2011, 11:52 AM   #62
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Are you guys actually bragging about who has the high score in "borrowing money?"

I look forward to the day when I haven't had to borrow money from anyone in years, and my score is 0.

But for the record, at the moment, it's in the 800's.
That would be good if credit scores were only used for going into debt these days. If you ever want to rent a home, if you purchase auto insurance, if you want a j*b that requires a background check (including credit history), all of these can be negatively impacted by a "zero" credit score.

It sucks and I don't like that credit scores are used for more than obtaining credit, but it is what it is and striving for a "zero" credit score may not be such a good idea.
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Old 08-25-2011, 11:56 AM   #63
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The were charging me interest all along the way... that was the accrued interest that was 'forgiven' since I paid all payments on time....
Sorry, I must be missing something. You said that you were paying 0% so I don't know how you were paying interest and got a rebate.
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Old 08-25-2011, 12:00 PM   #64
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Sorry, I must be missing something. You said that you were paying 0% so I don't know how you were paying interest and got a rebate.
I think it's a gimmick in the amortization of the loan.

Say you took out an $18K loan for 36 months with payments of $500 per month. They compute what your interest will be in case you miss payments or otherwise don't comply with the terms of the no-interest provision. But at the end of the 36 months, if you've made all 36 payments of $500 on time, the remaining balance -- all associated with what the balance would be if interest were accruing -- will be "credited" to the loan balance and make it paid in full.
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Old 08-25-2011, 12:11 PM   #65
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Ziggy's quote

Yeah, managing cash flow from retirement accounts can be a biggie. I'm not there yet, but my general plan will be to withdraw as much as I can while exhausting the low tax brackets (currently, say, up to 15%) and not disqualifying myself from benefits that will likely be means-tested by then. For example, if in late December I see I've left $5,000 unused in the 15% bracket (or have about $5000 to go before I bump into means testing), I'd withdraw another $5,000 or close to it -- and move it to a taxable account as needed. That would have the added benefit of reducing future RMDs.

Unquote.

Just a question, but I am doing the same thing. But I have been urged to put IRA money in a Roth instead up to my !5% bracket.

I have 15 years of living expenses in my taxable as it is. So except for the fact that it is out of the gov't hands, what say you.
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Old 08-25-2011, 12:19 PM   #66
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If you ever want to rent a home, if you purchase auto insurance, if you want a j*b that requires a background check (including credit history), all of these can be negatively impacted by a "zero" credit score.
Yes, that's certainly chapter-and-verse from the FICO marketing materials, and that's obviously what they want us to believe, but does it hold up to scrutiny?

I'm not denying that a bad credit score can work against you in the situations you outline - but I do think that a 0 credit score is given special treatment.

That is, if you try to rent an apartment, and your prospective landlord pulls your credit, and it comes back as 640 with a bunch of delinquencies, then you're probably not getting that apartment. But if it comes back as literally "0", with no activity at all in the past 7 years, why would he/she reject you as a tenant? Wouldn't they at least *ask* you about such a curious thing?

Same thing for potential employers. I have a hard time believing that HR staff are really so stupid that they'll pull an applicant's credit, see a "0" score with an empty history, and just discard that applicant, regardless of their other qualifications. Surely they possess enough critical thinking capability to recognize the difference between an applicant with severe debt problems, and an applicant who simply lives debt-free.

As for insurance, again, I'm quite confident they can tell that there is a meaningful difference between "620" and "0," and that if you've been a faithful, accident-free client whose made every payment on-time for the last 20 years, they're not just going to suddenly dump you or hike your rates, just because your FICO score disappeared.
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Old 08-25-2011, 12:19 PM   #67
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Just a question, but I am doing the same thing. But I have been urged to put IRA money in a Roth instead up to my !5% bracket.

I have 15 years of living expenses in my taxable as it is. So except for the fact that it is out of the gov't hands, what say you.
Even better -- if you have the earned income. When I said "move it to a taxable account" I was assuming no earned income and thus no eligibility to contribute to a Roth. But if you have earned income, by all means, move it to a Roth if you don't need the money for current income.
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Old 08-25-2011, 12:27 PM   #68
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Yes, that's certainly chapter-and-verse from the FICO marketing materials, and that's obviously what they want us to believe, but does it hold up to scrutiny?
I could reply with saying the quoted text above is chapter-and-verse from the Dave Ramsey playbook.

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That is, if you try to rent an apartment, and your prospective landlord pulls your credit, and it comes back as 640 with a bunch of delinquencies, then you're probably not getting that apartment. But if it comes back as literally "0", with no activity at all in the past 7 years, why would he/she reject you as a tenant? Wouldn't they at least *ask* you about such a curious thing?
Sure, and if you're dealing with an individual or a small complex where the property manager/landlord has leeway, it could work. (Though they may ask for a larger deposit up front.) Some larger entities may be more rigid in their policies.

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Same thing for potential employers. I have a hard time believing that HR staff are really so stupid that they'll pull an applicant's credit, see a "0" score with an empty history, and just discard that applicant, regardless of their other qualifications. Surely they possess enough critical thinking capability to recognize the difference between an applicant with severe debt problems, and an applicant who simply lives debt-free.
Sure, maybe *some* hiring managers and HR departments won't care. But some places do, especially where security clearances and jobs handling money are concerned -- and in this day and age when every "help wanted" sign results in 100+ applications, hiring managers are quick to use a lot of "screening" to get the applicant pool down to a manageable number to consider seriously, say 5-10. Credit score may be one of them, and if they have to ask about a 0 instead of seeing (say) 750+, they may not bother. In this job market there is no excuse, IMO, for giving employers *any* excuse to reject you that is well within your control. You have to be nearly perfect in their eyes to be hired these days.

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As for insurance, again, I'm quite confident they can tell that there is a meaningful difference between "620" and "0," and that if you've been a faithful, accident-free client whose made every payment on-time for the last 20 years, they're not just going to suddenly dump you or hike your rates, just because your FICO score disappeared.
OK, so given that some insurers use credit score as a factor, where would you suggest they "assume" the credit score really is for the purposes of setting rates? 700? 800? 650? Where?

Having said all that, in most cases I strongly disagree with the concept of taking out loans just to improve your credit score, especially if you're already in the 760+ range where you pretty much qualify as top-tier regardless of whether you're at 765 or 810.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 08-25-2011, 12:34 PM   #69
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OK, so given that some insurers use credit score as a factor, where would you suggest they "assume" the credit score really is for the purposes of setting rates? 700? 800? 650? Where?
Darned if I know - they've got teams of actuaries on staff whose job it is to make those kinds of decisions.

But there are people out there who live credit-free, and who have FICO scores of 0. Presumeably, they own cars, and thus, they have to insure those cars. Somehow, they're finding people to insure them, so obviously it can be done. We're not talking hypothetical here - this is already happening out there, in the real world. Insurance companies see people with 0 scores all the time, and know how to handle them. Do they turn away customers with no FICO scores, just because they don't know how to impute that into their formulas? Have you ever known an insurance company to turn away profit?
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Old 08-25-2011, 12:42 PM   #70
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Just helped MIL purchase a Camry .... she took the 0% and had the cash in her checking account.

The car also had a "rebate" of $500 with the financing ... $1000 rebate if you paid cash. Also went 5 years on the term. Things might have chaged - for you - this was 2 months ago.

Taking the loan is/was a "no brainer". They pull a credit report and she could have driven the car that afternoon.
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Old 08-25-2011, 12:54 PM   #71
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Maybe it's different in Canada.

Up here, when we buy a new car, the dealership and government pile on thousands of dollars in extra fees and taxes that you don't have to pay when buying used. Things like delivery, dealer prep, admin fee, Scotchguarding, rustproofing, undercoating, "gas guzzler" tax, air conditioning tax, extended warranties, and whatever else they can slip on the invoice before they start piling on federal and provincial sales taxes.

When buying used, you still pay the federal sales tax, but not the provincial sales tax (at least not with a private sale). And you skip all those other nonsense charges. That's thousands and thousands of dollars.

But those new car prices are factored into the used car price. That's how markets work. Example with made up numbers:

Car basic cost is $25,000, add-ons, taxes etc are $3,000. Total cost of the car is $28,000.

Used cars will be based on supply/demand around that $28,000 price, not on the $25,000. The $3,000 isn't just a paper cost, it came out of the buyers pocket.



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A credit card isn't "borrowing money?"
If I pay it off before the due date, and never incur interest or fees, no, I don't consider it 'borrowing' money. It is just 'float' between transaction and due date.


When you write a check, it may take 5 days or longer for it to clear (maybe much longer if the person does not get the check to the bank in a timely manner). Are you 'borrowing money" when you write a check? Or how about your utility bill? You use the electricity, get billed and pay the bill some weeks later. Did you 'borrow' that money?


-ERD50
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Old 08-25-2011, 01:19 PM   #72
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Once I was given a $500 rebate for taking out a loan. Promptly paid it off a month later.
I've been looking for a new car and the Honda dealer told me there would be a rebate if I took the 0.9% loan offer but no rebate if I didn't. I thought that was counterintuitive but had also figured that once I better understood the fine print, I could take the loan and the rebate and pay the loan off a month later. But, I'm probably not going with a Honda after all, so it's a moot point.
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Old 08-25-2011, 01:32 PM   #73
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The dealerships that I spoke to seemed to imply that the USSA rate was THE rate. But they are still salesmen with a lot full of cars to move, so I used that knowledge to wragle a few freebies like free floor mats ($200 value) and a full tank of gas (?$). I tried to get free extra tinted windows but that fell flat.
Another question about USAA...

Has anyone had any luck taking the printout with the prices off the USAA web site (after you log in and ask for specific prices from specific dealers but before you provide your personal contact info to those dealers via USAA) to another dealer and using this as a bargaining point? In my case, the dealers USAA came back with are from 40 - 150 miles away. There is a dealer much closer that I'd prefer to deal with (although I'm happy to drive 40 miles to get a much better price.) I'm thinking that the closer guy, if he saw I only had to go 40 miles, would probably meet that price and perhaps underbid it. Or am I living in Never-Never Land?
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Old 08-25-2011, 01:38 PM   #74
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It has nothing to do with what you borrow. It's your record of payment that has the most impact.

Heck, I have no outstanding loans nor any earned/unearned income and my score is above 800 (not bragging - I just paid my debts on time and still do for monthly CC payments - paid in full each month).
Actually it does in a way....

I was debt free and had a high score... got married... whe wanted furniture... we got that 0% interest rate so got a new loan with a loan balance...

Bought a new car with a low rate, but it is still listed as debt...

Bought a new house and decided to take a loan since the rates were low... more new debt... borrowed the down payment from my old debt free house... more new debt...

So I went from having zero debt to over $200K of debt in less than a year... my score went down fast...

Now two years later have paid off the line of credit on the old house, paid off the furniture but still paying on the other and the debt is about $130K... it is back up, but has not yet gone above 800 even though I have made all payments on time etc. etc... it was all the 'new' credit lines and the debt that did me in..... and I used to be way above 800 from what I can tell... (the guy at the furniture store where I got the first line said he had never seen anybody as high as me and he had been in the business 30 years)...

To me it doesn't make a lick of difference as I still get the lowest rates if I want to pay interest and I have enough to pay everything off if I wished...
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Old 08-25-2011, 01:39 PM   #75
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Or am I living in Never-Never Land?
Sounds to me like you're close, only 40 - 150 miles away.

To answer your question, no I did not attempt to use the USAA numbers as a bargaining tool at a non participating dealer as the opportunity didn't present itself. Turns out there was only one of the specific vehicle I wanted (color, options, etc) within a 200 mile radius, and it was at a USAA dealer.

If you do try it, please let us know how it works out.
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Old 08-25-2011, 01:59 PM   #76
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Sorry, I must be missing something. You said that you were paying 0% so I don't know how you were paying interest and got a rebate.

It was the fine print.... it was 0% IF you made all payments when due...but 17% if you missed a payment... from the time you signed the papers... (the salesman doesn't bring this up and even when I read the docs I did not see it).. so for their accounting, they treated it like a 17% loan and when you paid off your principal balance they credited your account with the accrued interest for the years it was outstanding...
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Old 08-25-2011, 01:59 PM   #77
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Darned if I know - they've got teams of actuaries on staff whose job it is to make those kinds of decisions.

But there are people out there who live credit-free, and who have FICO scores of 0. Presumeably, they own cars, and thus, they have to insure those cars. Somehow, they're finding people to insure them, so obviously it can be done. We're not talking hypothetical here - this is already happening out there, in the real world. Insurance companies see people with 0 scores all the time, and know how to handle them. Do they turn away customers with no FICO scores, just because they don't know how to impute that into their formulas? Have you ever known an insurance company to turn away profit?
People with no credit rating have fewer options. A FICO score of "0" is never a reason to approve but can be a reason to reject. It's not worth paying market rate interest just to build a credit score, but if there is an opportunity for a preferred rate or a small loan it might make sense.
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Old 08-25-2011, 02:04 PM   #78
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Originally Posted by ziggy29

I could reply with saying the quoted text above is chapter-and-verse from the Dave Ramsey playbook.

...

Having said all that, in most cases I strongly disagree with the concept of taking out loans just to improve your credit score, especially if you're already in the 760+ range where you pretty much qualify as top-tier regardless of whether you're at 765 or 810.
That Ramsey quote probably applies to some but I don't think it applies to the majority of us with higher ratings. Any score over 760 doesn't matter and I don't see it as bragging since it just reflects keeping your financial promises! Everyone I know w/high FICOs live very modest lifestyles and are not very wealthy.

I'd not carried any debt (CCs used for cash-back and paid in full monthly) except a mortgage (paid off last year) since 1990. The dealership asked me to promise to wait the 60 days to pay off that auto-loan stating that they knew what would happen as soon as I received the payment book. I paid all but about $10 the first month to minimize the interest but GMAC then zeroed out the loan! I called the dealership to explain that I hated that they lost out on the $1000 back from GMAC but I didn't break my verbal promise to them. Oh well.
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Old 08-25-2011, 02:13 PM   #79
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Darned if I know - they've got teams of actuaries on staff whose job it is to make those kinds of decisions.

But there are people out there who live credit-free, and who have FICO scores of 0. Presumeably, they own cars, and thus, they have to insure those cars. Somehow, they're finding people to insure them, so obviously it can be done. We're not talking hypothetical here - this is already happening out there, in the real world. Insurance companies see people with 0 scores all the time, and know how to handle them. Do they turn away customers with no FICO scores, just because they don't know how to impute that into their formulas? Have you ever known an insurance company to turn away profit?

I would doubt that there are very many people with a 0 score... you would have to work at it to get there...

NO credit card use at all.. and from what I can see that is for your whole life as they still have accounts listed on me that I have not used in 20 years...

Basically the only way I can see you having a 0 score is to never ever have debt of any kind in your life....


As for employement, we do a full background check, not just credit score... but we have not hired a few people due to low scores and will not hire more in the future....
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Old 08-25-2011, 02:26 PM   #80
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It was the fine print.... it was 0% IF you made all payments when due...but 17% if you missed a payment... from the time you signed the papers... (the salesman doesn't bring this up and even when I read the docs I did not see it).. so for their accounting, they treated it like a 17% loan and when you paid off your principal balance they credited your account with the accrued interest for the years it was outstanding...
That's a new twist to an old scam. They used to just hope you were late on one payment and they charged you back to payment #1 all the interest. Now they collect it up front, CUTE!
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