Yeah, these guys truly suck balls in a way that is seldom seen in this day and age. Truly awe-inspiring. Stay in school.
Anyway, since nothing happened today I'll just write something that might actually be interesting to some people.
Reading bits and pieces of Rori's new blog about credit card stuff has inspired me to put to paper something I was telling P-Base (see, I'm starting the pseudonym game already, though in this case I'm not sure why) a few weeks ago. Lori's take is very Dave Ramseyish, and that is fine if it works and you are looking for the easiest way to just pay off some debt. My take on the matter is pretty much as anti-Dave as one can get, but you end up with a lot more in terms of return on time and money.
For those who don't know, Dave's plan is based on 'debt snowballs', paying bills from smallest to largest, and cutting up credit cards. It is very easy to figure out and stick with, and there is pretty much no risk involved. It is aimed at those who either don't know or don't really care how credit scoring works, and there is a huge amount of nonsense credit card scaremongering thrown in. But it works. With Dave's plan you pay interest on your debt, hurt your credit score, and live in some fantasy world free of liquidity where having $10k in the bank as an emergency fund will somehow solve all your problems.
The path I walk is very different and not for everybody and is admittedly more difficult given the economy these days. But, with some patience and time you can still save money, travel well for almost free and even make money by having huge amounts of credit card debt. All the while your creditworthiness will be going through the roof and you will be establishing a solid credit history (which should come in handy when trying to make some decent money once credit starts flowing again). The downside to this is that it's really easy to fuck up big time if you are a lazy shit and/ or just don't have time for it.
My plan is based around getting
more credit cards shifting debt. If you don't have debt, get some, as it will become your friend. If you are old-fashioned and don't feel like leveraging one of your most valuable assets (your credit score) stop reading. If you are reckless and can't control yourself then you are already fucked. Now, to be fair, this isn't something I just came up with myself; it's based on what I've read over the years at Fatwallet finance forums (ignore most of the rest of the site) and countless other sites as well as what has worked for me. You'll notice I focus a great deal on Greg's credit score. This is what the whole fucking shebang is about. Get that right and everything else will just fall into place. Unless you're an asshole or something. I'll also try and throw in some bullet points somewhere along the way explicitly highlighting important stuff that may or may not be inferred by you, the hapless reader doucheass.
I've tried to explain this to people a couple times without much success, so if this doesn't make sense I will edit it and expand as necessary. I'll try a case-study approach. Let us take Greg DiPhallus and his $10k of debt as an example, calling him Greg or GDP for short. I just noticed that GDP is harder to type than Greg, so we're going with Greg. Moving on, Greg has just finished a few shitty years at a small private Christian college where he never got laid despite being hot as fuck and smart as shit, as well as incredibly humble. Up to this point in his life Greg has thought about his credit score about as much as hot bitches have thought about his bulge: Not too fucking much. Over the years he has signed up for various store cards to save 20% at Structure or get a free T-Shirt on the beach during spring break at PCB or some shit like that, and he also has a debit card, some other credit cards and a checking account. Most of his debt is spread across several low-limit cards that charge high interest rates (I think this seems like the most common scenario). Greg has a job that pays average wage for the area. I don't know, $50k or so? $60? $30? It probably won't matter anyway. But the fucker has a job and some income. And rent. Car payment? I don't think most people I know have them so I'll say no. But if we want to give him one we can work that in in another post. In fact, lets say he does have one and we'll get to it later.
Right. So Greg has $10k on 4 credit cards. What is he to do? Well, first and foremost he needs to check his credit score. Not the FAKO shit from freecreditreport.com or any other similar garbage. He needs to know his real FICO score. It is not free. Reports are free, scores are not. Let's put him at a shitty-but common 640 or so. This is not a great score, but with patience it is certainly workable. Along with the naked number it will be helpful to have an idea of what exactly it means and how it is calculated; once we know how they figure it we can figure out how to raise it. Here is a good explanation http://www.bankrate.com/brm/news/credit-scoring/20031104a1.asp
A couple things to note: Paying your shit on time, your debt to credit ratio and the age of your accounts together make up
80% of your score. Eighty fucking percent. Notice what doesn't mean shit: Income, owning a home, age, whether you're a bitch or dude, etc. The things we can easily change are the things that matter most, and the things we're more or less stuck with count for ass.
How does this apply to Greg and what should he do next? First, pay all his bills on time for a few months. That is common sense. Then hit the phones, bitch. Start with the easiest possible shit and call each card co and ask them to drop the interest rate. Every little bit helps, though soon he won't even look at APRs because they won't matter. But for now Greg is a broke ass pussy bitch. He will probably get a lot of 'nos' but whatever. Fuck them.
Now that he is working on the first factor he can control it's time to move on to the second: the debt to credit ratio. Let's say Greg owes $2k on a card with a limit of $2500. That means he's carrying a balance equal to 80% of his credit available, and that looks bad to creditors and the layman alike. Knowing that a lower % of credit used is better regardless of the exact numbers involved, how can a guy with more or less fixed income and expenses decrease that number most easily and make himself at least appear more credit-worthy? Save up and pay it off? Sure, but we want easy, and the easiest way is to simply
get more available credit. It is at this point Dave Ramsey starts blowing loads into his own face. Most credit cards have a button online that reads 'request credit limit increase' and most of them are fairly loose with what they give you, though once you get around $24.9k with AMEX on a single card they can be a pain to deal with. Anyway the idea is to either call or go online and request a credit line increase for that card. Let's lowball and say they only give him $1k more of credit. Now he owes $2k on a card that will give him $3.5k. Despite his debt not changing he is now only using 57% or so of his available credit. Do this for each card and it will make a difference in his score, and that is what counts in the long run. Now, it is important to do your homework, as you do not want the card issuers making hard pulls when they do this. I am getting tired but will pick this up later. I'm going to leave myself some notes as to what I'm thinking.
-planning - balance transfer (to card and/ or bank account)- online banking- liquidity- money in hand/ credit (as it relates to emergency fund) - interest compounding for/ against you - getting stuff along the way - 100s of ks of airline miles/ hotel points/ etc - avoiding renewal fees - consolidation - issuers - resources - conventional wisdom is for dumb people - making money with other people's money (enough to pay bills/ more) - don't cut up cards, never close them, consolidate
- minimize hard pulls
- what are pulls
- FAKO/FIKO
- Business cards
- hide debt
There is plenty more. I didn't realize how much there was to this when I started writing it. Shit. So I guess from here on out this blog will be finishing this explanation of stuff mixed with the random stupid shit that goes on. Since I don't have to worry about mixing audiences (since there isn't one) I'm not going to bother with starting a new blog. If by some chance you've come here for one thing and find the other that day then I don't care. Please keep in mind that it's 3 am here so the syntax and grammar might suck but if you're reading this so does your credit. And sister. At this point I'm just typing what I think of and the editing/ correcting can be done later. By your mother. I have not proofread this and I don't plan on it until I come back and splice all this type of shit together into one big story.
