As the son of a widowed mom (my dad died when I was not quite 8 years old) the lesson that she taught me growing up in Glenside was “never buy what you cannot afford and always live within your means.” And it was a mantra I have always followed. Now I’m not so sure that it was the way to go. If Mom only knew then about credit bureaus.
Apparently the bankers and the credit card companies like it better when you seem to be skating on the edge of financial problems and appear to be over-extended, making you a sitting duck for higher payments and staggering interest rates. If you are in that boat, they will loan you more money. Like giving a drowning man another drink of water. I just learned that lesson in a most interesting but, yet, very frustrating way.
Over my lifetime I have owned a number of houses — both residences and vacation abodes. I’ve called Abington, Warminster, Hatboro, Ocean City, NJ, Harleysville, Wildwood Crest, NJ, Towamencin and Buckingham home. Paid real estate taxes on all of them. In each of those places where I bought a domicile (in all but one of them) I carried a mortgage. One, the most recent, I bought outright little suspecting that I was greasing the skids for problems with my credit report. Credit bureaus like you to have mortgages.
I’ve always enjoyed the best credit ratings. I’ve bragged about my ratings being well over 800 (that’s the highest plateau, the 800s). My mom’s advice was heeded at all times. Yes, I have credit cards ($25,000 limit on one of my five) and use them often, but each month I pay the full balance. Clearly the banks and the credit card companies don’t like this. Why? Because they can’t charge you interest if there is no balance. In fact the one card I use the most pays me nicely for the points I accumulate every few months. But I’m not really costing them, am I? No, I’m not. Each time I charge something, the merchant who accepts my card pays them a percentage of the sale. But instead of double dipping both me and the merchant, they only get one dip — the merchant.
We bought our new home three years ago last month — this is the one I bought outright, cash, no mortgage. To celebrate I went out and leased a sporty new convertible, got rid of the sedan. Nice car, and the manufacturer assumed the lease payments. No problem with the credit rating. My other car, the SUV, I paid cash. Ditto several before that.
Three years passed I ended the convertible’s lease and decided, instead, to buy a replacement — but to do so with car payments. I hadn’t done that in years, but decided that instead of having nothing left at the end of the lease I’d own the car at the end of the payments. Seemed like a good plan. But then the ulcers began.
First I picked an expensive, but used, Mercedes SUV. I wanted to finance the whole deal. Why not? Well, no bank would do that because it was a used car. They tried a couple of banks, the best they could get was someone to go 50-50. So I said, let’s skip the Benz.
I finally found a new car I liked, but financed most of it — I did lay out some cash too. A bank in New Jersey took it. No sweat, think I. Then I learned, in the days that passed, that several banks turned thumbs down on me. In fact I got a small parade of letters from banks declining my loan application because — Are you ready? — I didn’t owe enough money. They couldn’t find any record of my installment payments on anything. (I guess the lease on the car that I just paid off didn’t count.) It didn’t matter that I owned two houses, another car and owed no one anything. They would have liked me better if I did.
As you may know, there are three competing credit bureaus. For some reason they seldom are on the same page. Trying to reach them by phone is a joke and by e-mail not much better. One rated me in the mid-700s (not a terrible rating, but not warranted either), the other two rated me well over 800 – but the banks got cold feet over the 700 rating. So despite two 800s out of three, six banks turned me down and all for the same reason. They said I needed more credit cards, that I have no record of “on time” payments. I guess paying the cards each month, on time and in full, doesn’t count.
One bank that turned me down was Bank of America. I use their personal credit card most of all, cash in my bonus points there regularly and pay it off each month. The same bank also handles my business credit card, same deal — always paid off. So of the ones that turned me down that was the one that bugged me the most. And when I called them you should have heard the tap dancing when the bank officer actually ran my accounts and learned that I was a long-time customer and had high limits on both cards.
After he got done with the multiple apologies he suggested I go to any nearby branch where he would guarantee that they’d underwrite the car loan, no questions asked. I don’t know where there is such a branch office and told him what he could do with his offer. That ship sailed.
This month I made partial payments on my credit cards, thus insuring they could charge me interest. Next time around they’ll probably love me.