Would you rather have good credit or no debt?
The shift from the gold standard is becoming increasingly evident as the lines between cash and credit continue to blur. Its obvious the average American doesn't have a problem acquiring debt as long as the monthly payments are low enough to manage. I must admit as a twenty-something year old woman, I'm not at all surprised to see people jumping at the opportunity to borrow more money. Since, the recession began in my late adolescence. However, it is interesting to see people avoid paying off debt in order to raise the almighty FICO score.
How Much Are You Willing to Pay for a High Credit Score?
What's even more disturbing is the amount of people deciding to carry student loan debt in order to establish long-term payment history. I understand credit is important. Especially in a debt based society but does it make sense?
According to the Federal Reserve student loan debt has surpassed credit card debt and now tops $1 trillion. It is also estimated that 9.1% of new graduates default within the first two years, according to the US Department of Education. Unfortunately, the news just keeps getting worse. The Bureau of Labor Statistics reports an unemployment rate of 7.8% for the month of September. So, the risk of default seems pretty high considering underemployment and those that have simply given up are not included in current unemployment statistics.
I strongly disagree with voluntarily carrying student loan debt because it can't be discharged unless you can prove your 100% percent disabled, in which case you have way bigger problems than personal finance. As a result, I think extending such a large debt with few repayment options and, no possibility of forgiveness isn't a fair trade for a better credit score.
I am aware there are other types of debt obtained to improve credit worthiness. However, no debt is as permanent or damaging as student loans. Here's a perfect example of why student loans should be immediately paid off.
Are You Considering All the Cost?
Our country is heading in the wrong direction with no sign of change in sight. However, an entirely different picture is being drawn by the mainstream media, who claim a rise in consumer confidence is a sign of economic recovery.
The US Census Bureau announced August retail trade sales were up 1.2% from July and 5.3% above the same time last year. This information was reported as a sign of better times which is really disheartening because no real growth has occurred.
The new increase in sales is not a response to new job creation or raised wages but increased lending. In my opinion, the housing bubble and the impeding student debt bubble is just a lending crisis in disguise. Improving credit scores in order to obtain more debt is harmful to the recipient and the country as a whole.
A new normal is being created causing entitlement to spiral out of control. Everyone wants to own a house but, unfortunately not everyone can afford one. So, most people are willing to serve a 30 year sentence in order to buy their piece of The America Dream. Reality is slipping away and owing money is becoming all too normal.
The forces that be are encouraging us to carry large debts for decades. Thus, preventing us from gaining real wealth until we qualify for the senior's discount at Ihop! Consequently, most people's "assets" are leased not owned, including their house! No wonder their wanting to extend the age of retirement.
Side note: How does a homeowner lose their home? They don't! They never owned it in the first place but I digress, that's a post for another day.
At the end of the day credit should be a perk. A tool that allows you get lower insurance, better jobs, and low or no deposits when starting a new service. Perks are nice but not missed. Unfortunately, it seems some people would rather have an excellent credit score and substantial debt, than low or no credit without any financial burdens which explains why Americans are losing wealth by the minute.
We need to remember credit is nice but cash is king. Actually, I take that back. Credit isn't nice, it fact it can have sharp jagged teeth when in the wrong hands. The American dream has been hijacked and refinanced over and over again. Don't believe the hype. Digging yourself deeper and deeper in debt in order to buy things you don't own is just plan stupid. If you were considering managing debt in order to improve your credit score, I hope this article got you thinking and changed your mind.
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