Life Without Credit?
Question: Bob on Facebook wants to know how new college grads make it in the world without credit. Dave has a lot to say on this topic.
Answer: Let me ask you the question the other way. Why would you tell a new college graduate that in order to get an apartment easier, in order to impress a potential employer with your credit score, or in order to buy a home using a credit score, in order to do that, why would you tell them to go into debt and stay in debt and spend their whole life working for banks like most people do? Underlying your passive-aggressive question is that our advice to stay out of debt and not build credit is stupid, and I think your question is stupid. I think it’s ignorant because what you’re doing is you’re presupposing that the only way to have a quality life is to go into debt, stay in debt, and pay payments in order to get an apartment easier, get a mortgage easier, and maybe some employer hire you based on your credit score. By the way, Bob, how many people do you really think get hired based on their credit score—potential employers pulling a copy of your credit?
Let me just tell you if somebody’s hiring based on their credit score—given that a credit score is only developed by borrowing money and staying in debt and paying back lots of interest to the bank—if you call that smart, I don’t want to work for you. That’s something to think about. Some employers are pulling credit bureau reports, but if you have no credit whatsoever on your credit bureau report and you’re in your 20s and have just gotten out of college, why would that be shocking to an employer? Why would they rule out a candidate based on that? They won’t is the answer, Bob. Not a quality employer. An employer who makes a hiring decision based on that one factor only is not someone who’s smart enough to work for.
Are you limited on corporate-type apartments, apartments where they’re not allowed to do a full analysis, instead they just look at the FICO score, which is ignorant? Are you limited to not be able to rent from them? Yes, you are. The only people who rent an apartment to someone without a FICO score is Grandma over a garage—come on, Bob. That’s a ridiculous statement. I own a lot of real estate. I have never leased—ever—in the history of me being a landlord to someone based on their FICO score or based on their credit report being full of timely payments. That indicates to me they have a lot of payments, and they might not be able to pay my rent. If I find that when I pull it, that hurts them. Yes, we do pull bureaus on people. If they’ve got a bunch of bad debt, then we want to see that, meaning they don’t pay their bills. That’s a different thing. But this idea that you have to develop credit to have anything is stupid.
Can you get a mortgage never having borrowed money? You bet. Absolutely. If you have never borrowed money in your life, you have no open accounts whatsoever, you have a zero credit score as a result, you can get a Fannie Mae, FHA or VA mortgage. You use what we call nontraditional credit, which would be utilities—you can’t have lived in your mother’s basement the whole time. You pay a landlord early or on time for two years. You have a job for two years that’s steady and predictable and can be verified. You use nontraditional credit. You can use a company called eCredable. They’ll take your nontraditional credit and develop a nontraditional credit score, meaning it’s not based on debt. Churchill Mortgage will work with you with eCredable and get you a mortgage. This idea that you have to go in debt in order to get a mortgage later is, again, ignorant.
What happens is the culture has told lies to people—especially young people—for so long that frankly, it pisses me off. You people run around telling everybody that the only way they’re going to have a good life is to go into debt, and you’re lying to them because you’re stupid. You’re lying to them. You’re harming them. You tell a 22-year-old college graduate that they need to go get a credit card and a car loan to establish credit so they can have a good life—you ought to have your butt kicked up around your neck. You’re harming that person because they’re going to take your advice, and then they’re going to be in credit card debt, and they’re going to have car fleeces coming out their ears. They’re not going to be able to breathe, and you put a strain on their marriage.
You know the number-one cause of divorce in North America today? Money fights and money problems, because idiots like you told people to go into debt to build their credit. You’re tearing up marriages with your lame-butt advice. You’re messing up people’s futures. You’re taking away their most powerful, wealth-building tool, and that’s their income. When you give your income to General Motors and Ford and student loans, when you give your income to MasterCard—who named that anyway?—American Distress, when you give your income to Discovered Bondage, when all the money comes in and all the money goes out—you’ve got no money. All you do is work for the man. Well no wonder people get frustrated. They feel like a rat in a wheel.
I think one of the most insidious lies that has been told in our culture is the “build the credit, worship at the altar of the great FICO” lie. “Oh, FICO, you are our provider. If we don’t bring you offerings of credit card interest, you will not allow us to have a home later. Oh, FICO, the best way to get a car is to love you, FICO. Oh, great FICO, we bring you offerings of Discover card. Oh, great FICO, we’re going to keep our student loan around so long we think it’s a pet so that we can keep our score up with you, great FICO, because you bring us all good things, great FICO.” This is the dumbest thing I’ve ever heard in my life, and a whole bunch of you people fell for this crap. Maybe it’s time to be grownups and start analyzing things for yourself instead of believing the lies that the culture has told you.
“How do new college grads make it without credit? It seems to be getting more and more difficult for people with no credit.” No, Bob. It seems to be getting more and more difficult for people with no money. It always has been difficult for people with no money. When I had no money, it was difficult for me, so I went and got me some money. I try not to give it to the stupid bank—unless it’s a savings account. Seriously. I work hard for this money. I don’t want to give it to one of these idiots in order to build your pretend measure of wealth.
A FICO score is not a measure of wealth. It’s a pretend measure of wealth. Building your credit is the biggest myth—the biggest lie—that has been sold to the last two generations. So many people bought it that they are deeply in debt. It’s affected their marriages. It’s affected their future. It’s affected their ability to feed themselves, to take care of themselves at retirement. It’s affected their ability to change their family tree. It’s affected everything because we believe you have to go—we the people now are going to go into debt. Why? So we have the opportunity later to go further into debt. That’s the “build your credit” myth.
This aggravates the crud out of me. Can you tell? Are you getting the idea? Why? Because I love people, and I want people to win. You don’t win sitting around paying these stupid banks. You don’t win living your life for Chase and Bank of America. You don’t win with a student loan that’s been around so long you think it’s a pet. You don’t win with MasterCard wrapped around your neck like a boa constrictor. You don’t win dealing with the fools at American Express. You don’t win getting a mortgage over at Wells Fargo. You don’t win with getting a car lease—car fleece—over at General Motors or Ford or Lexus or whoever.
That’s it, dude. That’s it. Here’s a plan: If you can’t pay for it, you can’t afford it. That was deep.