I know that in America, people have to « build credit » in order to improve their Credit Score and have better loans for their houses.

Does this consumer credit system force many Americans to live beyond their means?

37 comments

  2. If anyone is living above their means to increase their credit then they are doing it wrong. Your credit is based on repaying loans on time and having liquid assets, among other things. So your credit score incentivizes you to live below your means, if anything.

  3. FOMO forces people to live beyond their means. And a belief that things are valuable rather than relationships.

  4. “Good Credit score” is just a way of saying “they pay their bills”. You do not need a credit card or to take a loan to have a good credit score. Just paying the bills that are in your name such as insurance, rent, utility payments will build your credit score. And if you don’t want to use credit you don’t have to worry much about building a credit score.

  5. If you’re actually living beyond your means, you’re not going to have a great credit score or be able to get a good loan for a house. Using a credit card and paying it off every month or having a loan for something worthwhile or needed, like tuition or a car to get to work, and making the payments on time every time, gives you a solid credit history without living beyond your means.

  7. I’m curious- what is the system for determining loans etc. in other countries?

  9. mmmm if youre asking for the sake of having good credit, no because you actually have to pay that back on time to get good credit

  10. No one is forced to do anything by our credit system. Americans need no help at all to live wildly above our means.

  11. No it forces quite the opposite actually.

    For the average American Building good credit typically requires sacrificing in other areas.

    In order to build credit you need to have loans and Loans have interest, the money that you were spending on interest is money that you could have spent on other things.

    Let’s say you want to buy a $20,000 car.

    If you’re trying to build credit in the best way to go about this is to get a loan on the vehicle and make sure that you always make the payments on time. The negative side to this is depending on what your current credit score is when you get the loan you’re going to have to pay more than the value of the car in interest.

    Alternatively you can just go pay $20,000 for the car but in a decade-and-a-half when you get married in your trying to get a mortgage on a house your credit might not be good enough to get you one you can afford.

  12. You do not have to go into debt to utilize credit.

    Earn $2,000 per month

    Have $500 per month in consumption costs that go onto the credit card (grocery, gasoline, health and beauty spending)

    Pay your $500 credit card bill with your cash.

    Do this every month. Boom, wonderful credit score.

  13. Yes. There’s an entire city in Tennessee that’s middle-class soccer moms. going up to their eyeballs in debt trying to look like upper-middle-class soccer moms. It’s called Franklin, and it’s one of the douchiest places I’ve ever been to.

  14. > Does this consumer credit system force many Americans to live beyond their means?

    No, not at all. All you have to do is just limit your credit card usage so as to be able to fully pay it off each month. That’s actually more beneficial for your credit score than carrying a balance.

  15. The way I built my credit up was getting a credit card from my bank, using it for gas and groceries, then paying it off when I get my statement every month so I know the purchases made it onto my credit history – never paid a single cent of interest, never had to buy anything I couldn’t realistically make the payments on.

  16. Plenty of Americans do live beyond their means. Carrying a (sometimes very large) credit card balance is not only common, most people don’t even think about it or realize what an awful idea it is to do this.

    They don’t do this to build credit, though. They do it because a lot of Americans are effectively financially illiterate.

  17. Doesn’t FORCE anyone to do anything. Many of the Loans people take out are for houses and vehicles. As long as the person is financially responsible, they can afford the monthly payments.

  18. I put every bill I can on my credit card, make every one time payment on my Credit Card (like restarauants stores etc)

    And then I pay the entire thing off at the end of the month and never carry a balance….mt mortgage and car payment come out of my check automatically

    If youre going into debt with CC you are doing it wrong.

  19. Do Americans live above their means? Yes, many of them do.

    Does it have anything to do with our credit system? Yes, because people often get credit cards to help build their credit and end up spending way more money than they have. And it affects it in other ways.

    Does living above you means mean your credit score will go up and positively impact your credit? No, it will *almost* certainly hurt it and go down. Buttttttt I said “almost” for a reason…it’s a little more complicated than that and I’m some cases living above your means can actually help your credit score.
    But you gotta look at the big picture, living above your means will always negatively effect you in the long run. Just because your credit score is good doesn’t meant you’re doing the best you could be financially.

  20. No. Most of us try to pay our bills with credit, live within our means. Every time that we pay our electric, our water, our sewage, it goes to our positive credit my be if we buy a house, or rent an apartment, those on time payments improvement. I have a card where I buy things for points to get bonus point, pay it off in full and pay it off in cash, so I can get free stuff.

  22. Your credit score is determined not by how much debt you carry, but by how well you pay the debt you have.

    So yes, to build credit you need to borrow money–generally done through the unsecured loan on a credit card.

    But then *you have to pay it back, on time, and promptly.*

    You’re better off, for example, charging about $1,000 on your credit card and paying that amount off relatively promptly (at most carrying the balance for a month–though ideally paying the full amount at the end of the month), than you are slowly running up a $20,000 debt on your credit cards you service with the minimum payments.

    (That’s because if you’re just barely making payments, the card company thinks you’re likely to default on the balance.)

  23. Huge numbers of Americans are just a couple missed paychecks away from financial ruin. Including many people who make very good money.

  24. Absolutely. I have known plenty of people who look like they have a lot, but in reality they are 1 “oh shit” away from losing it all. An old supervisor of mine had a new and big house, 2 brand new vehicles, a boat, motorcycle, all name brand clothes etc. He broke his foot and couldn’t work for 6 weeks. He lost everything. He had absolutely no savings, nothing to fall back on.

  26. Taking out too much credit is exactly the thing you should do to destroy your credit.

    It’s also not that hard to build up good credit, just use it sparingly and always pay it back early.

    Like I’m only in my mid 20s and have a credit score over 800

    Honestly most people don’t even really think about their credit, unless it is really bad, and that’s usually because they have a problem.

  27. Credit is a joke because your score goes down if you continuously pay all your bills on time and basically do everything you’re supposed to do. Not having a bunch of payments to make, closing old accounts you’re done with, not spending a certain amount of $$ if you make a decent amount of $$ all drops your credit. It’s stupid.

  28. I can’t see any possible scenario where living beyond your means would legitimately be a positive for your credit score. If you can’t pay off your credit bills then your score will go down…

  29. People live above their means because they want stuff and budget poorly. People only really worry about their credit score when they want to finance something.

  30. No just use your credit card as if it were a debit card. It’s actually better than a debit card in most cases due to fraud protection and the fact they often have rewards. I think most people that use them pay them off every month though so there’s no interest, so people usually don’t charge money they don’t have to the card

  31. No, nobody is forced to have credit or use it. Some people do try to live beyond their means which is why credit debt is so high but it’s certainly not required for good credit.

  32. >I know that in America, people have to « build credit » in order to improve their Credit Score and have better loans for their houses.

    You don’t “have” to do any of that. You don’t even have to buy a house. Hell, a lot of people just rent their entire lives.

  33. I believe our issues with debt stem from our low wages, car dependence, and costs of education and healthcare. Legit buying fancy stuff because I have a credit card is a drop in the bucket compared to medical debt and student loans.

  34. In no way does our credit system force people to live above their means. Many people choose to use it to live above their means because they are financially illiterate. This is one of the massive failings of our education system.

  35. not dying from type 1 diabetes is “living above your means” here. but people don’t really do it for the sake of credit (or if they do, they’re doing it very wrong).

  36. Hardly anyone lives within their means. Our capitalistic world is set up so that you can’t afford to buy outright. We borrow to buy a house, a car, an education, and many other things.

  37. It doesn’t force anybody to do anything. Good news for the banks is they don’t need to, people will run it up as much as they can all on their own.

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