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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 310321  
Subject: Re: Credit card, using them to build credit Date: 12/9/1999 2:56 PM
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As for buying a house I will concede that's it's very, very difficult (but not impossible) to save up enough cash to buy a house outright so you will probably need to borrow at some point. However, instead of buying something to make payments on to "establish credit", you'll be just as creditworthy if you have a steady job, a large down payment, and no debt. You probably won't be if all the lender looks at is you credit score. Put yourself on the other side of the desk, though. If someone comes in to get a loan from you and they show you a steady job, no debt, and a 25% down payment, I would imagine that you would be able to loan this person money. You just have to get them to look past the score.

I just wanted to add to this with some personal experience. Although we do use credit cards for most purchases, we also pay the bill off in full every month. I don't do car loans, so the only thing we borrow for is the house. We have just upgraded and moved to a new house that's worth about twice what the previous one was. When we went in to apply for the construction loan/mortgage [they treat it as one thing and there's only one closing], we actually got the commitment from the bank on the spot. Hubby thought it was all just too easy, and was uncomfortable with the fact that the banker just approved the loan without doing much checking. I knew why. He kept looking at our assets and liabilities list. We don't have any liabilities, and we've been Foolish forever, so we had enough in our taxable stock portfolio to be able cover the entire mortgage amount. That still left the non-taxable portion of the portfolio untouched.

So as the banker kept flipping back to the same page, he was just looking at the net worth line. From his point of view, there was very little risk since we were putting more than 50% down, and we had plenty of assets to cover us in case of job loss. He didn't need to do a credit check to see that, and it didn't matter that hubby has a very spotty job record because of the industry he chooses to work in. So it's not just the credit score they look at, although it probably helps to use a local banker where you actually sit down with the guy to go over the application. But you don't need credit just for credit's sake.
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