The more I learn about what happens to people who are in debt and fall into hard times, the less I want to buy anything with credit.
Sure, in the article the first example they posted was of a person down on his luck - but that doesn't explain the epidemic of high credit card debt we've had even during boom periods. In general, I think that people just aren't good at living within their means.
Having been on my own .com rollercoaster ride, I know what it's like to have to adjust your lifestyle drastically at times to avoid going into debt. It's difficult, but downsizing your house and selling your luxury car is a lot better than the alternative of living on the edge and losing everything when life throws your the inevitable curve ball.
From my point of view, it was absolutely crazy. I tried everything in order to persuade them to let me open an account, such as offering to pay for several months of service in advance, but their policy prohibited anyone with "unknown credit risk" from creating a new account under any circumstances.
All you have to do is get a credit card, buy all your groceries with it, then pay it off every month. Paying it off every month is the most important part. If you suddenly find yourself in a position where you have much less income, resist the temptation to use your credit card as a supplementary income.
In retrospect, I didn't give him good advice. It's not that the overall approach is a bad one, but I didn't understand or emphasize just how important it is to establish a credit history. When you're in college, credit card companies will offer you a line of credit even if you have no previous credit history. If you can charge $10 a month, and pay it on time every month, for several years… I'm not kidding, banks will lend you $750,000 to buy a house at the most favorable rates 5 years later simply based on your demonstrated ability to pay $10 a month reliably and not run up a $10,000 debt just because you can. It's a test, and it's an important one to pass - but if you aren't going to pass, don't take it (yet). You will need to eventually.
If you don't take this test and pass it, banks will at best charge you a higher interest rate that could actually cost you well over 100K over the lifetime of the loan. They might not loan to you at all.
So yeah… if you can't handle credit, don't do it, but be aware of how important it is to establish a credit history.
14 years lost.
14 years lost how? Do you not have the house/item that you spent 14 years paying off? Or was it credit-card debt?
I threw a lot of money into a mortgage and ended up in negative equity for 2 years as well.
This is how I learned that status and material things are not important. Unfortunately my parents taught me the opposite to this and I paid with slavery for a long time. I realised that they too are slaves to their purchases and status.
Shit happens! Everything I own is worth about £1000 now and I can afford to just replace it and go "meh".
The incredibly dangerous thing is purchasing something you don't actually have the money for, and paying for it over time, with interest.
If you think it about this way, the greatest generation never used credit. They saved until they had the money to buy stuff. My grandparents never had credit cards, and it wasn't until my parents were in their 40's and quite wealthy before they started using credit cards.
If anything, you should use them only to maintain your credit rating. Keep a small balance (under $100) and use them to make small purchases. That way, you can reap the benefits to your credit score, without putting yourself in a huge hole.
Don't leave the balance, pay it off every month. It doesn't benefit your credit score.
From a Bank of America FAQ [0]:
Fiction: You must carry a balance on your credit cards to build a credit history.
Fact: You do need to use your credit cards to build a credit history, but that doesn't mean you must carry an unpaid balance. In fact, your best strategy is to use your credit cards and pay off the bill in full each month so you keep your overall debt-to-credit limit low.
[0] https://www.bankofamerica.com/credit-cards/education/5-facts...
For example, if I have a balance of $800 when my statement was generated, my bank is going to report that $800 to the credit bureaus and FICO will calculate my credit score accordingly. So, for this cycle at least, it doesn't matter that I pay in full before my due date (thus avoiding any interest expense), my credit report will show an $800 balance on my account. This is why it's more likely to experience big month-to-month jumps in your credit score when you have fewer accounts/lower credit lines.
I do agree with you, I think that not carrying a balance doesn't have any negative impact on your credit score.