This is why schools should teach financial literacy

[Scooter]

[MajGenl.Meade]

14.99% interest? They both should get 0 or 0.9 these days. Maybe it's a Canadian thing and they should come down here to buy a car

[Long Run]

I was surprised that you can get a new Camry for $23,000 as much as car prices have climbed over the years, but that is a real world example.

Agree with the main point that including some real world financial education in school would be a good thing. There was a story recently about a lawsuit against Nike for its outlet stores listing suggested retail prices that were higher than actual retail prices, and thus, allegedly misleading consumers of a certain intelligence level, into thinking they are getting a better deal than they thought they were getting. http://solecollector.com/news/2016/04/n ... let-prices Same lack of financial understanding.

[BoSoxGal]

If you honestly think that lack of financial literacy is the only thing standing between people with bad credit and good credit, you are most seriously out of touch with the reality of the vast majority of Americans.

I'll agree that some people are hopeless with money, and I wholeheartedly support better education about life skills like budgeting and credit management being taught in public schools as a matter of core curriculum. But when 50% of bankruptcies are caused by medical debts and many of the rest by divorce, job loss, etc. - well most bad credit is caused by circumstances that financial literacy just isn't likely to prevent.

[Scooter]

I certainly wouldn't claim that financial literacy is the only difference between good credit and bad credit, but a lot of the reasons for a difference between a credit score in the 500s and one in the 700s are things that people can control - taking on too much debt for non-essentials without thinking about how it is going to be paid back, not making payments on time or at all, applying for credit repeatedly in the hope that some of it will get approved, etc. No one is going to be able to plan for a major medical crisis, but people can be taught simple household budgeting (which most people don't practice) that can make them conscious of how much they are spending and keep them from digging a financial hole larger than necessary.

[Jarlaxle]

If you cannot pay cash for a car, you probably cannot afford said car.

[rubato]

Financial literacy would teach someone with a bad credit score that if they can afford to pay $23,000 then they cannot buy a new Camry. A new Camry costs more than they can afford. And if it gets totaled they will owe more than the insurance will pay them.

The fact is that if you are poor our society fucks you harder and deeper.

It is also true that blacks with good credit often get offered the abusive financing esp in home loans.

But knowledge is power.

Yrs,
Rubato

[rubato]

If you cannot pay cash for a car, you probably cannot afford said car.

Most of the time that is a good rule.


Yrs,
Rubato

[BoSoxGal]

75% of Americans, even many with good credit scores, are 1-2 pay checks away from major financial problems.

So I guess what I'm saying is that proof of financial illiteracy is not necessarily measured by credit score and isn't even the root problem; a combination of stagnant/shrinking salaries v ever-increasing cost of living and the student debt crisis that make it pretty damn impossible for even good budgeters with good credit scores to achieve any true financial security in this economy - whether a spendthrift or penny pincher that isn't the primary problem by a long shot.

I'm having some struggles with articulating myself clearly today but I guess just to clarify, I support greatly expanded financial literacy education in public school pre-age 18 when very young adults are able to contract and begin establishing good or lousy credit management habits.

And I certainly am not arguing that persons with bad credit scores are seriously penalized in the whole credit use market for having bad credit - even unfairly in the pricing of auto insurance, etc.

I'm just saying that many Americans who already possessed sound financial management skills are in the bad credit market due to life circumstances and many cannot avoid those circumstances by building a safety net of savings because if you are working poor or lower middle class you are unlikely to make enough to pay basic costs of living and also set aside any substantial savings.

[rubato]

I think you're missing the point. The problem is when the person with the low score does not know they are being victimized. The low score ( however one got there) means you are offered bad choices, you don't have to take them and be even worse off.


Yrs,
Rubato

[BoSoxGal]

That's where I think [italic]you[/italic] miss the point; the working poor don't have choices. Car broke down, need a reliable car for transportation, don't have any savings to extensively repair broken car or buy replacement for cash - but have poor to average credit? Okay, thank God there is an asshole banker in the world willing to make serious buck over your misfortune and charge you usurious interest rates to provide the tool you need to feed your family.

Again, I support financial literacy.

Do you support outlawing usurious interest rates?

[Burning Petard]

"usurious interest rates" has no objective meaning. When I opened my first savings account at a bank, the passbook savings paid two percent, compounded monthly. The same bank charged a maximum of six percent on loans. Credit cards were unknown. Now banks in my area pay less than one percent on savings, and charge up to 24% on credit cards

snailgate

[Joe Guy]

As far as I can tell, all credit card companies charge usurious rates. There is no good rate being charged by anyone. If you don't pay in full every month, you're wasting a lot of money.

The lowest interest rate on a credit card I've seen is 9% and I think it was just a temporary rate to get you to apply for the card. Other than the first two cars that I bought when I was young and not yet an affluent member of society with a lot of time on my hands, I've only made monthly payments for a car when I was able to get zero interest loans from Toyota.

[dales]

If you cannot pay cash for a car, you probably cannot afford said car.

Same for a home, if one can't make it an all-cash deal............................rent!

[Burning Petard]

The first two cars I bought, I paid cash. The third was a' new' '66 Mustang with with 12000 miles on the odometer--a dealer demonstrator so-called, from a dealer in Midland Michigan. It had a matchbook from a bar in Portland, WA in the glove compartment. I suspect it had been driven regularly by the dealership owner's son. I financed it with 24 payments thru a credit union. As a new car purchaser, I received propaganda from the Ford Corp, explaining to me how it was actually cost effective to purchase a new car every two year. I looked at their numbers and the data clearly showed they were correct, but it was all a curve for total expenses and it came back down again if one kept the car for more than about 10 years and 100,000 miles.

That is what I have done ever since--bought a car new. The next two were also financed with a credit union. Starting with '87 Ford Escort I have always paid cash, and driven it till the wheels fall off or in the latest case, I total it. I now have a '00 Focus with 144,00 on the clock.

snailgate

[oldr_n_wsr]

Do you support outlawing usurious interest rates?

I was paying 12 3/4 APR when I bought my house, but that was the rate back in 1985.

We didn't buy a brand new car until 1999, fifteen years after we were married. I drove cars from the late 60's/early 70's until 2001 when I bought a new car for myself (previous one was for my wife).
When I would drop off or pick up the kids at some school function, it always amazed me at all the new cars/truck/suvs people, in my income bracket, were driving. People were putting in $20k inground pools borrowing against the equity in their homes that eventually went away in the crash.

Yes, many are one medical problem away from destitution, but going without can lessen the impact.
Learn to live without the "must have" and maybe you will have some money to survive the rough spots which will come about.

Meanwhile, my house is paid off and both cars were purchased with 0% interest loans (and 50% cash down), one fully paid off, one with less than 12 months left. I can now afford the "must have" but when I really think about it they become "no I don't have to have it".
unless of course it's some kind of tool I don't have yet like a bench top planer, hint, hint, fathers day is coming and so's my birthday

[Big RR]

Yes, many are one medical problem away from destitution, but going without can lessen the impact

if you have a very good salary, perhaps, but for the average (and well above average) person it would be near impossible to save enough to weather (or even significantly lessen the impact of) a major. Face it oldr, you did OK, but I'd bet you had a pretty well-paying job by average standards, and perhaps your wife worked as well. But I'd bet a lot of people had both spouses working and both salaries combined weren't as much as yours. I'm not saying people don't make stupid decisions--many do; however, it is a simple fact that many people are living paycheck to paycheck with very little cushion. Indeed, I heard a discussion on NPR a couple of weeks back where one professor did a poll and found that 48% of American families could not even come up with $400 in an emergency; when you think we live in a world where credit card advances, home equity loans, paycheck loans, or even personal loans should be able to help for a sum as small as that, I think it shows the position many are in.

[Scooter]

I believe it was that they couldn't come up with $400 without borrowing (i.e. without recourse to any of the means you listed), which really doesn't detract from main point, that people are basically living from pay cheque to pay cheque.

[Big RR]

I'll have to check--I came into the show late and thought it was not come up with it at all. But it doesn't detract from the point, even if they could borrow it.

[oldr_n_wsr]

Face it oldr, you did OK, but I'd bet you had a pretty well-paying job by average standards, and perhaps your wife worked as well.

By counrty standards, yes a good salary, but not so much here on LI. And my wife did not work for a good portion of my kids childhood, and even when, it was part time.

But I do get your point and agree, many are not able to save.
I also still think that many could save if they do without what is mostly non-necessities.