New answers tagged debt
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If you're thinking of buying a home, don't use your rent in the calculation. Use the expected mortgage payment (plus PMI, insurance and taxes).
Also, while the $2000 is a debt, the bank only looks at the minimum payment (which in your case would be $40-$60).
So, keep on using your CC, paying it off every month and living below your means.
(Since the $...
3
It depends on whether the debt is secured or unsecured. Student loans and virtually always unsecured so there is nothing for the lender to repossess. Auto loans are virtually always secured by the car so if you stop paying on the car loan, the lender can take the car back. The lender can only ever take back the property, if any, that was used to secure ...
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On paper, paying the higher-interest debt back first with the entire bonus amount is the most straightforward solution. However, many people will tell you to establish an emergency fund with some of the money. This may make sense for you, but (like pretty much all financial decisions) it boils down to risk tolerance. What are the chances that you will have a ...
7
It's gamed against people who lack basic financial literacy, which is a depressingly large number.
Credit cards make money three different ways:
Fees charged to the merchants.
Direct fees for customers uneducated enough to pay this
Interest charged to customers uneducated enough to carry a balance
My current "main" card has zero fees, I get about 2.65% ...
3
The act of issuing bonds will always increases the debt of the issuer. Debt is the "amount of money borrowed by one party from another" any increase to what is owed always increases the debt, since debt only looks at what is owed, not what is owned. Debt does not consider assets.
If we look at a larger picture, an issuer can lower their overall debt by ...
1
Consider a case where the bond offers no yield at all (zero).
If the sovereign debt in the negative yield case decreased, it would mean that the zero-yield bond has no effect on sovereign debt at all. That is non true.
What stays constant in the zero yield case and decreases in the negative yield case are the interest payments.
In the long run, a heap of ...
0
I won't delve into the technical answers to your question, as they're a beaten dead horse. I'll give a more philosophical aspect.
A lot of it boils down to worldview.
In your country, it appears that there are safeguards in place to keep you from going into debt. America is more sink or swim. Those ubiquitous "freedoms" you hear us bragging about allow ...
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The mistake you are making is thinking that "having debt" means having a good score when, in fact, the opposite is the truth. The credit score that most lenders in the US use is your FICO score (developed by the Fair Isaac Corporation). In this credit score calculation 35% is made up of payment history and 30% is made up of credit utilization. When it comes ...
0
I would like to add a few contributions on my experience in European contries.
First, in the majority of EU countries there is a so called usury tax rate, which is a limit on the effective APR (% of interest plus fees computed as if they were interests) above which the lender cannot issue a loan. This is regulatory and prevents interests from growing ...
3
I have moved recently to the US from Europe. The simplest answer I can think of is the ability of the Credit companies to trap you further by giving loans at "higher interest" rate.
For example, it is common to see Ads like "Have bad credit score? Don't worry! we have loan for you". Apparently such a loan is given at a significantly higher interest rate ...
8
Shouldn't the “credit score” prevent Americans from going deeper and deeper into personal debt?
The credit score is often used as a indicator of financial risk as @RonJohn stated.
Here is where it gets perverted in US Financial... Banks know low income folks and others with low credit scores are riskier, so they still make the loans but at a higher rate. ...
9
One part of the reason is that bad credit scores do not stop people from getting loans, it just means that they'll pay higher interest rates. At the lower end, they may resort to predatory lenders. From the point of view of such a lender, having the loan repaid is almost the last thing they want. They'd much prefer you to just keep paying the (very high) ...
20
How can you get more loans when the ones you already have are way over what you can ever pay back?
Credit scores don't exist to help the consumer; the exist to help the lender. A person who will never pay back their loans can be a fantastic investment.
The poor debtor still has to eat, so they will get a job. The court system will then let you garnish ...
26
One aspect that may not be obvious from outside the US is the prevalence of medical debt. A quick Google shows that about 2/3rds of bankruptcies are due to medical issues. The easiest way to end up $100k in debt is to find out you have cancer. While putting people into crippling debt because of medical issues is messed up, denying life-saving care to people ...
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In the U.S. though, I see people making 20K an year but have credit card debt of 90K. How is this possible?
You don't see that. I don't know what sort of fear-mongering sympathy extracting nonsense you've seen on the internet, it is not common at all for someone earning $20k to have $90k of credit card debt. In fact, at $20k of income a normal limit would ...
59
I think the heart of the matter is that you're misinterpreting both what comprises a credit score in the US, and how they are used. This is evident in your second to last paragraph:
A "credit score" in my country limits the extra debt you can take if you are already in debt. In The U.S. though, it seems that the "credit score" allows you to get even more ...
43
Can somehow add a layman explanation on how Americans can be so much in debt but have good "credit score" that allows them to borrow even more?
A credit score measures the risk of not making monthly payments.
That's all. Nothing more.
If a creditor thinks you're a larger risk, they'll likely just demand a higher interest rate, or some form of collateral ...
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