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dontlikemustard

question about credit scores

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so i made a thread a couple of months back asking what the best method to pay for a complete skydiving rig would be, if you don't have the money to pay it all upfront...

I was recommended from a private message to get a personal loan from a bank.

So I went to the bank a couple of weeks ago and they told me I was not eligible. My credit score was 768, but I did not have enough credit history.

Shortly after that, "magically", a bunch of credit cards appeared in my mailbox. Some of them offering a "0% interest for year" deal.

My question regarding that is... if I sign up for a credit card that has a maximum of, lets say... $5,000. And I put that money down to buy myself: a new container with AAD, used canopy, used reserve + jumpsuit...

That means I have to pay $416.67 a month for 12 months.

There is absolutely no reason why I cannot pay that amount monthly for 12 months, which essentially gives me an interest free $5,000 loan.


Using this method of payment, is there any chance of it actually hurting my credit? Considering I will be in debt to the card for 12 months? And if it does not, is this not a better alternative to a loan? Since I will not pay any interest on the amount given to me?

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This is a fun question, because as long as you pay on time, it can NOT hurt your credit rating.

I have used the "buy at 0% as long as you pay it off before x months" option for big purchases many times. I have always paid it off before the "deadline" so it was like using their money for free for 12, 24, 36, or more months.

HOWEVER, They are counting on the fact that very few people are disciplined enough to pay every payment on time (plus the amount that will get you paid off in time) so that the ENTIRE loan is paid off before the "grace" period is over.

This is how they make their money. If the "grace" date passes, and you are not paid in full, they will tack on the entire amount of interest that is owed.

In other words: Borrow $1000. The term of the loan is 3 years at 20%, BUT if you pay the entire balance off before 12 months, it is 0%, but if you take 366 days to pay, they will charge you the interest as if it was a 20% loan.

Unless you KNOW you can pay this back w/i the grace period, find a loan with a lower rate (they jack up the rate of this type of loan because some will actually use their money for free), but even if you take this and don't make the grace date, as long as all payments are made on time, this will show favorably on your credit report.
lisa
WSCR 594
FB 1023
CBDB 9

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so i made a thread a couple of months back asking what the best method to pay for a complete skydiving rig would be, if you don't have the money to pay it all upfront...

I was recommended from a private message to get a personal loan from a bank.

So I went to the bank a couple of weeks ago and they told me I was not eligible. My credit score was 768, but I did not have enough credit history.

Shortly after that, "magically", a bunch of credit cards appeared in my mailbox. Some of them offering a "0% interest for year" deal.

My question regarding that is... if I sign up for a credit card that has a maximum of, lets say... $5,000. And I put that money down to buy myself: a new container with AAD, used canopy, used reserve + jumpsuit...

That means I have to pay $416.67 a month for 12 months.
[/QUOTE]

I paid $800 for my last used rig + reserve in 2005 and have seen used Cypresses with a year left sell for about $200 (For a reasonable price on a Cypres following its 8 year check and on its last battery start with the best price you can get on a new Cypres. Add two 4 year services including shipping. Subtract the $80 trade-in. Divide that quantity by 12 years. Multiply that for time remaining. Add the $80 trade-in value. You should try to pay less and $200 is a good deal with a year left). That would net a rig with an AAD for about $1200 in current dollars or 3 months of saving at that rate.

Maybe skydiving isn't a good sport for you today but will be in 3 months over which you only make enough jumps to stay current (maybe a couple every other weekend because you won't learn anything on the first jump but might on the second and that will give you some breathing room on the 30 day currency rule for new jumpers if there's bad weather or the plane breaks.

[QUOTE]
Using this method of payment, is there any chance of it actually hurting my credit?
[/QUOTE]

It will hurt your credit because you're assessed on the percentage of revolving credit used on both each card and in total. You won't get an 800 FICO (not fako - what you get from freecreditreport.com or whatever is not the same number that the banks will pull when you apply for a loan) doing that because ($5000 - a bit)/$5000 is too much credit utilization.

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Considering I will be in debt to the card for 12 months? And if it does not, is this not a better alternative to a loan?



Buying a new rig or used rig from a big gear shop at a premium price is a bad idea. You'd be better off using paypal with a credit card to buy used gear and reimbursing the seller for the paypal charges (about 3%).

Beyond that you'll do better on interest paid with a 0% credit card than a personal loan. You'll do worse on credit score. That may (you're buying a house and get a worse rate or the back-end debt ratio disqualifies you for a good rate) or may not (you aren't buying a house, don't drop low enough for a rate change, and/or don't have income to debt service ratio problems) matter.

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Since I will not pay any interest on the amount given to me?



The $3800 difference between airworthy for free fly and what you're proposing would net some balance between 150 skydives and 5-10 hours in the wind tunnel (you start doing 2-ways when you're able) which will do much, much, much more for your freefall and/or canopy skills than when it's spent on new(er) gear in your colors.

Looking good on video is important, but not as important as being good enough that you're not ashamed to show your videos to other skydivers.

I skipped buying a new rig in my colors for ~600 jumps until I was unlikely to downsize farther at which point $xxxx / xxxx jumps was not a financially interesting number.

I didn't leave it on a credit card for a full month.

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This is a fun question, because as long as you pay on time, it can NOT hurt your credit rating.



[B]NO[/B]. It only works that way for installment loans, like for buying a car, mattress, etc. where you're not about to cross the threshold for "too many" of those (jet ski, boat, bike, mattress, furniture, car, ...) in which case it would make a difference.

It does not apply to credit cards which are revolving lines of credit on which the fraction you use WILL hurt your credit score. Especially if you have no other significant credit cards because the fraction of your total revolving line of credit is an additional factor.

That being enough (or not) to make a difference in the loan rates you get on a home is a separate issue I could not speak to.

[QUOTE]
I have used the "buy at 0% as long as you pay it off before x months" option for big purchases many times. I have always paid it off before the "deadline" so it was like using their money for free for 12, 24, 36, or more months.
[/QUOTE]

As installment loans. Not on a new credit card with a $5000 limit of which you're using $5000 - $200 which is 96% and the same fraction of your total credit with no other cards.

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Using this method of payment, is there any chance of it actually hurting my credit? Considering I will be in debt to the card for 12 months? And if it does not, is this not a better alternative to a loan? Since I will not pay any interest on the amount given to me?

I was carrying about $80K in debt on a rental home. One of my credit cards offered me $50K in cash for 9 months, interest free. I hopped on that offer like it was free beer. B|

Then my credit score took a 100 point nose dive. The reason? I had one of my credit cards maxed out to the tune of $50K and I wasn't paying it off. :S It didn't matter how much money I had in the stock market or other real estate I owned outright. They were only looking at that small part of the whole picture. I paid off the whole amount at 9 months and never paid a dime of interest on it. Still it's taken me several years to bring my score back up.

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sucks how credit worthiness and ability to pay the note are two different things. You can have a credit score of over 800 and barely clear 30K a year if you have a low credit utilization balance and perfect on-time payments, but have over 1M in net worth, pay bills on time but a higher credit utilization and find yourself with a lower score than the guy above. (lets assume paying all balance off is an ability but will take 10% off your liquid assets)
_____________________________

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sucks how credit worthiness and ability to pay the note are two different things.

And if it only affected your ability to borrow money, well fine.

But insurance companies are now using credit scores to set your personal rates, a good score being considered less of a risk. I just got over $1000 back from Geico on my car insurance because my credit score had climbed back to a certain threshold. Good for me now but bad that I had been paying extra for those several years. :S

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sucks how credit worthiness and ability to pay the note are two different things. You can have a credit score of over 800 and barely clear 30K a year if you have a low credit utilization balance and perfect on-time payments, but have over 1M in net worth, pay bills on time but a higher credit utilization and find yourself with a lower score than the guy above. (lets assume paying all balance off is an ability but will take 10% off your liquid assets)



No wonder the banks gave us a financial crisis. They appear to be run by morons.
...

The only sure way to survive a canopy collision is not to have one.

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Blind greed does cause moronic behavior. Who cares about if the mortgagee can pay the note as long as the lender can pawn it off to the CDO bond makers to supply the high demand of these "safe investments".
_____________________________

"The trouble with quotes on the internet is that you can never know if they are genuine" - Abraham Lincoln

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Maxing out your credit card will hurt your credit score, especially if you do it all at once and right when you first get the card. Though if you pay it off your credit score should go back up. Your credit score is based on many things and how much credit you have available versus the amount you are using plays a big part in that.

Once the introductory rate is over the rate usually jumps to 14-19%, so make sure you check that as well before you do anything. And don't apply for every card that comes in the mail, because then you have to much credit and are a risk. Though it is good to have one credit card that you use every now and again and keep for years, as that is one of the best ways to show/have credit history.

If you can make $400+ payments for the next year with no problem, then why have you not been saving that same $400+ the last few months? You would have had enough money to buy a complete used rig if you had. So, to me, you will not end up making all $400+ to the credit card company for 12 months straight (a boogie will come along, other new gear that you just have to have, etc.) and you'll end up paying way more than its worth for the gear and possibly end up with a huge credit problem. But the credit card companies will love you for all the interest you are paying them, regardless of what your credit score is.

But I agree with everyone else, get used gear to start off. Chances are you will want to downsize within a year or two and when you do that then maybe buy a new rig. If you are still a student, like your profile says, give yourself time in the sport to make sure you'll be sticking around long enough to make your investment worth it. Plus, in the beginning your much better off putting that money towards learning to skydive rather than new gear, IMO. It will serve you much better in the long run in this sport.
"Ego is the anesthesia that deadens the pain of stupidity"

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I sign up for a credit card that has a maximum of, lets say... $5,000. And I put that money down to buy myself: a new container with AAD, used canopy, used reserve + jumpsuit...



Don't buy a new container, and save yourself a boatlaod of cash. You won't get the untilization of a new contianer as a frist rig to make it worthwhile, you'll end up eating a huge chunk of the huge price tag, one way or another.

If you jump like a mad-man, you'll be looking to downsize in short order, and will take the hit selling a young rig with a couple 100 jumps on it. If you don't jump like mad-man, you'll hang onto it until it's an old rig with a couple 100 jumps on it, and take the hit then. Either way, your price per jump is going to be through the roof.

Look for the least expensive used rig you can find. Your money will be much, much, much better spent on jumps than on gear. With that in mind, the question of how to pay for it becomes twice as easy to answer.

Paypal is your friend in terms of buying used gear with a credit card, and another option is Chutingstar gear store. They offer escrow service where the seller can ship the gear to them, they will recieve and inspect it, and then you can pay them (with said credit card). They will pay the seller and ship you the gear. It keeps you from getting scammed, gets all of your used gear inspected, and allows the use of a credit card for a used gear purchase. I know they do the escrow service for just the cost of the inspection, you may have to pay a couple % extra to cover the credit card fees, call them for all the details.

Fancy gear and a pile of debt gets you nowhere. Airworthy gear and a ton of jumps is what you want to shoot for.

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I read all the posts, thank you for the responses. Looks like I'll just do this the old fashioned way and save my money. Now that I think about it... waiting for new equipment to be built and shipped over my house will probably take just as much time as me saving for a used rig.


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If you can make $400+ payments for the next year with no problem, then why have you not been saving that same $400+ the last few months? You would have had enough money to buy a complete used rig if you had. So, to me, you will not end up making all $400+ to the credit card company for 12 months straight (a boogie will come along, other new gear that you just have to have, etc.) and you'll end up paying way more than its worth for the gear and possibly end up with a huge credit problem. But the credit card companies will love you for all the interest you are paying them, regardless of what your credit score is.



I got out of college and started working only recently. I also just went through my aff... To be honest I have some money saved... I just dont feel comfortable emptying my bank account. And was I also looking for a way to build really good credit.

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I also just went through my aff... I have some money saved... I just dont feel comfortable emptying my bank account. I also want to build really good credit.

I've been in your shoes. Good credit and a savings account will serve you all your life.

Skydiving can, but only in skydiving.

Used gear will let you buy more jumps, which will serve your skydiving better than new gear, too. And pack it yourself.

With the savings account, your car needing repairs, or a lost freebag, or anything else like that becomes an inconvenience or an expense, and not a potential hit on your credit, or a choice between rent and expense.

Wendy P.
There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

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Buying a new rig or used rig from a big gear shop at a premium price is a bad idea.



I strongly disagree, especially for someone who knows little to nothing about gear. The "extra" couple hundred bucks you might spend buying from a reputable gear dealer will oftentimes get you knowledgeable advice instead of opinion, assistance in filling out order forms, a good chance that they will still be in business when your gear is completed, a good chance that they will refund your money and take used gear back if it won't work for you, and the possibility of using their demo gear to make your gear choices easier (if they have any). Amongst other things.

Spending that couple hundred bucks extra with the gear dealer at the dz you jump at just may make the difference between having a gear store on the dz or not. And the folks at the local gear store have a good reason to treat you right - they want your business for as long as you are jumping there.

Encouraging a noob to buy gear - new or used - from private parties online when they have no idea what they are doing and nobody that can hold their hand through the process is how new jumpers end up with gear that is not suitable for them or how they want to skydive.

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Buying a new rig or used rig from a big gear shop at a premium price is a bad idea.



I strongly disagree, especially for someone who knows little to nothing about gear. The "extra" couple hundred bucks you might spend buying from a reputable gear dealer will oftentimes get you knowledgeable advice instead of opinion, assistance in filling out order forms, a good chance that they will still be in business when your gear is completed, a good chance that they will refund your money and take used gear back if it won't work for you, and the possibility of using their demo gear to make your gear choices easier (if they have any). Amongst other things.

Spending that couple hundred bucks extra with the gear dealer at the dz you jump at just may make the difference between having a gear store on the dz or not. And the folks at the local gear store have a good reason to treat you right - they want your business for as long as you are jumping there.

Encouraging a noob to buy gear - new or used - from private parties online when they have no idea what they are doing and nobody that can hold their hand through the process is how new jumpers end up with gear that is not suitable for them or how they want to skydive.



To be fair, I will never commit to a purchase if the rig does not get inspected at the DZ first. If I do buy one I will ask it to be shipped at my DZ and have my rigger take a look.

Even before committing to any purchase I will ask the seller for as much information as possible, so that I can go to the DZ and talk to my rigger and instructors about it.

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