1)    You need a credit card or a loan to build your credit score.  MYTH, totally not true!!!.  Have you ever looked at what a credit score is?  It is an mathematical equation calculated by taking 35% of your debt history, 30% of your debt levels, 15% of your duration of debt, 10% of type of debt and 10% of new debt.  Notice the word “debt” in every section?  That is because it is an “I love debt” score.  You can have $50,000 in the bank and your credit score will not go up or down.  It is purely a measurement of how well you pay your debt.\

so what if I told you that if you pay cash for everything you will still be able to buy that house?  Yes it is true.  Credit card companies have told people since the mid 1970’s that you need a credit card to build a good credit score, not true at all, they told you this because they want you to use their product, and guess what, we believed them as a society!!!

Back in 1970’s only 12% of adult Americans had a credit card, now 99% of us have a credit card….and of that 99% most of them are living off the credit card or rely on the credit card.  So how did my parents qualify to buy a home when they had no credit score?  Well it is called manual underwriting, where they look at the person and not the credit score.

You use your debit card as a credit card (it has visa on it) and you are protected, it is the law and is mandated.  I have never had an issue and have traveled, rented cars and hotel rooms.  So Neal’s friend who cannot make reservations for golf can use his debit card as a credit card and good for his friend not having a credit card!!  I have not had one and never will.  If you have an emergency fund established and place it in a good money market account you don’t need a credit card.

2)     You can only afford a car now if you lease…MYTH…I have paid cash for my car for the past 15 years and the method I use is pay myself first, place that in a mutual fund and now I no longer have to contribute to that fund and every 7-9 years I get to purchase a brand new car without a car payment.  Leasing is a complete rip off and statistically people who lease do it because they cannot afford a regular car payment, you are throwing your money out the window.  I teach a complete lesson on how to do what I did, I am a teacher so I don’t make much of a salary and trust me it works.

3)    You should take out a 30 year mortgage…MYTH, if you save an extra 3-5 years take out the 15 year mortgage.  Years ago there were only 15 year mortgages and the banks said “hey we can offer 30 years they have a lower payment and we make more on interest”….so save that extra money to put down so you can do the 15 year…it is worth it in the end.

4)    I always hear “I use my credit card but pay it every month and I get points”.  Well all i can say is life happens, suddenly you have to replace a furnace or your car transmission, and suddenly that extra money you have goes towards that.  Also if you put your money in a mutual fund, you will get so much interest that you don’t “need points” to travel.

Anyway sorry for the long email, I just try to get the word out that banks and credit cards will tell people they need to do this to build credit only because they want you to use the product, that is how they make money.  My parents never had and never will have a credit card, I never have, and I try to teach my students “If you cannot pay cash for something you are not entitled to have it, save up for it and then make the purchase.”

You are welcome to talk about this on radio but please leave my name out…..I am also more then happy to explain further how this philosophy works…trust me it is nice to not have a car payment, have an emergency fund established, no credit card debt…