Typical scenario....."I just gotta score this car stereo setup with the trunk mounted thousand watt sub woofer'. "I know, I'll just stick the $1,500 on plastic and pay it next month with that commission I have coming". "I'm really stoked with this thing, man". "They'll be able to hear me all the way to St. Louis and that's only at half volume". "I mean, damn". "How cool is that"? "Hey, how long does it take you guys to install this stuff".
Actually, how uncool is that and, further, what's totally wrong with this picture. How about the proposed deal not closing and the commission not coming through that Mr. Eager was anticipating for one. Then, those oh so easy monthly payments that started out at 9.9% are no longer so easy ending up at 29% and with absolutely no advance notice. I don't want you to think I'm kidding for a single second. It's not crazy and can really happen until the proposed law that's presently being legislated adds the necessary safeguards and begins to regulate those types of rate and term changes.
Hang in, folks, as, unfortunately, were not quite done yet. Being that this particular revolving account has a $2,000 limit and our boy has used about $1,720 of it, including taxes and the long term warranty and such, he has now well exceeded the 35 to 40% maximum usage guideline thus causing his credit scoring take yet another hit.
Oh yeah, a bit more bad news. Ok, this one's it. I promise. Sales were not way good in the months that followed and it became a matter of either paying the minimum credit card payment of $65.00 or his cell phone bill. It's ok. Go ahead, take the guess and connect the dots on this one.
Just a small "what not to do" lesson predicated on the inner workings of our unfortunately complex credit scoring system, a system that means everything should you need to apply for any kind of loan. Not lots out there can have more of a dramatic effect on your credit scores than taking revolving charge balances to the limit or missing a payment and installment accounts like car loans and mortgages don't even come close.
Admittedly the example used is a bit over dramatic but what I really want to leave you with in addition to a little chuckle is to not reach for the plastic unless, beyond a shadow of a doubt, you have the ability to pay the statement in it's entirety at the end of the month when received. I really don't care if you have ants in your pants and want to dance. One mans car stereo is another's little "what happens in Vegas stays in Vegas" which could even be worse what with gambling losses and such (great topic for next time, right).
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