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Topics addressed on November 28, 2007:
Yes, the ultra rich do use credit and do have credit reports
I want to say thank you for the good laugh I had reading your reply on the following topic, "Even the ultra-rich have credit reports and credit scores." You say that savvy people put credit to work for them. So I have some questions for you. What is your net worth? How deeply in debt are you? Why should I take your advice?
P.S.: Not only is it possible to NOT use debt in everyday life, it is the only reliable way to become wealthy.
This column seems to have struck a chord with several readers. A number of people wrote to disagree with my recommendation to put credit to work for you.
First, I contend that even the very wealthy have credit reports and do still file for bankruptcy. Fortunes are easily lost or squandered, often by overspending and the misuse of credit. Additionally, there aren’t many who are so wealthy that they don’t need or use credit cards to travel, even if it is only a matter of protecting themselves from loss or the convenience of not having to convert cash from one currency to another.
Second, on a personal note, my finances are in fine shape. That does not mean that I am ultra wealthy. It does mean that I have put two boys through college, saved for retirement, and enjoyed trips to beautiful places. Most important, it means that I spend within my income, pay my bills in full each month, and I am not stressed about money.
By my standards, I have a very rich life, although by the standards of the rich and famous my lifestyle is quite modest.
To reach my current status, I paid for college using student loans, borrowed money to buy cars so I could drive to work, and still pay for the mortgage on a home that I enjoy to the fullest while paying for it.
I could quote many examples of extremely successful individuals and huge companies that started with a small loan. Without that seed money, they could never have achieved that success. But for many of us, credit means home and car loans, major appliances, and routine use of credit cards.
Wise use of credit enables me to order gifts online, fill up my car at the pump, rent a car, and make hotel reservations. I consider it a great convenience to shop all month and see exactly how much I spent on a detailed monthly statement that I pay in full long after I have enjoyed the purchases.
My advice is that if you use credit, use it wisely so that you enjoy all the advantages but don’t let it add stress to your life. Using credit should not mean spending more than you make for things you want, but can’t afford.
I should stress that I am an advocate for the wise use of credit, but am an adamant opponent of excessive debt. Credit and debt are not the same.
Now, I am not going to say that someone who does not use credit is not wise. If their lifestyle and financial needs allow them to live without credit, great for them. But, for most of us it is a great privilege and convenience to use credit to enhance our lives – when we use it wisely.
Thanks for asking.
- The "Ask Experian" team