Michael \"Dog3\" wrote:

> I just kind of popped in here but have gotten the gist of the
> conversation. A close friend of mine has seen my new kitchen and some of
> the remodeling we're currently doing. She has decided to proceed with
> some of her own remodeling and she's going to use my contractor. Her
> house is worth around $500,000 and it is paid for free and clear. She
> inherited it from her parents. She has paid cash for everything most of
> her adult life, and has no credit history. She needs about $100,000 for
> her remodel project. Not one bank would lend her the money with her
> house as collateral because she has "no credit history" even though she's
> provided utility bills, tax statements etc. which were paid on time.
>
> She told me that unless you are in debt up to your eyeballs it is really
> hard to get credit. Anyway, she's going to use cash for the remodel and
> actually got herself a credit card to establish some credit.
>
> Weird huh? We pay cash for everything but we do have credit cards and a
> credit history. Strange thing is we pay all credit cards in full at the
> end of the month. Is that considered good or bad with lenders I
> wonder... To me (and I'm really ignorant on this subject) it would appear
> that the lending/banking institutions set people up for failure and some
> people take the bait. I half way watched an HBO special on this and from
> what I gather, it would seem, that the more questionable your credit is,
> the more willing lenders are to give you credit.

Her problem is the lack of credit history. She could fix that easy enough by
taking out a small loan and paying it back. I could have a similar problem
if I tried to borrow some money because I don't have much of a credit
history. Our mortgage was in my wife's name and we paid it off early. We
had car loans in the past but when we inherited some money about 20 years ago
we paid it off and then set up a "car account", borrowing the money from our
car account and then paying ourselves back with a monthly transfer from our
chequining account. We only use credit cards for convenience an pay off the
balance each month. At this time, we have no mortgage payments, no loans, no
outstanding credit card balance. The only debt we have is a small student
loan that we co-signed for our son.

It is not (always) a matter of them not wanting to loan you money and setting
you up for failure as having a record that shows that you pay off your debts.
However, there are some predatory companies out there who will extend credit
to high risk borrowers. Those poor people are already deeply in debt and
having trouble making the payments on their current loans and accounts. I
have trouble with the idea that companies can loan those people even more
money and then use our legal system to squeeze blood out of a stone. The way
I figure it is that if they are stupid enough to extend even more credit to a
person who cannot pay it back they should be SOL. Maybe that would dissuade
them from lending to high risk customers.