A long, long time ago, back when people complained about gas costing more than $1.50 a gallon, I was, like many people in their early twenties, romantically challenged. I won’t go into the particulars, as this is not a turn-of-the-millennium coffee shop frantically staving off the advances of Starbucks. Also, I don’t know any of you well enough to tearfully tell you my relationship woes over an overpriced new beverage known as chai, but suffice to say that my love life seriously sucked. Because I was living in Berkeley and the Dot Com Boom 1.0 was ongoing, this situation had two practical ramifications:
I needed to move out of my boyfriend’s house post-posthaste.
In order to do so, I needed to:
Find a new abode
Come up with the funds for the first month, the last month, and a security deposit equaling one month. This was the Bay Area. That was a lot of money, even back then.
Further complicating matters, I was at that juncture unemployed and had no savings to speak of. What I did have was a credit card, which I’d used sporadically for inadvisable Fluevog purchases and the occasional tank of gas ($28?! The world of Mad Max was clearly forthcoming) between paychecks. I had heard various tales of woe regarding credit card debt and how it would OMIGOD RUIN YOUR LIFE, but I was fairly certain that my life was already ruined and besides, I needed to get the hell out. I went to the bank, pulled nearly the entire remaining available balance off my card, and deposited it into my checking account.
Within two days, I had a crappy apartment in south Berkeley within spitting distance of Oakland, had broken up with three people, had come out to my mom, and had a new job. I also had what felt like a giant toothy monster hanging over my head with a 17% interest rate. It was the first time in my life that I’d taken on more than a few hundred dollars of debt, and I certainly couldn’t pay it off within a month or so.
For those of you saying, “But what about your student loans?” Children, gather ‘round. Once upon a time, a person could go to a decent state university without taking out loans, if one had moderately prudent parents who had saved for one’s education. I know. It sounds crazy. It wasn’t even all that long ago. (Thank you again, Mom and Dad.)
That monster ruled my life for the next three years. Every month, I’d throw as much money into its gaping maw as I possibly could, usually an order of magnitude of the minimum payment. I never let a month go by without putting at least something into it, even though this meant seriously creative budgeting. Things would come up. My elderly car seemed to know exactly when I was finally making a dent into the monster and would barf up its brakes or transmission, thereby putting me back where I’d started. So, I reorganized my life and moved out of California to a place where I could walk everywhere and didn’t need a car.
I tried not to think about what I’d done to my finances long-term and reminded myself constantly that it was surely better than being back in my boyfriend’s house, which had the advantage of being true. Everything I’d heard about money and life—which frankly wasn’t much—pointed towards me looking like a terrible risk to creditors. It had been three years! I still don’t know exactly how much I paid in interest on that monster, because I can’t bring myself to acknowledge it. Clearly, I was a benighted idiot, right?
I had what felt like a giant toothy monster hanging over my head with a 17% interest rate.
The weird thing was, I kept getting credit card offers in the mail. At first, I just shredded them, but then I started looking at the terms. Some of them were flat-out amazing, especially the ones with 0% balance transfer options. I nervously got another card and shuffled the monster around. My original card company noticed the transfer and lowered my interest rate and gave me a 0% balance transfer option. None of this made any sense to me, so I just kept smacking the monster down into oblivion. Finally, it was gone. I celebrated by putting the amount I’d been spending to settle my debt each month into savings.
It felt weird to finally have some financial security, so of course, I looked into going back into major debt. I wanted a house of my own, one that I would never be forced to move out of in two days and that would be mine entirely. Since I wasn’t living in Berkeley any longer, this was an actual possibility. Besides, I’d seen a whole bunch of ads from local banks for first-time homebuyers with not-so-great credit, as mine surely was. I was too afraid to check my credit score, in fact, so I blindly trotted on down to the bank and filled out an application. An hour later, I got a thoroughly confusing phone call from a mortgage loan officer.
“I don’t think this is the best program for you, actually,” he said. Your credit is excellent.”
“It is?” I asked, gobsmacked.
“Yes, you qualify for one of our more standard loans, with a smaller down payment and a lower interest rate.”
“I do?”
“Yes, and we can pre-approve you by this afternoon.”
I looked at my credit score online. It was high. It was really high. It had been really high for two years. I felt amazingly dumb and smart all at the same time. How had this happened?
It turns out that, contrary to what everyone around me had said my entire life, financial institutions don’t assess credit based on how efficiently you can pay off debt without interest. Instead, they do the exact opposite: they look for someone who can take on a lot of debt and pay it off slowly over time with interest. Lots of interest. Lots and lots of interest, but also regular payments. I had, improbably, done myself an enormous favor by taking on the monster, and it got me a house.
I do not actually recommend this approach to building credit, but it worked. It is something to keep in mind if you are in your early twenties and have not yet been beset by one of the various financial disasters that are almost guaranteed to be on the horizon.
Oh, and avoid dating jerks.
La.Donna.Pietra is a Duke City denizen with opinions about pop culture, gender, and ice cream. She was disappointed by this season of True Detective."
