I recommend starting with nothing but that’s not to say that having no assets comes with no risk. If a person doesn’t have a home or a yacht to repossess then the banks and lenders will try to take their dignity instead.
Barring some kind of illegal activity, there are more-or-less two tools that banks have to deal with those who default on unsecured consumer debt like credit cards. They can take them to court and they can hurt their credit score.
Credit scores are ubiquitous these days. Your car insurance company may check it out to decide your rates. Employers may look at it to see if you’re trustworthy. Rental agencies may want to know it to figure out your security deposit. You’ll even hear jingles about it on the radio from people promising to help improve it.
If you read nothing else in this book, burn the next few sentences into your brain.
The reality of your credit score is that it is currency. In much the same way that you can convert US Dollars into Canadian Loonies (my favorite money name ever) you can also change your credit score into cash and then later turn cash back into a higher credit score.
Let’s take a quick time-out here to dispel a few notions about the credit score itself.
This number does not reflect your value as a human being. Unfortunately, ours is a consumer-driven society where the national religion is buying new toys and we make human sacrifices to the retail gods every Black Friday in the form of trampled shoppers. In this fiscal religion the worth of any individual person is calculated by how much potential they have to consume.
Consider this: in almost every other culture there are myths about people who are extremely poor and yet extremely wise. In modern America, though, we have almost no such stories. Make of that what you will.
The good news is that like any other religion, it’s possible to apostatize from the First Church of Consumerism — an approach that I highly recommend. Don’t spend the rest of your life valuing other human beings by their ability to buy things and don’t let others reduce your worth to a single number either. We’ve all got a lot to offer, including a lot of things that have no calculated APR%.
Once I decided to make peace with that Great Heresy then the next step lay ahead…