Jump to Navigation

How Tennesseans can use credit card debt to build credit

It may seem counterintuitive to allow low-income Tennessee residents to go into debt in order to build credit. However, it is a new type of loan that is being offered in some communities to allow people to establish credit - something that virtually everyone needs in order to buy a home or car, or even rent an apartment.

Many people do not have the income to even qualify for a basic credit card. But some new types of loans allow people to borrow money - but not spend it. The money - several hundred dollars or so - is put into a locked savings account. It sits there until the loan is paid off. Some loans allow the account to grow. For example, if a person pays $25 toward the debt, that money may be put into the savings account. So it is possible for $300 to turn into $600 by the end of the loan terms. In addition, the person's credit score will increase dramatically - in many cases, close to the United States average of 689.

Those without credit - or who have a low credit score - pay more for everything. Even if they have saved up more money than someone with a high credit score, the one with the higher credit almost always wins out.

Credit card debt - within reason - has some benefits. It allows a person to responsibly build credit, making it easier to buy high-cost items. The key is to not drown in debt. Once a person has several thousands of dollars in debt, it can be difficult to recover.

Source: New York Times, "How Credit-Card Debt Can Help the Poor,"Shaila Dewan, Feb. 11, 2014

No Comments

Leave a comment
Comment Information

What's Your Situation:

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close
Subscribe to This Blog's Feed Visit Our Bankruptcy Website

Our Office Location:

Richard Banks & Associates

393 Broad Street, N.W.
Cleveland, TN 37364-1515
Map & Directions

Phone: (423) 244-0009
Toll Free: (866) 596-8527
Fax: (423) 478-1175

FindLaw Network

Privacy Policy | Business Development Solutions by FindLaw, a Thomson Reuters business.