This article is a year old, but I just came across it today and thought it was worth sharing. It’s hard to know how much this sort of thing was really going on at credit card companies, and how much the credit card reform laws have changed things. But I find it particularly interesting that shopping at used clothing stores could be a red flag that a person is facing financial difficulties.
My husband and I make a very comfortable living. We’re on track to pay off our 15 year mortgage in less than half that time; we max out our HSA and both of our IRAs every year, and we set aside a significant amount of money each month into emergency savings and another savings account that we’ll eventually use to pay cash for a new (to us) car. We also fund our son’s 529 every month, and have never missed a payment on anything in our lives. We put all of our expenses on our credit card, and pay it off in full each month. In short, we’re a pretty darn good credit risk (and our credit scores do reflect that – when we bought our home last year, our scores were excellent and we qualified for a great loan).
But I’m curious whether the fact that we never purchase new clothing (or much of anything else, for that matter) has had any impact on our credit scores over the years? Back in April, I stopped going to the thrift store almost entirely. I pretty much stopped shopping all together, except for food. I started getting rid of clutter and stopped bringing more into the home. But before that, I went to Goodwill almost every week. I would usually purchase something, and I always used our credit card. There are never any charges on our card from malls or most of the major retailers. But our food tends to come from “upscale” places like the co-op, the local health food store, and sometimes Whole Foods. I wonder what people who analyze spending patterns think of us? If they believe that buying used clothing indicates financial distress, then our food purchases probably cause a bit of head-scratching.
For us, buying used whenever possible just makes sense. The fact that we skip a lot of purchases and buy used for a lot of others is the reason why we’re able to afford to stash a good amount of money in savings each year. It’s why we’re able to take out a 15 year loan and pay it off much faster than scheduled. It allows us to use our money on what really matters to us, rather than simply spending it on consumer goods that we can easily get used for far less money. And it’s also the most environmentally-friendly way to shop.
Personally, I don’t really care about our credit scores these days. I continue to monitor our credit reports to make sure that they’re accurate, but that’s more for avoiding scary things like identity theft. We don’t plan to apply for a loan again in the future. I know, life can throw some serious curve balls, and I’m not one to say never. But we’re setting ourselves up to not have to use our credit to apply for any more loans. We plan to stay in this house forever (or at least for a very long time). I know, that’s what we said about our last house… But if we do ever leave this house, it won’t be anytime soon, and will most likely be long after the mortgage is paid off. If we are ever in the position of needing to buy another home, hopefully we’ll be paying cash. We’re currently saving money to buy a newer vehicle one of these days, since ours are 20 years old and not going to last forever. But again, we’ll be paying cash – we would never finance a car. We don’t have any plans to apply for additional credit cards or other lines of credit either. So hopefully, our credit scores won’t be needed again (and yes, we could manage just fine without our current credit card – we use it for convenience rather than necessity).
But I know that credit scores are very important for a lot of people. And I find it odd that what I consider to be responsible behavior – buying stuff used – might be looked at as a potential problem when people apply for credit cards. Any thoughts on this?
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Peggy says
I sort of thought this was mostly urban legend when it came out. It seems to me like a lot of data crunching for some pretty unreliable assumptions which you are outlining a prime example of one. Maybe their algorhythms are smart enough to see a change in behavior from buying lots at the mall to buying lots at the thrift store but I sort of doubt it. I also thought that if they were really doing this sort of thing that they would be looking for a combination of factors and the media sort of portrayed it as any one thing could impact. I remember them saying something about bar tabs too.
Lindy Mint says
I saw a similar story on a news program about a gentleman who shopped at WalMart. He had a good credit score, paid his bill in full every month, no other red flags. It’s all really kind of crazy.
Leslie says
Not related to credit cards but…
I just wanted to say how refreshing it is to find people with similar mindsets via the web. The internet really is a great tool for connecting with people. I see so much of your lifestyle and choices mirrored in our current philosophy, and I really enjoy your blog.
Sam says
My first thought is that the average American likes new shiny things and so anything that deviates form the norm is a red flag to the big corporations.
Then I remembered something from almost a year ago. It sounds like you & I have (or had since you don’t thrift much anymore) very similar habits…
I have some debt from an extended layoff.
Last winter I got another CC paid off via snow ball method.
Within a week of that payoff that company lowered my limit from 5k @ 9.99% to 200@ 29.99%.
Their reason was the consignment & thirft stores that we had frequented over Christmas break (replacing Christmas items that broke in storage) and the other reason was the balances on my two remaining cards – one of which is paid of every month (the other is being snow balled).
I’m still taken aback by the dumbness of the whole deal.
IN the end, I am convinced big banks are dim. While I am grateful I had the means to keep things going after the emergency fund was dry till I landed a job, I can’t get it all paid off quick enough so I simply don’t have to really deal with ’em .
Tiffany says
My FI ran into issues when he bought his new (to him) car. He had little school loans, only one credit card, and no other debt. Ever. He had a sizeable chunk of savings and a great job, but the banks determined he had insufficient credit history, so he got a slightly higher interest rate than someone with debt!
It’s crazy.
Now we pay for things with our credit cards and pay off the balance each month. We’re not big shoppers, so this way we maintain our high credit score.
BigNan says
When my husband and I came here from Europe thirty years ago, we had a good credit history, and had saved our money so I could quit my job. We bought a house cash (so no mortgage), and paid cash for whatever we bought. When we decided to apply for a credit card, we were turned down – insufficient credit history. Two or three times over the years we applied and were rejected. My husband had a good job, and we had a sizeable amount of money in CDs, etc. When I mentioned the problem to our bank manager, he told me to bring the next credit card application to him, and just like that, we got approved.
People who pay cash, are careful with their money, shop in consignment/thrift stores are not what the financial industry wants. They make much more money on people who borrow and pay interest, but don’t default. They want us on their treadmill for life, paying them for using their money.
Jaime B says
If I remember the articles I read, it was more about how people’s spending habits changed. Going from shopping at Macy’s to shopping at Wal Mart. They were worried it signalled a change in their circumstances that could lead to them having difficulty paying off their balances. Of course, as you and posters have pointed out – all that did was trash people’s credit even when their payments never faltered when the cards cut their limit. I can see them using it to sort of predict accounts that *might* start to show struggles but it just seemed downright stupid and mean spirited to alienate customers by hurting their credit score even when their own behaviour with you didn’t warrant it.
*shaking head*
Sharon Warden says
The same thing happened to me, as I kept paying off balances, they kept lowering the credit limit–sort of humorous to watch. My credit score as well. I have a rewards card I use for all expenses, pay off each month, worth about a $25 gas card every two months! I am in process of paying them all the rest off anyway. Acquired quite a bit of debt over years helping kids, raising grandkids sometimes, tithing when I had to use my card to do it!! and other things. But 5,000 paid off in 2010, equal amount in 2009 and I’m getting there – maybe before I croak! Actually I have always lived frugally, have had to as I raised my family on my limited income most of the time, even though I am a col. grad. Although I do spend on communications – the internet is very important to me, so I have to give out the big bucks for satellite internet because I live in the sticks, believe me. Why? That’s another atory. Anyway, I sure am happy to have found this frugal network and all you SANE (minimalist) people!
Kaytee says
Almost all of my clothes come from Goodwill or Thrift stores as well. Right now I feel stuck between a rock and a hard place – I need to expand my work attire to include sweaters (I have one right now) and heavier material pants. Last year I repurposed or donated everything that needed to be replaced, and removed items that were no longer work worthy. I’ve been making do with lots and lots of layers, but I do need to start replenishing the wardrobe. Unfortunately, the bed bugs that have been infesting NYC and Boston appear to have made their way up here. We’ve all been warned to avoid places like movie theaters and shopping at thrift stores. Goodwill seems to have a good policy on the issue, but I really do wonder if it is implemented effectively. Not sure if these little critters have made their way to your side of the country yet. Sorry, this isn’t on topic, but it made me think about my current dilemma. I don’t really want to divert money from saving/debt payment to spend on clothing. The cost of getting rid of bed bugs, however, is quite high in terms of money and time. This assumes of course, that new clothing is not so afflicted.
Sam says
Kaytee – could you have the thrift clothes cleaned at the cleaners before taking home? Or could you leave them out side for a day or two? or take the clothes by a laundromat & run them through the dryer – I think the heat would kill bugs…. I’m kinda ignorant on them but I though I heard on the news they don’t survive the elements or extreme temps….
My Mom is from Jersey & she always hung every thing bought used in a tree (on hangers) for at least overnight insistent that any stow always would be killed or run off that way (we were in the middle of no where in Nebraska). I always thought it was roaches she spoke of but now I wonder….
Julie Waldrop says
I also buy all my clothing (except underwear) and most of my shoes used. One place not mentioned is garage sales. The prices are even cheaper there than at Goodwill and other thrift stores. Of course, now the garage/yard/estate sales are pretty well dried up so it is back to the stores. Great blog, great comments!
Laura M. says
I’m a 24 year-old graduate student working a full-time job. I have no debt, no college loans to pay off (scholarships & parents did me well), paid for the car I own with cash (as well as everything else) and…. no credit score. This last bit greatly frustrated me as I applied for a few cards and kept getting denied. I was so convinced that I needed a credit card to get an apartment, a car (I ended up just buying a nice used car), and anything else in the future. Well, I got my car – and I owe nothing on it! I managed to get an apartment without a problem, and as for everything else? I don’t need a credit card. So how do I buy something if I don’t have enough cash on me? Easy. I don’t buy it. And I save up enough so that I always manage to have just enough to pay for things.
Lately, I’ve realized that I don’t want a credit card at all!!!
I don’t want to be tied to plastic. I don’t want that door opened for me. I’m just fine without it… why bother?
My hope is that I will be able to live a credit-card-free life. Is that possible?