My Dealings With Credit: Early Experiences

My First Credit

When I bought my first car at the age of 18, my mom co-signed for the loan. It was for a used 1962 Volkswagen bug that I paid $1,200 for. It was a gamble because I had no idea how to drive a stick shift transmission in a vehicle. I had to lie that I did. It was an early entrance into my off-the-wall forays into how I would live my life.

Having no credit record to my name, I needed her to give me a start. She was reluctant to do it, since I had a childhood history of always getting into trouble. But I think the fact that I had survived 3 years of stringent educational training in a tough military style high school, caused her to decide that I might be worth the risk.

In any event, I made regular on-time payments on the car to her relief. As you might have surmised by now, it also began to give me a credit rating. When I sold it a few years later, I had completed my first successful credit history transaction.

Bypassing Credit

My next car was a 1956 Porsche. It was offered to me at such an amazing price ($800) that I already had the cash to pay for it. After selling the VW, I had the proceeds plus what was in my cash savings. So I did not need credit to make the purchase. But still, I had an early track record to fly by.

Back then, credit cards were not a big deal. Usage was still in it’s infancy. The only credit I knew of was when you used it to buy a car or a home. So everything else that I bought was done with cash.

In September 1958, Bank of America launched the BankAmericard in Fresno, California, which would become the first successful recognizably modern credit card. 

However, I did become very interested in the stock market. I sent money via cash or money order (no credit card or bank cash transfers) to a stock brokerage firm and set up an account with them. Then, when I wanted to buy a stock, money from that account was pulled out to make the purchase.

The broker I used also offered to let me establish a “margin account“. That was an account whereby I could have the brokerage extend me a line of credit using my cash and stock as collateral. I could buy more stock this way and hopefully make greater profits.

The writing was on the wall for me to see that this could be a very bad deal. If the margin-covered stock went down in value, and approached the minimum requirements I would have 2 choices: Send in more money to cover the credit, or have the broker sell the stock to protect against loss.

I passed on that risky maneuver, to say the least. I was familiar with using cash and that is where I stayed. It was a good decision. I later joined a 4 person group at my work to invest in futures contracts that promised a hefty return. The coworker in charge of the investment stayed in the transaction too long (against my prodding him to sell while a profit was still guaranteed).

As a result, the group lost everything. Since my outlay was all cash, that is what I lost. I did not have to pay off credit that was created by a margin account. Learning what I did, I never joined a group like that again. The pain of loss was my teacher.

Marriage Becomes The Catalyst For New Debt

My adventures with credit continued to revolve around vehicle purchases. After my demise with my Porsche, I again paid cash for a temporary vehicle. It was $300 for a 1958 Chevy station wagon. Again I was able to avoid credit.

The current value of a 1956A Porsche Coupe is $79,000 according to the Haggerty Vehicle Valuation Website as of the date of this post. For a 1962 Volkswagen Beetle the value is $10,300. A 1958 Chevy Station Wagon can bring 19,500.

But after becoming a car enthusiast, I wanted something with pizzazz. Another Porsche was out of my price range. So, I had my sights on a new 1970 Chevy SS Malibu, but with a $4,400 price tag, I couldn’t qualify with my existing credit rating. So I had to settle for a new under-powered 1970 Chevy Camaro for $3000. I sold the 58′ Chevy for $50. Bummer!

When I got married, my wife eventually took the Camaro for her personal use. While I was still buying other vehicles on credit, something new entered the arena. Credit cards were now more prevalent, and I began to get offers in the mail. I agreed to accept some of them even though the charge limits were small and the interest was high. To add to the equation, I was on the verge of becoming a bad credit risk.

With a new family to support, I was running out of money before all the bills were paid. Credit cards were very inviting and let me think there was extra money in the kitty that really didn’t exist at all. Monthly payments barely covered the hefty interest charges.

To add more money, I did the unthinkable. I got added more credit cards. Now, instead of one high monthly interest payment, I had 2. And then 3. But since the charge limits were always small, I couldn’t go very far with any one card.

Home Loans, Equity Loans, You Name It!

So the credit carousel was set in motion. The real fun began when I bought our second home. The first home (VA Repo) did not really need any expensive home improvement work, but the next one did. It was only about 750 square feet, and was some 50 years old with outdated everything.

This was another journey into my crazy thinking. I was planning to add a two-story addition to this 2nd home purchase. And this was back when it was a lot easier to qualify for a new mortgage and equity loans.

When I started the project I didn’t have the foggiest clue how much it was going to cost. I was depending heavily on my home building learning curve from days working in Arizona. While I was doing a lot of the work myself, I also received help from men in the local church I was attending. Since I did many repairs at the church in return, it was a fair trade-off.

Even with this DIY effort, I kept running out of money. I had established credit with the local lumber company, and that helped to carry me somewhat. But to keep going, I had to make a 2nd mortgage on the house. Later on, I had to borrow from high interest personal finance companies as well.

In the meantime, for added fun, my wife and I had to sleep in the new bedroom with no insulation or interior wall coverings in place. We could see the breath coming out of our mouths as we lay in bed. No furnace installed yet, but with 3 kids in tow, we couldn’t wait. Unbelievable.

The End Of An Era

When the end of construction was near, I didn’t have enough money to keep up with the mortgage payments. That was even after consolidating all the various loans. So I put the house up for sale hoping to close before foreclosure took place. I would continue making final repairs to help complete the deal.

My insane solution for our next residence was to buy another house with funds borrowed from my new realtor’s father. As that deal was close to finishing up, I accepted a comparatively medium offer on the remodeled house that turned out to be a premature decision. The realtor I used to find a buyer for that house told me he could have gotten more money if he knew about my plans to finish the repairs. Lack of communication with him was the culprit here.

So that early gambit with credit signaled the end of an era for me. All those early learning debt-centered events set the stage for my future exploits. I was continually wading in and out of all sorts of schemes to make the borrowed dollar work for me. Some were set to work out very well, and others brought me near to total collapse. I am amazed that I have survived and made it this far.

Well that is it for this blog. I hope it has shed some light on what you can get into dealing with debt and credit. If you have any comments on this subject, please leave one.

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