In a post several months ago, I asked if credit was a right or a privilege. Part of our current economic problems began with the creation of the Credit Score.
As I mentioned in the post, I worked for a local Credit Union about 17 years ago. Back then, if you needed a loan, they would take into consideration your debt to income ratio (DTI). If your DTI was over 40% then you would be turned down for the loan.
We even pulled credit reports before opening checking accounts or ordering ATM cards.
When our children want something we don't think they should have or wouldn't be in their best interest, we tell them no. If more people had been told no to a loan that they couldn't really afford, there would be a lot less people in financial trouble today.
But there should also be personal responsibility. When we purchased our home, the person helping us with the financial part kept telling us that we could afford a much larger home (and of course a much larger loan). We politely said no thank you. Just because we could afford it did not mean it was in our best interest.
If one of us were to lose our jobs today, we would still be doing well financially because we have kept our DTI very low.
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