Sunday, February 25, 2007

Chapter 7: Credit is Life part 2, pages 195-198

This passage is interesting mostly for Rhie's fearmongering about the so-called 'economic death sentence' of bad credit. Although Koreans certainly have a lot more cash than Americans do he also doesn't acknowledge the prevailing American view of this disparity, in which Americans are enjoying their houses and cars while they pay them off, while Koreans are going without in the time it takes them to buy things outright with cash.

In America people with no credit that is to say an unverified credit rating, cannot do anything. When such people first come to America they still have no verified credit rating, they can't get a credit card, and for people in America once you are stuck with the label of bad credit, that is the equivalent of an economic death sentence.
Good credit is not just having a lot of money, creditis the evidence that you repay the money that you borrowed or the things that you bought on installment plans, and that you aren't the kind of person who borrows money and then fails to pay it back. The only way to have good credit is to build up a record of faithful repayment.
You can only get a credit card by building a credit history. Once you do that banks that had haughtily refused to issue credit cards will fiercely compete to offer their credit cards to you.

In America you can't do anything without a credit card. You can't rent a car or reserve a hotel and in many cases you can't even rent a house.
(Graphic shows the author and a real estate agent)
Rhie: I want to rent this house.
Agent: Oh, you came to America as an exchange professor.
Rhie: Yes, I would like to rent this house for two years.
Agent: Professor, you have no credit history, so I can't rent this house to you.
Rhie: I'm a college professor, but you still think I won't pay the rent?
Agent: It's not important to me whether you're a college professor. There's no guarantee that you will pay rent at the right time, professor. You have no credit history.
Rhie: Can't I just show you my bank book? There's enough money in it.
Agent: That's your money, not mine. If you don't give me the rent I'm the only victim.
Rhie: Oh, I'm angry. Even though I have enough money I can't rent this house because I have no credit. How about I pay one year rent in advance.
Agent (eyes exploding and jaw dropping): No problem. I'll give you a 10% discount. (thinks) In America it's a dream t touch this much money at once.

There are many times when credit is more important thatn cash. Let's say you're buying a car.
(Graphic shows a man and a salesman)
Man: OK, let's make a contract.
Salesman: $22,000 at 7.75% interest. How would you like to pay? Over 36 months?
Man: Installment plans are too complicated. I'll just pay all at once.
In this case the salesman will make a strange face.
Salesman (thinking): Naturally Asians have a lot of money. No American can buy a car with cash.
It's nice that you don't have to pay interest every month like you do on the installment plan, but the reliable monthly payment is decisively recorded in your credit history, and your credit points pile up regularly. If you come to be recognized as a trustworthy person you get accepted for a credit card. What Americans call a credit card literally means "trust card", so people who have one are people who've been economically verified to be trustworthy people. Before a credit card company issues a card they perform various meticulous checks. The basic information is where you work and how long you've worked there, and how much your income is, whether you have your own house and ho long you've lived there.

They check how much money a person has in the bank and whether he's paid off his loans on time and exactly. They must thoroughly check his economic power and ability to repay, and if the investigation company puts him on a "credit risk" or "bad credit" blacklist, we can see this person as economically already dead.
Even when the card is issued you don't get complete credit. For a fixed period, a so-called "secure card" is issued. In this case you can never take out more than the amount you have in the bank. Even though the monthly limit that you can use is high, it is strictly limited. In American society credit is so important that it is the same as life. If you have a credit card you can live your economic life even without a penny [of cash]. The credit card issuance process is strict and picky but America is also a capitalist society and if you can get a job there you can use that company's credit to get a credit card.


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