My Credit Score

Hi RIP friends,

Today I’m going to show you my credit score! Are you ready?

Well, not an actual numeric value like the ones that are popular in the US. Why? Because we in Europe (at least in Italy and Switzerland) don’t have this fancy number attached to our identity. At least not in a transparent way. Who knows if bankers, in their secret dark meetings, emit financial death sentences like: “Who? RIP? That cheapass?? No no no don’t give a dime to him!“.

Anyway, we all have a credit history don’t we? We all took student loans, car loans, mortgages or other personal loans, don’t we? We all use credit cards and sometimes we don’t repay the debit in full each month, carrying over a little bit (or a lot of it) at a convenient 9.99% interest rate, don’t we? Sure!

Being rich today has nothing to do with having money but having access to credit, isn’t it? How can you complain with that? There’s way way more circulating credits/debts than money! So the key to be rich is to have access to credit and use the borrowed wealth, isn’t it true?

Well, let alone that this leads to financial cycles, some of them crossing generations and establishing roots for inequality, anger and wars, my personal take on this is: no, we should not abuse of this mechanism and we should avoid using credit (and getting into debts) as much as we can.

Are all debts bad? That’s a widely discussed topic among the personal finance community and I don’t want to start this discussion here. I generally agree that not all debts are necessarily bad. For example one may use the power of leverage to boost their wealth. Getting mortgages to buy rental properties, getting a student loan to access higher education, getting your idea financed and start a business/startup and so on.

What’s my relationship with debts? Wait a minute. I just realized that I’ve never had one. I had to sit down and think again at it: I never had debts. No banks or other financial institutions have ever opened a credit line on my name.

debtfree
image credit: http://www.stockmonkeys.com/

RIP, you joking? How’s that possible?? Don’t you have a credit card? Do you withdraw your paycheck and do everything with cash? Are you a caveman??

Well, yeah… I need to sit down, breathe, and think again at it. Btw, it’s fun: I didn’t do that on purpose. I didn’t avoid borrowing money based purely on some ideology or anti-something-ism. I just did my best to avoid getting into debts as much as I could and actually I could for my entire life so far!

RIP, let’s break this down: you telling me that you didn’t get a degree? Or your parents paid for your study in full?

sapienzaNo. I grew up in Italy and even though everyone throw shit on Italian education, getting a degree that opens the Silicon Valley doors is almost free in Italy. You only pay taxes in the order of 1,000 Euros (but can be more than halved if you’re not rich) per year and maybe another 500 for books each year. Ok, if you don’t want to live with your parents or if you study far from home you need to find a room in a shared apartment and maintain a student lifestyle which adds up to another 10K per year, but in my case I stayed with my parents while getting the degree. So no, I spent very little and I did it on my own budget.

Wow… that’s amazing! I should move to Italy to get a degree!

Yes, that may be an idea. I don’t know how things work for foreigner students, may be you have other taxes or may be you can’t actually attend. I don’t know. Anyway, let me remember that you get what you pay for. None of the italian Uni is listed in the top 100 in 2016 ranking. I didn’t care since in 1996, when I started, there were no www to look for this kind data 😀

Joking aside, I do consider networking and individual curiosity way more valuable that what you can get by professors during your study. And I had great connections with colleagues and my curiosity started to flourish in those years and thus all the steps that brought me to Hooli followed.

Ok, ok, let’s get back on track. So you didn’t take a student loan. Lucky you. What about a car loan? Everyone got one!

Yeah, agree. Everyone loves shiny new cars and can’t obviously afford to pay cash. Who says: “I want that amazing 30K car! I can save 300 per month so in just 100 month I can get it!“. Who does that? No one, trust me.

Yes, I know… So what did you do?

First: I’ve never been interested in fancy cars. I know, it’s an amazing superpower! I’m lucky to have survived the teenager era when everybody around me was talking only about girls, cars and soccer. Cars, cars, cars… which one is better: the Toyota Celica or the Lancia Delta Integrale? Carlos Sainz or Didier Auriol? Which one is your favorite?? It’s been hard to pretend I care when I didn’t care at all. You couldn’t just say “hey guys, aren’t cars just tools to go from A to B?”. You’d have been ostracized from friend circles forever! Anyway, trust me, not being interested in fancy cars is a superpower you can get too. I simply consider luxury a cost (and a weakness) I’m not willing to pay for.

Second: I’ve never been interested in new cars. Another super power. Actually a super super power because I bring this concept even further: I’m not interested in new things. Even further: I’m not interested in the (illusory) possession of things. I consider possession a cost I’m usually not willing to pay for. I don’t want to dig here more into this, it deserves a post (or a series?) on its own. Cars are things that need to move your ass from A to B. On a side note: I hate the fact that they have to weight 10-20 times their payload. I scientifically hate that to move 70kg of meat we need to use a ton of iron. Anyway, I never cared about having a new car. Cars depreciate dramatically on their first years, so why buy a new car if you can get for half its price a 3 years old car? What about very very used cars? Their price goes down to zero in Italy.

Third: I drive cars till they are piece of metals randomly kept together. Another amazing superpower! I can bay a very used car (10+ years older) and drive it for another 10 years! I can hear your complains: an ultra used car is dangerous and maintenance costs are high. False myths. Why? Because I consider safety and security, above a subjective reasonable threshold, another cost I’m not willing to pay for. Car accidents are caused 90% by high speed, alcohol or drugs and in general human errors. I’m an overly prudent driver and that cuts the first source of problems. Unless my car is really really dangerous and behaving unpredictably (which, let’s be honest, doesn’t normally happen) I’m not willing to pay for the extra supposed safety of a new car. Plus, I’ve always lived in reasonably big cities, small commute times, streets with streetlights and no dangerous country roads that bring me home.

So, given all the above, wanna take a look at my car ownership history? Enjoy!

y101995 – 2001: Got the driving license in 1995 at age 18 like every other Italian boy. Drove mother’s 10 years old car Autobianchi Y10 till year 2001 when it was not usable anymore. I learned how to drive with my Y10. I had my first kiss experience in a rainy night inside “her”. I had my first… ok, back on track. RIP my dear first car! Purchase costs: Zero. Well, my parents propably paid something when they bought the car (used) in 1991.

uno2001 – 2004: A friend of mine wanted to buy a new car after having been hired at his new job. He used to drive a very very very old Fiat Uno barely able to not collapse on the street. He was complaining about the high dismantling costs of that shitty vehicle when I offered to take it for free. He actually thanked me. I don’t remember how old was that shitty car, but it was super super shitty. Who cares?? I enjoyed it and I’ve been lucky enough that someone have stolen my car in 2004 and I didn’t have to dismantle it! How cool is that? Purchase costs: Zero. Well, just 200 Euros of ownership transfer Italian taxes.

fiesta2004 – 2006: Ok, My car was stolen. I kind of got angry at the time and I just graduated and I’ve soon after started working as researcher… Let’s celebrate! Let’s do something completely gross, let’s buy a car that actually costs money! I set up a 2,000 Euro budget that at that time were ~20% of my NW. After few weeks of research I purchased a shiny old 1996 Ford Fiesta for 1,600 Euro (+200 taxes). That car was awesome! The feeling of getting a “better” car and still navigating in the range of badassity-cheapassity was indescribable. Purchase costs: 1,800 Euro. The car was stolen in 2006. I know, I’m not very lucky with cars. I think I already told you I grew up in one of the shittiest neighborhood of Rome. Drugs dealing and car thefts were (and still are) the biggest component of my neighborhood economy.

escortsw2006  – 2008: The father of my former girlfriend wanted to buy a new car and he offered me to take his old one for free. A 1995 Ford Escort Station Wagon. A nice car, a little bit enormous, not very suited for a young sporty guy like me. But who cares? It was very useful when we relocated from Rome to Milan to work on Game Company. It was a gift I accepted happily. The actual value of the car could have been in the range of 1-2 thousands, probably closer to the lower end of the range. Purchase costs: Zero. The car was stolen in 2008 in Milan. Yes, again! This time they found my car few days after, partially damaged, 100km far from my life in Milan. It has been a shitty situation and I had to ask for help to dismantle the car.

carfree2008 – present: Car Free. Yes, given my theft rate I started analyzing alternatives. I started biking seriously in 2005 in Rome and I owned few bicycles. Why not trying to be car free and move by bicycle and by public transportation only? It worked out decently in Milan and since my relocation in Switzerland in 2012 it’s working great! I don’t need a car anymore! I dream of not owning a car ever again! I know it may change in case we’d move back to Italy, grow old, get babies… let me just dream for now 🙂

So, as you can see, my car history speaks for me. Never got into debts due to cars. Let’s move on.

Fun fact: I never owned a car manufactured in this millennium 🙂

Holy Sheet RIP… that impressed me. Ok, no student or car loan. What about mortgages? You have an apartment! Got you!! You lied!

Ouch, I hoped you forgot it. I purchased a flat in 2010 in Milan and I hadn’t enough money at that time. My father helped me. End of story. I’m a liar.

But let me show you more data, maybe we’ll give another angle to this story.

  • I had ~35K cash at that time.
  • I got 100K from RIP Sr. at 0% interest with a repay plan of 500 per month. He was willing to help me anyway, so I could have shopped around for a way better and bigger house with 135K potential down payment. I didn’t.
  • I wanted to not zero my cash so I went shopping for flats below 120K.
  • I went shopping for the cheapest flats I could find in the cheapest town in Milan’s hinterlands. I found mine listed at 110K, negotiated down to 105K directly with the owner, no estate agents involved, no extra fees (just notary and taxes). Total costs including very basic furniture and taxes: 113K. Still ~20K were sitting in my bank account. I soon started to earn a lot and I was never ever impacted by this family debt
  • I’m accelerated repayment once at Hooli and I’m going to close this debt next month with a final 9K payment.

Yes, I know, I still lied. I went into debts. I still am! But I like to see that as a family loan, which never felt like a big burden on my shoulders. Nothing really bad would have happened if I hadn’t paid back my debt. My sister, who got a similar amount (actually slightly bigger), is struggling with her job and she is not paying back her debt these days. We all understand it, it’s not her fault, it’s all ok. No bank will put her flat on auction.

And anyway, RIP Sr. is a modest person and he’s not going to spend this money. It will still sit there when inheritance will sadly happen.

Plus: I’m still invisible to banks and credit institutions when it comes to my “credit score”.

Finally: it would have been way way better to not have purchased the flat. Weren’t I able to access this credit, I’d be way more wealthy right now. My flat purchase was the single worst financial decision of my life. Period.

Uhm… you’re technically right even though you didn’t fully convince me, but let’s move on. Credit cards. You want to make me believe you never owned a credit card?

Yes! I never owned a credit card! Technically I now own a Hooli issued credit card with my name on it, but I can only use it for work related issues, like booking hotels and flights to hooliland, renting cars for work and paying for dinners out while working remotely. I don’t feel it as “mine”.

RIP, please… don’t you have a bank account?

I’ve too many of them! In different countries, in different currencies. Too many of them. But still no credit cards! I’ve only owned debit cards.

It’s fun how they name things. A credit card is one that sends you into debts. A (rechargeable) debit card is one that I need to top up so I always am in credit with the financial institution that issued the card. Funny. Plus I obviously own debit cards associated with bank accounts to get money from ATMs and pay directly at shops. These could technically send me into debts but I need to open a line of credit (credit, again, means I’d be into debts) with banks. I didn’t. So in case I won’t have enough funds in my checking accounts the cards will simply not work and the purchase won’t happen. I can’t go in debt with such tools.

But.. why? Credit cards are awesome and they reward you for spending money!!

I know, the internet and the FIRE community is filled with people sharing credit cards hacks to get free miles, free money, free whatever, sign-up and referral bonuses. It’s actually how FI blogs make money!

I still don’t get it, really. Maybe in Europe credit cards related debts are not so common. Or it’s just me, I don’t know. I admit I never deeply investigated it. I only recently took a look at the personalized Cumulus Credit Cards with some rewards on grocery shopping, but I’m still scared. Need to investigate more.

No payday loan, personal loan, any other kind of loan? Peer to peer landing?

please

Truth is: I’ve never borrowed money from a bank.

Holy sheet RIP, you crazy! Don’t you think this is going to negatively impact your future? What if you need money to bay a true house?

I’d figure it out my friend 🙂

For now, all I can say is that I’ve enjoyed so much a life without creditors. I can’t actually even tell the differences because I never tried what it means to have to live with real debts.

So, what’s my credit score? Zero, I suppose 🙂