This commentary is by Victoria Rhodin, a clinical social worker in Montpelier.
A young Vermont family I know recently asked me for advice about buying a house. They are the kind of people of whom elders would say, “They know how to work” — both have held jobs since they were 12 or 14 years old, and grew up with the traditional ethic that you live within your means as best you can and don’t borrow money if you can avoid it.
Their recent interest in buying a house was inspired by the fact that their landlord intends to sell the house where they’ve lived for several years out from under them. They are worried a new owner will raise the rent beyond what they can afford.
So, having stable jobs and a kid, they came up with the idea that maybe they could buy the house, allowing them and the other tenants to stay put. (To be clear, I’m reserving judgment about whether this would be a good idea.)
I suggested a first step would be to talk with a bank about whether and how they could get a mortgage, and also take a first-time homeowners course from the housing trust. Sometime later, I asked how the talk with the bank had gone. “They said we have to get our credit score up,” one of them said. “That’s interesting,” I said. “I thought the only money you’d borrowed was a school loan, and that was paid off. Shouldn’t that give you a great credit score?”
Well, it turns out, that is the problem. If you don’t borrow money — if you don’t live on credit — then you don’t have a credit score. So if you have a school loan, and you pay it off — and you work for a living doing something that benefits society, and pay your rent and day care and other bills on time — then you have a lousy credit score! “Did they suggest a way to get your credit score up?” I asked. Apparently the bank suggested they get a credit card, something they have scrupulously avoided doing up to this point.
Maybe they misunderstood, I thought, so I called the mortgage people at the VSECU, because they are helpful people, to see if this was really how things worked these days, and what a young working person should do to increase their credit score, other than work hard and pay their bills on time.
And the VSECU lady told me the same thing. If you don’t borrow money (what I would translate into “if you don’t live beyond your means”), then you don’t “build credit” and you don’t have a good credit score. She suggested these young people could take out a credit card, use it for one purpose and pay it off in full every month (the “pay it off in full every month” part sounded smart) or “take out a personal loan” for no purpose at all and pay that back (apparently the school loan, for the purpose of higher education leading to a better job, doesn’t cut it).
So basically, you’re telling me these people who work hard and live within their means will have a harder time buying a house in their home state than age-mates who live on credit, thus compiling a high credit score? “Say it ain’t so, Joe!” But mournfully she affirmed I had understood her correctly.
Anyway, I passed along the excellent information to the family in question, that they need to sign up for the first-time homebuyers class with the housing trust in the part of the state where they live, and that there may be other “alternative paths” to proving credit-worthiness, such as the landlord attesting that they pay their rent on time, and I sat down to ponder how the ancient values I have tried to live by and to pass along could go so askew.
And we will see who buys that rickety old house on a back street of an old Vermont river town, and what they raise the rent to, and who gets to live there then.
