Are you infatuated with your credit score? Do you know what yours is?
The last time I checked… wait – I’ll be honest, I haven’t checked in years. It has literally been years – 5 or 6? Maybe even 7? I could care less… I honestly have no clue what it is.
The lending industry has people believing that everyone needs to be increasing their credit score. The ONLY way to financial security is through .. guess what? Your credit score. In fact, if you don’t have a good credit score, you can’t buy a house, get a car, you may not even be able to get a job.
Right? That’s scary for some.
Your credit score is quite honestly the most deceptive marketing tool that the lending industry uses – to control your financial behavior. It’s the truth.
Your Credit Score
Your Credit Score, also known as the FICO score, is a financial tool that lenders use to determine the risk that they are inheriting by giving you a loan.
The score is a reflection of the type and age of accounts you hold, history of payments, and the debt you have accrued – plus several other things. A score of 700 or more is relatively good, while the lower the score, the bigger risk you pose to a bank or a lender.
Some (not all) insurance companies include your credit score as a factor in your premiums – but not all. .. (Ours didn’t!)
Over the years, people have been taught that financial stability equates to good credit – but that in itself couldn’t be farther from the truth. Financial stability actually isn’t dictated by a number – but by how little debt you owe. So instead of spending time worrying about your credit score you should actually be more worried about the effect your debt is having on your finances as a whole.
Your score tells you whether you are good at borrowing money and paying it back.
Banks and Lenders will make you think you need to spend more time improving your credit so that they can get you to purchase more credit – so they can therefore make more money.
Lending Starts Early
Backpedal to the age of 18 – most lenders are already working to target your children in the form of offers tied to college admission. Direct mail offers hit your mailbox – letting them know they should start building their credit for purchases later on (house, car, etc.) Buying things you can’t afford you are ALSO kickstarting your adulthood – after all, to most, credit is necessary for everything.
Right?
Once you sign off on that credit card, you are hooked into your student loans – then, your car purchase. Before you know it, you are told by those same lenders that anything is possible, through financing.
Just charge it – they can make the payments affordable. After all you are working on establishing a credit history for yourself which will help you over the next few years. Perhaps even when you buy a house.
After a series of offers, decisions and signatures, it’s now 10 years later, and you are faced with a huge student loan bill, a car payment that you might be upside down on (therefore convincing you to trade it in – after all, it’s your only option)..
Once in a rare while you will get that person that mentions that they are done with credit – they don’t need a credit card, they don’t feel like a car loan is required – and they are punished by banks. Loan companies will tell them they can’t buy a house because, after all, they don’t have enough credit. Although they may have paid off all of their consumer debt, the bank will tell them that they can’t give them a loan because they don’t have “enough” credit.
As a result, banks have kind of conned people into thinking they must perpetually stay in debt just for the sake of having things.
What your FICO Doesn’t Factor In
Your FICO basically reflects your I LOVE DEBT score.
Think that’s incorrect? Does it factor in your savings accounts? Net worth? Children’s college funds? Absolutely not. It doesn’t’ even factor in your income, or your debt to income ratio.
The only way to have a great credit score is to go into debt, stay in debt and pay off your accounts perfectly – without adding much or paying too much off. In other words: staying in debt as long as you can.
Getting things without a Credit Score
Banks and Lenders will tell you that your credit score is key to the larger world of home ownership – it’s necessary to rent a car. You have to have one to travel. You might even be told you must have one to rent an apartment, or even get insurance (whether life or auto).
That couldn’t be farther from the truth.
- You CAN get a job without a FICO score or credit report check. Why work for a company that determines your employability based on your debt and whether or not you repay instead of your skills and personal relationship? We were both able to obtain Top Secret Security Clearances in the military and that was aside from a FICO score – they are looking at your history, not your score.
- Think you need one to travel? You don’t. We travel just fine. We rent cars JUST fine without one. In fact .. your debit works the same – the only difference is that the deposit will come out of your bank account – if you are scraping by paycheck to paycheck, then of course that will not sit well with you. … but in that case, perhaps you need to re-evaluate your budget if you have to rely on a credit card to fund what you should realistically be able to pay for.
- Utilities will often look at credit when establishing your account. But it’s untrue that you need credit to get utilities turned on. If that was the case, we’d be sitting in the dark, without water or power.
- There ARE insurance companies who will give you a better price on your insurance based on whether or not you have 2 forms of the insurance with the company; trade associations, and even the schools you may have attended.
- It’s absolutely unnecessary that you need a credit score for a mortgage – you’ll need to find a lender that can look at the more common sense financial factors (your income, not just your score). You will need to put down 20% on your home, and choose a fixed rate 15-year – you will also need a relatively strong employment history and of course, income to support your purchase.
Not worrying about your credit is not a matter of poor/wealthy – it equates to living within your means. Saving up the cash to make that car purchase. It means A. Reducing your spending B. Increasing your Income or C. Doing both – to financially come out ahead.
The art of saving up until you can afford what you want is relatively lost with most people today. Especially when society teaches you that it’s not logical “to” wait. Instead, loan, and just make payments.
Being a slave to the lender your entire life on the notion that it’s impossible to come out ahead will just keep you poor forever.
Your Credit Score is actually a Debt Score
Though they can’t quite name it that or it wouldn’t be as attractive.
Credit is very attractive to people. The attraction OF credit itself is very real – just a few weeks ago we mentioned anyone can literally buy anything they want. We might just have 2 large SUV’s in our driveway – granted they are 14 year old trucks, they are paid. We could go out today and probably buy a brand new 2016 Yukon IF we wanted to.
The thing is, neither of us want to. The thought of that payment and commitment is scary.
But let me tell you that having a driveway of paid for vehicles, without exorbitant registration fees, without incredibly high insurance, and an incredibly high car payment is liberating. Knowing how hard we worked for several years to save up to buy these vehicles is in itself a sense of accomplishment. They aren’t flashy. In fact, they rarely get washed – and sometimes, they need some elbow grease, but all in all, a liberating feeling.
While that may not have been the popular route, it was our route and being able to walk into the dealership WITH cash was priceless. Are we wealthy? Not a bit. Is something like this achievable for others? It certainly is.
It should hurt people to make large purchases – the buy now pay later mentality has to stop.. it has gotten Americans into so much trouble the last 10 years. Sure – you might be able to pay off that credit card in full every month (right? So what’s the big deal?) — huge problems CAN surface when things don’t go as planned.
Anyone can suffer a job loss.
Anyone can suffer from sudden ill health.
I Don’t Care About my Credit Score
I don’t know what mine is and I truly don’t care – why? Because I don’t find myself needing debt to fund my lifestyle. We don’t believe in using credit to buy things that we can’t afford, and that cash can’t pay for on the spot.
But that also means being able to say no to a lot of things you might want. It also means being unpopular when others want you to take trips, go out to eat, or around holidays when they load up their family with gifts.
This doesn’t mean you should blow your credit score to bits either – it just means that you should probably put more emphasis into building up your finances (eradicating your debt, saving in your emergency fund) to give you that head start you need to being able to pay for those things you want in cash.
Not being a slave to the lender and falling for marketing tactics all for the benefit of the lender and to keep you under their thumb.