Wednesday, January 7, 2009

Do You Know Your Credit Score? NOT!

A few years ago I had a credit score of 775. Then, we started investing in real estate and purchased eleven properties in about seven months. With all that new activity and inquiries into our credit my score quickly dropped to the mid 600's. It stayed there for a while and I can guarantee that it has dropped even more since then. Now that we are getting out of real estate entirely and will be going back to our previous no-debt lifestyle I was concerned about rebuilding that strong credit score. I didn't like the thought of the techniques of building it, though. I didn't want to have anymore credit cards.... none at all. I didn't want to simply go into debt so that I could build the score. I was torn. Some would argue that it is important because without a good credit score my insurance rates will go up, any loans I get will be higher in interest. That may be the case, but I don't plan to go into debt other than my house that I already own and perhaps someday a vehicle, in which I will save money so that any money I do borrow will be minimal. I am really intent on staying debt free. We were before real estate investments and we can do it again.

What about the credit score? I ran into this answer given to someone with the same kind of concern that I have and this has now convinced me not to worry about it anymore. Although, I still am using my credit by having a mortgage, I feel that Dave Ramsey wrote this answer for me as well as to Wayne. I thought I would share it here.

Better to Leave Them Open?
by Dave Ramsey Tuesday, December 30, 2008

Dear Dave,
We’ve paid off most of our credit cards. My wife doesn’t want to pay all of them off, though. She says it’s a good idea to have open cards and a high score on your credit report to show that you’re creditworthy. I want them out of our lives completely. What do you think?

Dear Wayne,
I think it depends a lot on the goal you have in mind. If your goal is to stay in debt for a really long time, then by all means keep a credit card open. If your goal is to get out of debt and stay out of debt, then what does it matter if your credit score goes down? My FICO score is zero, and I could probably buy the FICO company for cash!

A credit score is really nothing more than an “I Love Debt” score. It isn’t based on how “worthy” you are, how much you have, or how much you make. It’s based on the fact that you got into debt, stayed there for a long time, and paid creditors a lot of unnecessary money. I stopped borrowing and paying back debt 20 years ago. As a result, my credit score gradually deteriorated to the point where it doesn’t even exist anymore.

FICO will love you if you’re always in debt and making payments, but you’ll never be able to take care of your family, retire with dignity, or make a difference in the world through giving.

Close the accounts, Wayne. Cut up the cards and pay cash for everything! You can’t worship at the altar of the great FICO if you want to get out of debt, and stay out of debt!
– Dave

For more great advice from Dave, please visit