Jerry just left a comment on my previous post. My post talked about canceling one of my credit cards and lower the available credit on the other. This is Jerry's comment:
"I thought lowering your available credit leads to lowering your credit score? Maybe that's changed since the last information I've heard. I always kept my available high because I thought it was insurance for a strong FICO score."
I will admit I haven't done any research into this but I do believe what Jerry said is correct. I'm not really concerned about my credit score at this particular moment in time though. I hope the only reason I am ever really concerned about it again is for a mortgage.
Part of my journey to become debt free involves changing the way I think about and use credit. Yes I will keep a credit card. In Canada this is still a requirement in order to rent a car, book a hotel room and a number of other reasons. I tend to follow a lot of what Dave Ramsey says and part of that is that he doesn't believe in having a credit card and he has no credit score. Well the banking system in the USA is different from ours in Canada. Although we are just coming out with the Visa debit cards they are not widely available. To my understanding the Visa debit card can be used in the same way as a credit card but instead the money actually comes directly from your bank account. Also Dave Ramsey doesn't need to worry about having a credit score because he has lots of money and doesn't need to borrow for a home.
My financial future will involve as little credit as possible. Once I know more about the Visa debit card I may make a switch to that. I will require a nice size emergency fund, maybe around $10 000.00. I will also have a separate emergency fund for my pets. (I highly recommend this for any pet owner) I will also be incorporating planned spending into my budget. Plan spending to me means "saving" for future expenses such as car repairs, clothing, Christmas and regular vet bills, etc. I will also start a savings fund for a future car once my current one is paid off. I never want a car loan again. Eventually I will save for a down payment on a house but I am in no rush and would like to have all the other things I have mentioned in place before that ever happens.
So does your credit score (FICO score) matter to you? Why or why not? What does your financial future involve?
Thanks to the new readers who have stopped by and left comments :)
opps - combined both posts into one comment on your previous post!
ReplyDeleteYour Fico score allows you to borrow money and it also sets up what interest you will borrow at. It also affects the amount you will pay for car insurance and other insurance. People of poor financial status are at a higher risk for claims so they pay much higher premiums. But I also think you need to get rid of excess cards on your account. As long as you are current and have been current, have a savings you do not need a ton of outstanding cards that you do not use. Yes it will affect you for a little while but in 6 months to a year it will make no difference.
ReplyDeleteMy credit score does NOT matter to me. The last time I had it checked it was 3 years ago to sign a new mortgage. I think you are on such a good path right now that when you need a great credit score to qalify for a mortgage or whatever you can get one without going into debt.
ReplyDeleteIt matters to me but it doesn't look like I am doing anything about it... yet. Just focusing on hardcore debt repayments for the next 18 months.
ReplyDeleteBeing fairly young, I am yet to get a car, and it will take me longer than I can afford to buy a car with cash-only (though I will be able to make a sizeable downpayment!). And of course, the mortgage. Not that I will need that anytime within the next... oh, 5-7 years, but when I do it, I want to get the best rate/offer I can get, which is hard with poor credit. Also, I have OCD with numbers like that... If it can get high, I want it to be high. I wont get into debt just to get the number high enough, but I know that right now it sucks and I can do better without major fallbacks.
It doesn't matter to me because I plan to live a debt free life. I believe it is completely realistic for me to purchase a house in cash. This belief comes after paying $80K+ to debt in 4 years as a single person. After doing this I feel I can pay for anything with cash.
ReplyDeleteI am not worried about mine BUT I own my home and don't plan on buying a new car any time soon. Im am sure mine took a ding when i closed all the small store cards and the evil chase but thats ok because they are gone
ReplyDeleteI do keep an eye on my credit score. I use to have crappy credit and worked hard to get the numbers out of the toilet. Now I just have to get rid of a large balance on my last credit card.
ReplyDeleteGood idea to have an emergency fund for pets!
we don't have credit scores in Australia, and our interest rates are set rates, not determined by your credit history or increased if you are late with a payment etc.
ReplyDeleteI check my credit report each year for errors, it's in great shape as we have never defaulted on anything.
I'm looking forward to having no Credit cards, we did it before for about 5 years and it was great, we'll just use a visa debit card to pay for things. But loans to buy real estate are in our future.