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July 27, 2008

Your Credit Score

-- by Dave Johnson

A thought: If you don't borrow, you don't care what your credit score is.

If you don't borrow you don't get in so much trouble if you lose your job or have a medical emergency...

If you don't borrow you don't have any payments. If you don't have any payments you have so much more to live on and enjoy.

Posted by Dave Johnson at July 27, 2008 2:16 PM

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Comments

Uh... wrong.

If you apply for health or auto insurance, you care what your credit score is. Some companies are giving unfavorable insurance rates to people with bad credit.

If you apply for a job paying over $35k/year, you care what your credit score is. Employers are legally allowed to check your credit when applying for that category of job.

If you want to rent an apartment, you care what your credit score is. Landlords won't rent to people with bad credit ratings.

If you want a cell phone account, you care what your credit rating is. People with bad credit often can only get prepaid phones.

I could go on..

Posted by: Charles at July 27, 2008 4:00 PM

Sadly, Charles is right. Often people who don't use credit still have a lousy credit score. Weird, but true.

Still it's good to avoid as much credit as possible and only pay On Time and maybe get a few loans just to show you have good credit. A small personal loan for a used car of something from your bank would help.

But paying all bills on time is important. Late payments can be almost as bad as no payment at all. Not fair and clever bondage for the lot of us to Big Capital.

Personally, my credit stinks for those not payments for services unrendered.

Posted by: datadave at July 28, 2008 9:07 PM

Charles:

A person who never borrows won't have "bad credit." He will have a very thin credit history, but that won't disqualify him from a cell phone or hurt him when he buys insurance.

Even if you don't have debt but you pay all of your other bills on time, your credit history will not have any collection accounts or "derogatory" records in it. That's all these companies want to see.

Dave is right - people get advised to go into debt to "help their credit score." It's a very bad idea to carry any debt for this reason alone.

Posted by: Jay Muntz [TypeKey Profile Page] at July 30, 2008 5:25 PM

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