Is Your Credit Score Deceiving You?

creditscore

There may not be any question or statement I get more than “How do I build my credit score?” or “I did this to help build my score.”  It’s a HUGE issue in our culture and the hot topic everyone is talking about.  But how do you tackle this elusive beast?  In this post, I’ll share what the credit score is, how it’s calculated, what score you should be aiming for, and how to get there.  Buckle up your seat belts, Dorothy, because we aren’t in Kansas anymore…

The Truth About Your Score

Contrary to popular belief the credit score in not a reflection of your responsibility with money.  Don’t believe me?  See for yourself.

ce_FICO-Score-chart

I pulled that image straight from Fico’s own website here.  The credit score has nothing to do with financial responsibility… unless it’s debt.  Makes sense, right?  It’s a credit score.  If you get a raise your score doesn’t change one point.  Grandma left you a million dollars?  Sorry, the score doesn’t change.  You can be a multi-millionaire or a bum on the street and have absolutely no score (note: not zero but non-existent) unless you choose to interact with debt.

However, we’ve adopted in this culture a belief that if you want to be successful you need to have a good credit score.  I’m here to tell you that is a bold face lie sold to you by those who want to sell you credit.  Credit is a product.  It’s simply other people’s money.

The credit score is generated based on your credit report.  What’s not on this report?  Utility payment information, rent payments, checking or savings account information, or anything else that is not debt.  Your report can be a great guide for how you can clean up your past bad debts and get debt free, rather than a paranoid barometer as to how you can take out more debt.

You can be a multi-millionaire or a bum on the street and have absolutely no score unless you take out debt. Click To Tweet

 

Breaking the Payment Mindset

So if the score has nothing to do with overall financial responsibility how do we live without it?  This may sound overly simplistic but with your own money!  It’s true.  You CAN live debt free.  You CAN live a life without debt payments.  You CAN take control and stop depending on other people’s money.  It’s what I do every day, help people break the chains of this culturally sick system.

I’ve been debt free for over 7 years now and I don’t miss it one bit.  You should try it!  If you don’t like it, it’s very easy to go back into debt!  Get angry and get focused.  Draw up a budget, commit to sticking to it, and if you need help reach out.  Stop living under the shadow of debt.  Payments are robbing you of your ability to make your money work for you.

It should come as no surprise that the credit card itself was borne out of financial irresponsibility.  Check out this brief clip from the History Channel’s 101 Inventions that Changed the World.

Stop believing the lie.  Credit is not good for you.

 

But I Need a Good Score To Get A House!

That’s a total myth.  What do you think they were doing before credit scores existed?  I’ll clue you in.  It’s called manual underwriting.  This is a process where instead of the lender looking at a score like a monkey and not looking at your real financial responsibility they instead take several things into account.

First, they’ll look at your income, then your ability to pay, then how much mortgage you can really afford, and finally they’ll ask you to gather 4 to 5 simple documents showing you’ve been faithful in paying your bills.  For example, this could be a one-page letter from your electric company showing you’ve paid on time for a year on company letterhead and signed by a supervisor.

Makes sense right?  If you’re going to lend someone 6 figures for a house (the only debt I’m not against if in proper parameters) it would probably be smart to do your research!  So why don’t they use this method primarily anymore?  Money.  It’s faster to just look a score provided by an objective third party like FICO than to do your proper homework for every applicant.

I personally qualified for a mortgage under the manual underwriting process with no credit score.  It is not a unicorn.  It’s real and it’s not as hard as you may think.  Bonus: Most lenders are likely to qualify you only for what you can afford when doing manual underwriting rather than the typical industry standard of 40% more than you can afford.  That’s good for you!

I believe the score you should aim for is not ZERO, but rather DEAD.  Non-existent.  Kaput.

 

The Bottom Line

You don’t need a credit score.  There, I said it.  You can live on your own income without debt, and you can get a mortgage without a credit score.  Think about it, even if you are paying off your credit card every month you are still in debt from point of purchase to point of pay off.  The odds are against you on continuing to pay it off consistently, and you’re dealing with an industry that spends the most worldwide on marketing.  The odds are [not] ever in your favor.  Your instinct may be to buck against this revelation, but I urge you to consider the wise sage, Dr. Phil, when you compare debt freedom to your usual way of thinking…

 

Question: Do you have a story about how debt freedom has changed your life?  Do you have tips on how you “survive” in a post debt way of living?  Share your thoughts below and share this post with someone you love!

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