I came across this article linked on CNN Money called, “20 rules to live by for cheapskates,” and one of the points caught my interest.
Point #4: “Do everything in your power to achieve or maintain a great credit rating for a huge financial payoff.” The paragraph goes on to explain that if you have great credit vs. poor credit, you’ll get better interest rates for car loans, mortgages, and even some insurances. Even more, the article mentions that your prospective employer can pull your credit report and make hiring decisions based on its contents. Yikes.
So yes, it’s good to make sure you have a good credit report. Make sure you don’t have any errors. Make sure you pay all your bills on time. Make sure you don’t have a high debt-to-credit ratio. Etc.
But “everything in your power”? I think that could be interpreted broadly.
I don’t think you should take on debt or pay it down less quickly simply to maintain your credit score.
I just pulled my score from Credit Karma (a free site that lets you do so without any credit dings).
It’s 710. Down from a high of 773 back when I still had a car loan. Ugh.
Shane and I have one credit card account open, down from 3-4 or so from our debt heydays. Not too long ago, I closed my oldest credit card because they were going to start charging an annual fee for the privilege of having a card. No thanks!
I use the card for online purchases, simply to keep our credit somewhat active. But we don’t carry a balance (cuz hi, I don’t want to pay 14% interest EVER AGAIN).
The report at Credit Karma says that part of where I’m being dinged is because I only have 1 credit account open. I don’t really want to open more, though.
So why do I care about my credit score?
I hope that we can buy a house in the near future. Buy a house as in, get a mortgage. I want us to get the best possible interest rate we can on that booger.
Because if lenders tell us, “Sorry, based on your credit score, you only qualify for a high-interest mortgage,” I’m going to be pretty mad. We have no debt. We’ll put a respectable amount of money as a down payment. And we’ll borrow well within our means. So I think those factors should qualify us for a lovely mortgage.
Dave Ramsey tells us that we can get a mortgage with no credit score if we can find a lender that does manual underwriting. You’ve gotta meet a few requirements, though — 20 percent down on a 15-year fixed, and a few other things. I think we can do it, maybe. Having an affordable mortgage is important. You don’t want to put yourself in danger of a foreclosure and wonder how long does a foreclosure stay on your credit report.
I don’t know how our credit scores are going to impact us until we actually do set out to obtain a mortgage. I just hope it works out in our favor. We’ve been working too hard and too long at this to be penalized for such a dumb reason.