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If you don’t like the way Wall Street behaves, if you want to hit back at those paragons of entitled excess, the best way to do it is to go through life without borrowing money. That includes credit cards, student loans, car loans, or a mortgage. It is possible — people do it all the time, including yours truly. We have no credit cards, paid cash for our house, and trade vehicles like most people change clothes.
Despite the financial entertainment industry telling us that not having a high credit score is bad, we’ve had our credit reports frozen for years, and still manage to do all the same things as people living the debt economy lifestyle. We fly, stay in hotels, rent cars, buy gas with plastic, and we’ve never had any trouble getting insurance for either the house or cars, and pay pretty decent rates compared to our neighbors. From the perspective of someone who doesn’t use credit, here’s my take on credit score myths.
Wealthy People Have Excellent Credit Scores
The wealthy do not necessarily have good credit scores, they just care less. The credit score rating system cares more about how you manage credit than how much you have. That’s why people of relatively modest means can have a credit score in the high 700s, and some people living large on the other side of the bridge in Palm Beach have credit scores closer to 600. If your net worth is in the tens of millions, do you really care about your FICO score?
Credit Scores Reflect the Likelihood of Defaulting on a Debt
Maybe that’s the intent, but according to research, what credit ratings should measure and what they actually measure don’t always line up. The financial crisis of 2008 revealed how corporate credit ratings investment ratings could be manipulated.
You Won’t Be Able to Get Insurance Without a Credit Score
That comes as news to me, Dave Ramsey, and all the people following his program for living a debt free lifestyle, all of whom have car insurance. While a bad credit score can have a negative impact, your insurance rates are dictated by your insurance score, which looks at your likelihood of getting in an accident, not at your ability to repay loans. There are also companies that sell auto insurance without credit checks. They’re usually more expensive, but still cheaper than a car payment.
You Can’t Get a Credit Score Without Borrowing Money
It used to be that you couldn’t get a credit history without borrowing money, but that’s not true anymore. There is a growing population of people who do not borrow money, collectively known as “underbanked” in the credit industry. The industry has adapted by offering what’s called an “Extended View” credit history, that draws information from public record data, and looks at factors like whether you pay your rent on time.
You’ll Lower Your Credit Score by Checking It
You won’t lower your credit score by checking it, which I still do even though our credit reports are frozen. What can lower your credit score is when lenders check your report when you apply for new credit. Even if you’re comparison shopping for the best mortgage rate, if multiple checks happen in a short time frame, they’ll usually be lumped together as a single inquiry.
The entire concept of the debt economy, and that you need to borrow money to get by, is an artificial PR construct of Wall Street and the debt industry. If you’re not going to borrow money or live in debt, what difference does your FICO score really make? Just for the sake of argument, let’s say your insurance rates did go up; without a mortgage or credit card bills, your insurance costs are a relatively minor expense. That’s never happened to us — our insurance rates are comparable with our neighbors.
So far the biggest inconvenience weave experienced living debt free is we had to pay a deposit to get our electricity hooked up, which we got back a few weeks ago. We do everything on the one easy payment plan, and companies still line up to take our money. Don’t buy into the hype; borrowing money is a loser and you can get by without credit.
-Redtea
Independent News for the Right-Minded American
redteanews
Despite the financial entertainment industry telling us that not having a high credit score is bad, we’ve had our credit reports frozen for years, and still manage to do all the same things as people living the debt economy lifestyle. We fly, stay in hotels, rent cars, buy gas with plastic, and we’ve never had any trouble getting insurance for either the house or cars, and pay pretty decent rates compared to our neighbors. From the perspective of someone who doesn’t use credit, here’s my take on credit score myths.
Wealthy People Have Excellent Credit Scores
The wealthy do not necessarily have good credit scores, they just care less. The credit score rating system cares more about how you manage credit than how much you have. That’s why people of relatively modest means can have a credit score in the high 700s, and some people living large on the other side of the bridge in Palm Beach have credit scores closer to 600. If your net worth is in the tens of millions, do you really care about your FICO score?
Credit Scores Reflect the Likelihood of Defaulting on a Debt
Maybe that’s the intent, but according to research, what credit ratings should measure and what they actually measure don’t always line up. The financial crisis of 2008 revealed how corporate credit ratings investment ratings could be manipulated.
You Won’t Be Able to Get Insurance Without a Credit Score
That comes as news to me, Dave Ramsey, and all the people following his program for living a debt free lifestyle, all of whom have car insurance. While a bad credit score can have a negative impact, your insurance rates are dictated by your insurance score, which looks at your likelihood of getting in an accident, not at your ability to repay loans. There are also companies that sell auto insurance without credit checks. They’re usually more expensive, but still cheaper than a car payment.
You Can’t Get a Credit Score Without Borrowing Money
It used to be that you couldn’t get a credit history without borrowing money, but that’s not true anymore. There is a growing population of people who do not borrow money, collectively known as “underbanked” in the credit industry. The industry has adapted by offering what’s called an “Extended View” credit history, that draws information from public record data, and looks at factors like whether you pay your rent on time.
You’ll Lower Your Credit Score by Checking It
You won’t lower your credit score by checking it, which I still do even though our credit reports are frozen. What can lower your credit score is when lenders check your report when you apply for new credit. Even if you’re comparison shopping for the best mortgage rate, if multiple checks happen in a short time frame, they’ll usually be lumped together as a single inquiry.
The entire concept of the debt economy, and that you need to borrow money to get by, is an artificial PR construct of Wall Street and the debt industry. If you’re not going to borrow money or live in debt, what difference does your FICO score really make? Just for the sake of argument, let’s say your insurance rates did go up; without a mortgage or credit card bills, your insurance costs are a relatively minor expense. That’s never happened to us — our insurance rates are comparable with our neighbors.
So far the biggest inconvenience weave experienced living debt free is we had to pay a deposit to get our electricity hooked up, which we got back a few weeks ago. We do everything on the one easy payment plan, and companies still line up to take our money. Don’t buy into the hype; borrowing money is a loser and you can get by without credit.
-Redtea
Independent News for the Right-Minded American
redteanews
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