Don logged onto our credit card company's website today to see what our upcoming bill will be this month. We have one credit card, and we use it to pay our regular monthly bills (internet, phone, electricity, car insurance, etc.). Until last month (when I got laid off and we entered our spending lockdown), we also used the credit card for ordering anything online. We pay it off completely every month.
While logged onto the company's website, it also shows our FICO credit score. We've always had an excellent credit score (north of 800+), but this time our score had tanked into the 760s. It's still rated as "very good," but we wondered – why did it tank so much in one month? We've barely purchased anything (except hay, paid for in cash) since the job loss.
And that, dear readers, appears to be the issue. We're not spending enough money.We're continuing to live the all-cash (whenever possible) lifestyle we've lived for the past ten years and spending far less money overall, and the credit card company is trying to convince us that's somehow unfair and irresponsible.
The explanation given for this change in credit score is below:
Translation: We're not servicing enough revolving debt. We have no outstanding bills, we're spending a whole lot less money, and we pay off the credit card in full no matter what. And for being responsible adults, we're "punished" by having our credit score tank 40 points. Go figure.
Personally, we could care less. We don't really care what our credit score is because we have no intention of ever owing anybody anything ever again. So there!
He can be pretty vulgar at times, but I've been watching Caleb Hammer on Youtube. It's amazing how much money trouble a lot of these people have gotten themselves into, and I think for most of them, he's the first person that's called him out on it. He recommends that most of them cut up the credit cards, and the response is almost invariably, "But what about my credit score?" It's a hilarious question, because most of these people have trashed their scores already, but his point is that getting out of the debt is going to do a lot more for a person's credit than anything else.
ReplyDeleteOn a totally unrelated note, a lot of people have money that belongs to them that is being held by the state - sometimes checking this out for every state a person has lived in is a really good idea. I just found out I had a few bucks Amazon owed me here in WI, but years ago, I found money from an apartment deposit that belonged to my cousin (extenuating circumstances; she and her husband had to break a lease and move very quickly) and she didn't even have any idea that they'd be getting any money back, so to find that was kind of cool.
When my wife and I moved to Texas back in the early 1970's we needed a credit card. We could not get one because we had always used cash. I was able to get one with a $200 limit that was only usable in a few stores in the small town where we lived. We used that card as much as possible and paid it off every month. After a few months our limit was raised to $500 and we were stuck there for about a further 6 mo when we were upgraded to a regular card usable everywhere. Still had a $500 limit but after another year we were adjusted to $2000. We kept using that for another year when we were judged to be creditworthy. 10 years later we were using a discover card to get the cash back and that had a $7000 limit when we were purchasing a new car. The dealership said we could put $15000 on the card and when I called to ask for an increase, it was approved. That was the easiest $500 I had ever made!
ReplyDeletethe more credit you use the higher your credit rating becomes, because the deeper in debt you are likely to be. and it's a use it or lose it deal. if you stop using credit, you lose your "good" rating.
ReplyDeletefor me an ideal credit rating would be "0", meaning i would never use credit and pay cash for everything. the only down side to this would be a very high interest rate if ever i did have to take out a loan.
I moved from Florida to Virginia and my car insurance rate went down because the rates are cheaper in Virginia. However, Geico charged me a "higher price based on my credit information". Mind you, my credit score is 812, I've never missed a payment and I only have a balance on one card that is interest free over six months. There reasons?
ReplyDelete1 Average number of months trades on file too short.
2 Too many credit card accounts.
3 Time since oldest trade opened too recent.
4 Too many non-bank revolving trades in last 5 years.
So I've closed four of my "newest" cards and can't wait for it to show on my credit report because I'm going to call Geico and give them a piece of my mind and demand that they requote me the lesser rate or I'm going with another company for the principle of it. I've been with them over 20 years. I'm still fuming!
Edward
Sorry, one of my pet peeves. It's "couldn't care less". "Could care less" means you actually do care a little bit. Also, Dave Ramsey says his credit is in the toilet for the exact same reason as you. He pays everything off monthly and uses cash whenever he can. Tells me credit scores are a bit of a scam, but, unfortunately, they're still used to punish you if you don't play the game correctly.
ReplyDeleteI feel like I am bragging, but I haven’t had a credit score in six years. Once we paid off the last debt, we save up to buy big purchases. We think ahead. We have a good emergency fund. It took a while to get to this point, but it is worth it! A little bit at a time. Everyday.
ReplyDeletePeople talk like having a budget means they can’t do anything fun. A budget means planning for fun.
G.
We have a moderately high credit rating, but the bank said we could make It go higher by taking out a loan which is not on our agenda. As we pay our bills most generally after it posts on the institutions account, before the end of the billing cycle. Don't want to carry a ballance and be slave to the world system. It's a good feeling to be debt free.
ReplyDeleteTrump thinks the whole credit score thing needs to be re-vamped in favor of people retiring debt, and so forth. Kind of like folks here believe and practice. He believes in having and using credit, it helped make him rich. But a lot of the system has gotten itself in trouble multiple times because it rewards irresponsibility. Used as it stands can really just be gambling. Taxpayers don't need to be picking up the tab for bad decisions of the bankers any more. I can't wait to see how credit scoring gets re-done.
ReplyDeleteThis morning on Armstrong Williams one of the topics was the unexpectedly low inflation rate for February. Credit was given to not printing money and slashing expenses.
DeleteI didn't know money stopped being printed. I know they're getting rid of the penny and talking about stopping printing dollar bills because they're both too expensive to justify continuing production. Lots of things going on with money. But there's a lot of stuff being said by some angry people that I think is supposition.
I really like the Armstrong Williams Show. He brings on knowledgeable people to debate current events, and they don't all share just one point of view. So refreshing, and enlightening.
This will fry you. I work at a BigBox and one day the members started coming in mad as hell. Most had opened a store credit card through Synchrony Bank and paid it in full every month. The result? Synchrony cancelled their credit cards with no notice because they were paying them off every month. This policy also hit store employees who did the same. It is an odd, strange world that we live in when paying your bills on time, in full, affects your credit negatively.
ReplyDeleteI discovered in my early 20's that I am not responsible enough to keep a credit card, so I cut them up and never looked back. Occasionally I would get a store card for a few years but purchases were limited and paid off quickly. Most of my vehicles were purchased used from local ads and the one time a car lot tried to get me a car loan I didn't have any credit score (I laughed and told him that's why I wanted to pay cash for the used car). I do have one of those medical credit cards now because hospitals insist on a down payment for the deductible. You might call it call it hand to mouth living but I sleep a lot easier not being in debt .
ReplyDeleteFor those who don't understand credit score as of now-a-days is just another scam on the public, at one time there were valid, but now just a scam that at the current time we are stuck with. I pay for everything with a credit card, BUT pay it off each month and i only use on to obtain a few hundred extra bucks a year in points and I use them to pay certain bills.
ReplyDeleteSince I haven't finished paying off my cards and am sometimes forced to use one , I try to pre-pay the planned expense over and above the planned payment. Or, like recently, there was a great sale on tank tops, which I wear year round. Mine are all about worn out and I've been holding off because they've been too high. But these were $3 so I bought a stack. In this instance, the card gets an extra payment for the amount of purchase. This method works. Will finish paying off 3 more cards this year. No debt on house, land, or vehicles, and the cards have mostly been used for prepping.
ReplyDeleteWhen the credit card company started sending me offers to roll over or transfer debt from another credit card I looked into it.
ReplyDeleteThey were offering 0% interest for 14 months and a 3% fee up front which is added to the debt. After thinking about it for a while I realized that inflation was somewhere between 4 and 8%. So I did it and that freed up some capital for me to use.
I played that game for about 5 years and it worked out quite well for me as I was able to increase my savings way past what I needed to pay off the credit cards. The credit score here is about 810 and I have zero debt. I used two or three credit cards and pay them off in full every month.
Your mileage will vary.