Anyone else not have any credit cards & why does it hurt my FICO score?

[Anonymous]

OP, I felt the same way as you for a long time. I still had a credit card, but I'd only use it to buy big things (like plane tickets) that I would pay off immediately, but just didn't want to worry about cash flow for the charge. Then my DH convinced me to try his way of doing things, which I was REALLY resistant to at first. We charge anything and everything we can to a credit card with a rewards/points system. We get between 1-3% on each dollar spent back in the form of rewards. We almost always take the cash option yearly and use it to pad our savings. We have NEVER paid a late fee and we have no annual fee for the card. It's free money IF you pay it off in FULL every single month. We actually pay 2-3 times a month to keep up with it.

Your credit score is all about how you handle credit. If you aren't handling any credit, yes it dings your score. Of course my DH has a slighter higher score than I do, since at one point he wracked up credit card debt (before he knew me!) and then paid it all off. That sends your score soaring because you made them money, while also paying it all off. I don't recommend that route at all though....

[Anonymous]

Anonymous wrote:Of course my DH has a slighter higher score than I do, since at one point he wracked up credit card debt (before he knew me!) and then paid it all off. That sends your score soaring because you made them money, while also paying it all off.

Yeah, that's not how it works.

[Anonymous]

Anonymous wrote:I haven't owned a credit card in over 8 years. Not because I have a problem spending or went through a bankruptcy, but because I don't like them and I sort of generally feel that paying interest is somewhat immoral. If I cannot afford something I just don't buy it and when I do want something I save up for it. DH and I wanted a new car, so we saved specifically for that and got one cash.

I thought this was normal until I was curious about my FICO score the other day so I signed up for a free monitoring service through my bank. I thought I always had great credit, only debt I have is a mortgage, paid my student loans early, but my FICO score was not exceptional. Instead, Experian advised that if I wanted to increase my FICO score 10 points (which would get me over 800), it was recommend to take out multiple credit cards or other revolving loan accounts and pay it off regularly. I am sure there is some logic behind this, but it just doesn't make sense to me. Shouldn't I have already demonstrated how good with credit I am in that I don't actually need any and that I paid off my student loan in 5 years and will pay off my mortgage 20 years early?

Anyone else in this situation? What gives?

The whole system is rigged, just like most of our political scene.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I haven't owned a credit card in over 8 years. Not because I have a problem spending or went through a bankruptcy, but because I don't like them and I sort of generally feel that paying interest is somewhat immoral. If I cannot afford something I just don't buy it and when I do want something I save up for it. DH and I wanted a new car, so we saved specifically for that and got one cash.

That's silly. Who said you had to pay interest to use a credit card? You don't pay interest if you pay off the balance every month. Credit cards to those with good financial sense isn't about borrowing money, but about convenience. I typically don't like carrying cash because cash gets lost, I have to remember how much I have, and it makes my wallet thicker than I like it. Not only do I not pay interest, but I get *paid* for using my credit card. At a minimum I get 2% cash back on all my credit card purchase. Gas and Amazon.com purchases gets me more. When it comes to buying cars, some times a manufacturer will offer additional incentives if you finance the car. In those cases, I will absolutely take the financing and pay it off after about a month.

Anonymous wrote:
I thought this was normal until I was curious about my FICO score the other day so I signed up for a free monitoring service through my bank. I thought I always had great credit, only debt I have is a mortgage, paid my student loans early, but my FICO score was not exceptional. Instead, Experian advised that if I wanted to increase my FICO score 10 points (which would get me over 800), it was recommend to take out multiple credit cards or other revolving loan accounts and pay it off regularly. I am sure there is some logic behind this, but it just doesn't make sense to me. Shouldn't I have already demonstrated how good with credit I am in that I don't actually need any and that I paid off my student loan in 5 years and will pay off my mortgage 20 years early?

Anyone else in this situation? What gives?

Your logic is like saying that a student has demonstrated he is good at math by not even needing to do any homework. To demonstrate that you are credit worthy, you have to use credit and repay as agreed. Your lack of credit utilization represents a chunk of missing information for lenders. Missing information represents risk. Risk decreases your credit scores.

Having said all that, 790 is pretty good credit score already. I don't understand why you want to go over 800 if you don't intend on using credit.

+1. Another way to look at it is that prospective lenders have no way of knowing whether you have no credit lines because you're just naturally awesome at managing money and simply have no use for them, or if it's because you actually have a terrible problem controlling your spending when you have credit available, and so it's safer for you to not have any credit lines. It's like knowing a person never drinks the smallest drop of alcohol -- you could assume that this means the person has total control over their use of alcohol, but they could just as easily be a recovering alcoholic.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Of course my DH has a slighter higher score than I do, since at one point he wracked up credit card debt (before he knew me!) and then paid it all off. That sends your score soaring because you made them money, while also paying it all off.

Yeah, that's not how it works.

+1

[Anonymous]

OP here. Thanks for all of the advice. Some more helpful than others. So these autopay reward card options sound interesting. Assuming that the autopay function actually pay the entire balance every month. Like another PP, I would need to get over it psychologically. I would also need to accept feeling like part of the problem of merchants getting ripped off so I can get rewards driving prices up for everyone. But that ship seems to have sailed.

Anyone have any recommendations on good cards to get?

[Anonymous]

I have had credit cards with cashback programs for over 25 years. I charge as much as possible, get the cash back and pay off the balance every month. Not doing this is just throwing money away. I get between $400-900 per year back in cashback bonuses. You can also maximize this in various ways. For example Discover allows you to use your cashback bonus to purchase special gift cards, like a $50 gift card which you can purchase for $40 of bonus money. You then just use the giftcard at the vendor same as cash and you have made more money. I have earned over $20K in cashback bonuses over the years.

If you want to improve your credit score, get one credit card, only use it for minimal purchases (say gas) and then pay it off every month. The credit history will give you that FICO bump that you read about.

[Anonymous]

Credit cards have a lot of benefits like reward points and also return policies that are better than stores for high ticket items like electronics. Do you never pay online? how do you dispute charges? I would not want to pay something on line with my bank account.

[Anonymous]

Companies can't forecast what kind of a credit risk you would be if you have no credit history. Your mortgage should help a lot, but it's only one data point.

I have two credit cards. One is for big purchases to spread out the payment over time, and for online purchases because it's safer to use a credit card than a debit card for such purchases. I also use it for situations where my card has to leave my sight, like for a bar tab. Otherwise, I use debit or cash. This card has a low interest rate and I keep the balance low. (I have a balance at all because I had to pay for $4,000 of summer camps in Jan/Feb, followed by a big car repair bill.)

the other credit card is just a back-up card in case the first one gets compromised - I haven't used it for years and I pay nothing for it.

My credit score is around 800.

[Anonymous]

OP, for you I would probably look at the Citi Double Cash Card. I am guessing you will not be ok yet with an annual fee, and this one has none. The rewards program is straight-forward: you get 1% back and another 1% when you pay it off, which might make you feel better about "taking advantage of the system" if you get paid to pay off your bill.

The other top no fee cards are Chase Freedom and Discover Cashback. You can get slightly higher rewards from these because they have special categories that earn 5% back. But they require a little more planning and thought about which purchases to out on your card and what to buy when. Since it seems like a "set it up and forget about it" approach might fit you better they may be weaker choices.

If you are more open to an annual fee, look at some of the AmEx options. AmEx has better customer service and better secondary perks. They also have a large initial reward on some cards for spending X amount in the first few months after purchase. I opened one right before holiday shopping and basically got more than $1000 back, which I think of as having effectively waived my annual fee for the first decade.

I would not feel to guilty about taking advantage of rewards programs. My family owns a small business and yes, it's pretty annoying how much of our money we give to credit card companies. But at this point, it's such an excepted part of our business model we can't do anything about it and don't hold it against customers. If anything, the recent trend is to accept that we're never getting rid of fees and move in the opposite direction, towards no cash operations.

[Anonymous]

Anonymous wrote:OP here. Thanks for all of the advice. Some more helpful than others. So these autopay reward card options sound interesting. Assuming that the autopay function actually pay the entire balance every month. Like another PP, I would need to get over it psychologically. I would also need to accept feeling like part of the problem of merchants getting ripped off so I can get rewards driving prices up for everyone. But that ship seems to have sailed.

Anyone have any recommendations on good cards to get?

We have Citi Double Cash card, which gives 2%. We also have Fidelity Amex, which also gives 2%, but that's going away since Amex lost the contract to Citi/Visa. The only other card we have is Costco Amex, again going away due to Citi/Visa.

I believe in the end we'll have two cards, Costco Visa, and Citi Double Cash Card.

If you are an Amazon.com shopper, can be difficult if you don't have a credit card - you could buy gift cards with cash, I guess. Anyway, if you by chance is an Amazon.com shopper and is also a Prime member, their Prime credit card gives 5% cash back on Amazon.com purchases.

[Anonymous]

We haven't used credit cards in 10 years. We keep one active, Discover, to get $10 quarterly scores. We have no other debt, no mortgage.

My score is 799. I don't work.

My husband's score is 835. He works.

Sometimes I think the whole score thing is a crock of shit.

[Anonymous]

I clicked on my score on Amex the other day - I guess they started providing them for free. We bought a house 18 mos ago. At the time we had zero debt, including no mortgage on our then-current house. Our credit score at the time was like 780. Since then, now have a 600K mortgage and just leased a new car. I now have an 850 score. It makes no sense to me. I went from zero debt to 600K, and my credit score went up (to the highest possible number).

[Anonymous]

OP, note what others have said: getting a credit card in your situation isn't likely to do much for you. If your current FICO score is within 10 points of 800, it is already very good. Certainly enough to get you good rates on any loans you would need. A credit card isn't suddenly going to vault you to 850 (a "perfect" score). You also need time -- a long history of paying on time, with typically comes with age.
If your financial situation is good for you now, and you are comfortable living without credit cards, I wouldn't get one just to watch my FICO score go above 800.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Of course my DH has a slighter higher score than I do, since at one point he wracked up credit card debt (before he knew me!) and then paid it all off. That sends your score soaring because you made them money, while also paying it all off.

Yeah, that's not how it works.

+1

I most likely phrased it poorly, but after carrying CC debt, and then paying it all off, his credit score jumped an incredible amount. It was good while he had the debt, and then it became stellar. So, take from that what you will. We had similar histories otherwise, and his was 20 points higher than mine. The difference was he had carried way more debt, and paid it off, than I had.