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

[Anonymous]

Anonymous wrote:

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.

His credit score is higher than yours because he has a longer history of timely payments. The score jumped after pay-off because his debt to available credit ratio dramatically improved. Your original statement (and still kind of your clarification) implies that holding credit card debt that he paid interest on could have been good for his credit score. But that's not true. If he'd made small purchases on his credit card and paid in full each month (e.g. never holding any debt capable of accumulating interest) his credit score would be the same or even higher than it is today and the credit card company never would have made any money (from him, anyway). Meanwhile, the jump he saw was because his high debt to credit-limit was masking the gains in his credit score he'd made by having a long payment history.

I'm sorry if it sounds pedantic, but I think its important because a lot of people seem to think FICO scores irrationally reward people who carry credit card debt. And they don't. They reward people who have extensive histories of using lines of credit without forcing collection actions.

[Anonymous]

Anonymous wrote: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).

** Score went to 850

[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?

Why do you care about the credit score if your plan is to continue being a cash and carry person?

[Anonymous]

FICO score = I love debt score

[Anonymous]

Oh OP, don't buy an investment property until you have a better understanding of finances. You WILL NOT get mortgage interest deduction for an investment property in the same way as your home mortgage deduction. For an investment property mortgage costs will reduce your taxable profit.