Comments on: Does a Credit Score Matter to Someone Living a Debt-Free Lifestyle?

By: Matt Jabs

Matt Jabs — Mon, 18 Oct 2010 13:50:40 +0000

I refuse to play their game. If it were me, I would simply leave the insurance company in favor for one with manual underwriting who would not only write my policy, but VALUE having me as a customer.

Never be afraid to think *and LIVE* outside the box.

By: Shauna

Shauna — Tue, 09 Feb 2010 02:17:39 +0000

At some banks, they offer a line of credit that you build. Same thing as taking a loan, but instead of paying after the loan you are strapped into paying into the loan before hand (you have to sign a contract that you will pay a certain amount each month). I cant remember what this is called, but it is usually in the form on a credit card that you are adding money into. Its a backwards loan, that builds your credit and then you have the money back when you are done. This is a great way to build credit without having to pay money towards anything you don’t want.

By: Henry

Henry — Fri, 05 Feb 2010 22:36:21 +0000

There’s no mail fraud, deposit and bills paid at the local office always. How did I know that they wanted the adult and not the child’s number?

By: AnnJo

AnnJo — Fri, 05 Feb 2010 19:54:39 +0000

@Henry #56. You are right. It’s not identity theft if you have the person’s consent to use his/her identity.

It’s fraud against the person/company to whom you knowingly give the false information in order to obtain goods or services under false pretenses. Fraud by you and fraud by the person who allowed his/her ID to be used for that purpose. Still a crime. Depending on the amount involved and the method of transmission, it could be a felony, it could be a misdemeanor, and it could also be the federal offense of mail fraud.

By: Sara Bee

Sara Bee — Fri, 05 Feb 2010 18:54:32 +0000

I’m 63 and have been around the block a few times. I’ve been in debt and been out of debt. Being out of debt is better. As my credit card limits are north of $50,000 and the equity on my home is north of 80%, I think I have enough borrowing capacity.

I watch my credit reports and scores. The last time I checked the only reason I wasn’t over 800 was I wasn’t using my cards enough. I did the same thing Trent advises here.

I checked again six months later, and the only thing holding my score below 800 was I don’t have enough credit available to me. As my credit card limits are about 3 times my income and the equity on my home is north of 80%, I think I have enough borrowing capacity.

Didn’t the financial services industry learn anything about being overextended?

I’m not complaining about my scores hovering around 800. However, since I think I am just about perfect as a credit risk, I wondered why my scores weren’t perfect.

My takeaways:
1. maintain some credit availability
2. keep your balances at or near zero balances
3. use the cards at least a little
4. your score being close to 800 is good enough 5. monitor credit reports and scores regularly.

By: Sarah

Sarah — Fri, 05 Feb 2010 17:53:06 +0000

Someone may have already mentioned this, but I have been told that the credit gas cards do not factor into your credit score at all. I think a better plan may be to take out a small loan from your credit union and use that same money to pay it back. That way you are not using credit cards to buy everyday things – which can be dangerous for someone who has a harder time being thrifty.

By: SLCCOM

SLCCOM — Fri, 05 Feb 2010 07:46:15 +0000

To have no credit card at all strikes me as extremely risky. If you want to rent a car, you are often just plain out of luck. If you are under 25, many rental companies simply will NOT rent to you with a debt card. If you are allowed to use a debit card, they will hold back on your bank account something very close to the full price of the rental, which can cause real problems when you want to pay other bills and $500 is not available. And it may take up to two weeks for the hold to be released!

If there is a family emergency and you need to fly somewhere in a hurry, without a credit card you are going to have real problems. Many debit cards have daily limits, and you may well not have enough to pay for the ticket. Furthermore, if your airline goes bankrupt and you bought your tickets with a debit card, you are out of luck. If you bought it with a credit card, you would get your money back.

If you do manage to fly out and then try to rent a car on your debit card, well, good luck with that! You are gambling that you can even find a place that will rent you a car, and I hope you have a whole lot of money in the bank account.

I feel a whole lot better knowing that I can fly to the bedside of a dying family member and get to say “goodbye.”

By: Vikas G Kshemakalyani

Vikas G Kshemakalyani — Fri, 05 Feb 2010 06:28:38 +0000

It is definitely a good idea to live a debt-free and credit card free life. I strongly support the views expressed by the author of the article. The person who has paid out all his outstanding debts and credit card balances punctually, and without hesitation, and if he is managing his monthly budget with whatever monthly income and without any use of credit card, must be rated with high creditworthy person,this is my opinion. It is definitely a bad idea to treat such person to be less creditworthy.

By: Personal Finance Student

Personal Finance Student — Fri, 05 Feb 2010 04:05:10 +0000

I knew a family that went through the Dad’s, the Mom’s, the first son’s, the daughter’s, second son’s, second daughter’s and finally the grandson’s SS# getting the electric turned back on at the same address. I’m surprised the electric company let it go that far, and kept doing it. They damaged the credit report of at least six people just trying to keep the lights on.This is pretty scary.

By: Marle

Marle — Thu, 04 Feb 2010 23:24:50 +0000

On the subject of making all insurance voluntary, the only insurance the government makes mandatory is a minor amount of liability coverage for your car. Yes, your uninsured motorist coverage will cover you if someone without insurance hits you, but do you really want your insurance to take the hit, and raise your rates, when it’s someone else’s fault? How would THAT lower rates?

Home insurance is usually mandated by a mortgage company. If you don’t have a mortgage, you aren’t required to have insurance, but it’s a good idea. Does anyone, especially you littlepitcher, think it would be a good idea to prevent lenders from requiring insurance, and then if the house burns down the lender can choose between writing off hundreds of thousands in debt, or trying to collect said debt from a now homeless family?

By: Jill

Jill — Thu, 04 Feb 2010 23:18:13 +0000

If you live in a high hazard state, ‘just get another insurance company’ isn’t that simple. We’re in Florida, the number of insurance companies who have pulled out of the state, gone out of business, or tripled their rates since the storms of 2004 is staggering. If someone told us we should get another credit card in order to adjust our credit score and keep our homeowner’s insurance under $2K a year, I would do it in a heartbeat because I know too many people who are looking at $4-$5K per year for an ordinary house in a not particularly surge-prone mainland location.

By: Claudia

Claudia — Thu, 04 Feb 2010 22:28:09 +0000

I personally think having no credit card is not fiscally responsible. Apparently these people never travel more than a few miles from their home. I sure would hate having my car break down without one. Do they have a debit card? Otherwise, you would be out of luck until your bank could electronically transfer the money, that frequently takes until the next day.
I too, would think someone without a credit card is too irresponsible to handle one correctly (paying off the balance each month). Sure there are exceptions to all the rules companies have, but how are they supposed to know, they don’t know you personally. They have to use some sort of criteria.

By: Lucas

Lucas — Thu, 04 Feb 2010 21:57:00 +0000

I’m from Australia and have never heard of our credit reports being accessed for things like insurance, employment etc. It’s occasionally checked for some utilities like telephone etc where you’re being billed in arrears, but for the most part, it’s just loans and credit cards.

The whole situation being descibed in America in this post and comments sounds horrible.

By: michael bash

michael bash — Thu, 04 Feb 2010 21:53:13 +0000

A friend told me 40 years ago that having no credit rating (I had not yet borrowed or charged anything) meant having a bad credit rating. He said to go to my bank (I did have a checking account), take out a loan for $100 and put the money in a savings account. Then pay off the loan in 5 monthly installments. Then I would have a very good credit rating. Simple, but it makes the point.

By: emma

emma — Thu, 04 Feb 2010 21:33:51 +0000

I’m in the same boat and would recommend finding a manual underwriting insurance company.

I also own my home and car, hadn’t used credit of any kind in nearly 10 years, have significant savings and investments and still saw my insurance increase based on my “low” credit score.

Stupidly, I followed friends’ advice to apply for a credit card for small regular purchases and pay it in full every month, remain debt free and create a more recent credit history.

Well, can you imagine how many credit card companies wanted to offer me an account? That’s right – none. And in my naivete, I applied for 3 others in a search for one that would accept me, and by the time I got the rejections from the final 2 cards, their reasons for rejection now included “too many credit inquiries in past year” from all my recent applications.

I then asked advice from more savvy financial advisers and they introduced me to manual underwriting and insurance companies who would be willing to work with me and actually LOOK at my finances.

Oh, and I still don’t have a credit card! I never did get one.

By: MrzFitz

MrzFitz — Thu, 04 Feb 2010 21:22:58 +0000

@ Troy and others… I agree so much. SO WHAT! Just search around for another carrier that does manual underwriting or pay the higher premium. Nothing is worth going back into debt, that’s plain silly. Normal, but still silly. I don’t want to be normal when it comes to debt.

@ Trent – I am somewhat shocked that you recommend credit after all your research, personal interviews and financial experiences. I love following your blog and will continue to do so, but I do see you leaning a bit more towards recommending riskier ideas and I really hope to see your recommendations return to things like having larger cash reserves, not using credit, etc. even when that type of advice goes against the voice of the masses.

By: Henry

Henry — Thu, 04 Feb 2010 19:39:32 +0000

Well, Anne it is not identity theft when we had permission and they benefited from the arrangement. Now what the other household did, going through all their kids like sure is, a one-year-old can’t consent. But I guess they could’ve sit there without heat.

By: Sam

Sam — Thu, 04 Feb 2010 19:21:13 +0000

Rerating based on credit for an existing customer without obtaining an authorization may be illegal in some areas. Mary should check with her Insurance Department.

By: Evangeline

Evangeline — Thu, 04 Feb 2010 19:14:46 +0000

I’d do a little research, find a new company and pay cash for the year’s policy. Then I’d call the original insurer, cancel my coverage and never do business with them again.

By: cs

cs — Thu, 04 Feb 2010 18:41:15 +0000

Hi – I too live completely debt free, but I simply make purchses like groceries, gas, etc. on a credit card & pay it off monthly. I get points, have an excellent credit score & I agree with the person who says even employers check on credit scores. We have to deal with the here & now, not what “ought to be” – insurance companies make assumptions based on previous behavior. If they can’t track your spending pattern, they must make assumptions based on the “worst case scenario” – they insure risk after all! Who can realistically blame them? CS