Credit Scores: How important do you think they are?
I recently decided to change up the way I use money.
For many years I was always cautious to keep a bunch of credit accounts active. I did it to keep my credit score very high, which it has pretty much, always been. But one day I started to add up the amount in finance charges I was paying just to maintain that lofty score. It turned out to be a lot. Enough to simply pay cash for something big, like a short block for my Suburban.
That's when I decided to change my tact completely. Finally taking the advice of Dave Ramsey, I decided to just payoff everything and just make pure cash purchases. I began the process last year.
So one by one, I'd pick out an account, then simply pay it off. I maintain a healthy income, even in retirement, so it wasn't all that difficult. But something interesting started happening. As I paid off successive accounts, my credit score would drop. It would later start to recover, but then I'd pay another one off, and I'd be down again.
Mind you, I never missed anything, nor was late, nor defaulted. The only thing I did was to start to make huge payments. If I would have, for example, a payment on the wife's Honda Talon, I'd make a $5,000 payment in lieu of the monthly one of $396. My credit report would post a note showing that my balance had decreased with Honda, but the FICO score remained the same. Then when I'd pay it off altogether the following month, my score would drop 6 points!
So I got fed up with doing the right thing and getting dinged by it so I started really taking big bites out of all my remaining debt. Two months ago I got pi$$ed at the "unfairness" of the system and paid off three of my remaining accounts leaving me with only a car and a tractor payment. As a result my credit score dropped 31 points, to one of the lowest scores ever!
I'm in better shape than ever with the lowest score I have seen in decades!
Think about it. I reduced my debt substantially and made myself financially healthier than ever, and killed my credit by doing it! Bad thing, right? Killing one's credit score? Thinking about it, I don't think so. Because now I am in a position to simply pay cash for anything we might need or want!
But the "system" doesn't like me doing that.
It seems that the credit system only works to your benefit if you stay in debt. Isn't that curious! Seems as though by reducing debt load you create more personal freedom. The powers to be do not like that very much and punish you. But in the same breath, I don't really need credit all that much any longer.
I buckled down for a good chunk of my life and actually paid cash for my farm, so I don't need credit to buy a place. When we sell our current home, and after paying off the balance, we should have enough cash left over to build a modest home on our farm for cash. So no need for a mortgage there, nope, we'll just pay for it.
This system we have is all about controlling people. Stay in debt and we'll reward you with the ability to carry even more debt. And while you're getting a bigger credit score with, likely an increasing debt load, the interest you pay monthly is enslaving you. It is stealing your ability to pay off that mountain of debt.
That's good according to our system and on and on you go subject to a mountain of debt while living in a country which has regulated away a good portion of the rest of your so called freedoms.
The American Dream?...Or is it something else?
