Does having NO debt hurt your FICO score?

[Anonymous]

I am rapidly moving towards having NO debt. I pay off my car in a few months. I have no mortgage, my credit cards are paid off (FINALLY!) and I pay cash for everything. At one time, I thought I wanted a mortgage, but I am perfectly content renting.

But in a weekend discussion with friends, I was told that is worse than having too much debt...that over time, my FICO score will plunge and I'll be in the same boat all over again...

I just tunneled out of more than $50,000 in medical debt that forced me into bankruptcy, and I emerged ticked off enough that I won't sign a contract, or commit to anything that will put me into debt.

So what is true? Debt or no debt?

[Anonymous]

To answer your question, Yes.  Your credit score takes into consideration all different types of accounts.  Mortage accounts, installment, and revolving accounts.  Take me for example, I do not have any revolving accounts and it has brought my credit score down drastically.

[Anonymous]

from what I've gathered from this forum, no debt can have a serious impact on your scores. I can totally see why you would want to avoid any debt, but there may be a simple solution for you. perhaps opening a couple of cards, one prime, and maybe a merchant card like Target or a gas card or something. then if you have any monthly memberships, say to a movie club or other monthly recurring cost, have it paid by the prime card, then pay 90% of the bill every month. You will likely pay next to no interest and the activity will boost your scores. Use the Target card to buy pet food or milk or something every month (for example) and do the same thing. perhaps this would be a happy medium you could live with. thoughts anyone?

[Anonymous]

Thanks. It seems like one is caught between a rock and a hard place. If you owe money....they badger you about it, or charge you high interest rates. If you don't..then you still get whacked over the head.

I have a Household Bank card...and an Orchard Bank card, both which I obtained after I filed bankruptcy to help rebuild my credit....at a whooping 29.5 percent interest. Efforts to get them to lower that interest rate since I've been a customer for eight years has been like trying to get President Bush to become a Democrat. Not happening. So I've paid them off, and have just let them go dormant, except to pay the annual fee.

I am so sick of finanical institutions I could just scream. It's why I've got the bulk of my cash stashed in a safety deposit box. Costs me $15 a month. No fees. I only put enough in my bank accounts to cover living expenses.

[Anonymous]

well, what are your scores like now? perhaps you are in prime territory and you won't have to use those nasty ones anymore.

[Anonymous]

ABSOLUTELY - if you do it long enough (11+ years in my case).  Paid cash for everything including a car -- then I was told I basically had 'no credit score'. Definately not good.

DTI was 0%, Net Income every high -- but no credit score.  Excuse me - that was because I SAVED for things and just paid for them (isn't that the opposite exactly of credit? LOL)

[Anonymous]

My scores now are 573 Ex, 650 Equifax, 553 TU.

I think the lower scores are because of a few errors on my report that I found last week. I've disputed those and expect those scores to rise again over the next couple of months.

[MM1234]

Zen -

I just posted another Topic how I got dinged 22 points after having zero debt and trying to add a small amount to keep my UTIL at 1%. It backfired but will recover now that I found the culprit.

Financial Advisors promotes Debt Free but really I would want to keep my score good just in case so keeping some small balances on 2-3 cards may be fine. You can keep your other cards but once your paid off you can apply for some Prime Cards.

Good deal!

[Anonymous]

HSBC- 6 months On time usage and payments = Interest reduction.

E-mail them, (they will reply denied) next statement with APR reduction.

I have done this with 2 of my cards and 3 of DW's.

[Anonymous]

cras tu and experian actually told me i need installment loan to help my scores. i paid off my car in 2004 and don't need to buy another and do not need a loan. what do you think of that?