Help, what will happen to my credit score when I'm debt free?

[Anonymous]

I'm on my mission to be 100% debt free. Dave Ramsey changed my life and I see the light. I have 3 accounts open 1. CC zero balance (never used it) 2. Sallie Mae (just paid them off will update this month) 3. My car So I'm really now down to 2 accounts when my credit updates. I did some research on this site and as long as I'm in good standing with zero balance canceling my CC won't hurt me. I want it gone gone gone! Plus I don't use it or need it. I'm a cash man. So I'd be down to 1 account, my car. However I want a house in the next year, so, if I sell my car and buy one for cash, I would have no open accounts on my credit. What would happen to my score? My wamu score is 694, was 708 after I paid off one of my student loans, then went down for no reason but should jump up once Sallie Mae reports. My goal is a 0 Fico score but that's after I get my MTG. So how will my score be affected with zero open TL's and how will a bank look at me? I will have perfect income to debt ratio and a 10% down payment.

[Anonymous]

WRONG MOVE!  BTDT - went cash only for 11+ years and lost my entire credit file except for verizon.  Eating high cost cards to re-build with because of it.  Using credit does not mean you are in debt - as long as you can pay the balances tomorrow if you had to.  It doesn't go on a credit card unless I can pay for it then and there - hence, you are really not 'in debt'.  If you want to experience debt wait until you get the mortgage - now THAT is debt!

From the Fannie/Freddie CreditSmart Course - 4 accounts is optimal (including any installment loans) and all current or paid as agreed (seems you do have that now).  As for the car loan - if it has less than 10 months left to the life of it, it will not be counted in your DTI for the amount you can qual for.

There are ways to tweak FICO - using that card and having between 1-9% of CL report as a balance is the best.  I told you how to tweak the auto loan (helps with FICO also).

Some util companies will also report (Verizon does).

Message Edited by Lady_Scarlet on 10-09-2007 02:18 PM

[Anonymous]

Well I'm not going to get suckered into this scam called Fico or credit scores. I can't see how being in debt gives you a higher cs. I only need my score one more time for the rest of my life! I'm 30 years old and only need my 1st mtg, after that I have the cash to buy anything including cars. None of my services report to my credit. In fact I'm not so sure I even have to worry about my fico score when getting a mtg these days. I've been told Fico gets you in the door, but won't get you the loan or better terms. I will put a down 10-15%, have near 700cs and have the best DTI. However, I don't want my CS to tank before I apply for my MTG over the next year.

[Anonymous]

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I can't see how being in debt gives you a higher cs.

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That's not what people are suggesting, although it's an easy detail to misconstrue.

Here's the scenario

Statement date: 15th of every month
Credit Line: $1000
1%-9% range: $1 - $99

Example: It's October 10th, and you hop online to check your credit card balance. It says $900. You're at 90% utilization as far as the credit card companies are concerned, and they make it a point to make a negative report on that.

Pay that $900 down to $99, so that when your statement generates in 5 days, the credit card company reports that you're using 9% of your total available credit.

So when people say report a balance, they mean: At the time the credit card statement is generated, make sure your balance is between 1% and 9% of your total available credit line.

Then just pay it off before the grace period expires.

[Anonymous]

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Mochaboy wrote:

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So when people say report a balance, they mean: At the time the credit card statement is generated, make sure your balance is between 1% and 9% of your total available credit line.

Then just pay it off before the grace period expires.

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Almost correct ...

You want your balance to be between 1% and 9% of your CL at the time that your credit card issuer reports to the CRAs.  That may be the date that the statement is generated.  Or it may be just after the due date.  Find out by calling them and asking.

[scramblingin2007]

Hi barbarino, I love dave ramsey, I am currently debt-free. I have 6 cc's open but 0 balance. I cut up all the cards but did not close accounts. I have no intention on playing the fico game because I have no need for credit. you can keep all of you accounts open, just cut the cards up. when you come close to when you need a credit check use 1 card or 2 for a book or something small, let it report to cr and you should be fine. My mom only has 2 cc's that she hardly ever uses and her fico is a 780! If you do close all your accounts they will still be a positive for 10 years, so it really does not matter if you close accounts and dave doesnt want you to have cc's anyway, pay in full baby! I sleep so much better now since I am not in debt, life is great even with a crappy fico like mine!

[Anonymous]

Ah yes...the whole "I have to be in major debt to keep a good FICO" canard.

Dave Ramsey takes what is basically a good idea--to not be in debt--to an illogical extreme. Not all debt is bad.

The bottom line is you don't even need to carry a $99 balance on each of your credit cards to help your FICO. $9 will do just fine. The whole "1% to 9%" should really be stated, "an amount greater than zero but no more than 9%." If you feel compelled to close some of your CCs, be sure to start with your newest cards. You can revolve as little as $40-$50 amongst four or five cards and maintain a good to excellent credit score without being in significant debt.

[Anonymous]

Well, when I decided to live the debt free life I became obsessed about it. Thus why the CC has to be canceled. It's eats me up at night that I have it open. (what would Dave think, lol) In fact I feel like a loser with the CC. Thus it can't stay open. However I just want to make sure my Fico won't sink like the Titanic over the next 12 months if I pay everything off and close them out. I wouldn't be surprise in the next few years that FICO changes their scoring model because more and more FICO doesn't matter. What does matter is good old cash! There are only two ideal credit reports.
1. MTG only, no other debt
2. A FICO of zero

I'm working on getting to #1 and #2 will be achieved years from now, but I'll get there.

[Anonymous]

I can understand being 30 - and thinking that absolutely nothing will change in your life.  Sorry, but it will - that is just life.

As for never needing credit ever again because financially you are secure - remember all the people at Enron?  Life can not be looked in absolutes.

[Anonymous]

Put 100k in liquid savings in your name and you can quickly see how if you got the cash, you'll never need the credit. Enron is a poor example. Go watch The Smartest People in the Room fantastic movie, but in the movie the idiot employees fell for the sales ploy and never diversified their holdings.. That is idiotic.

Message Edited by barbarino on 10-09-2007 02:39 PM