Credit Score Without Debt

[Anonymous]

I've recently paid off my debt to zero and closed most of my credit cards (kept 2 out of 9 with no balance). I hate debt and hope to never get back in debt! I hate worrying about monthly payments too. I am saving cash for a home, so I won’t need a bank loan for that either. I heard that if I don't go back in debt my score will eventually be zero. Is that true? How long would it take before my credit score goes from around 800 to zero without borrowing anymore money? I heard that insurance companies look at credit scores. Is there a way to maintain my high credit score without borrowing money and getting back in debt? Is Dave Ramsey right, is this FICO score an "I love debt” score?

[llecs]

If your CCs all reflect $0, then you'd still have a score. However if everything gets closed, then you'll have a 0 score.

I like Dave Ramsey. I listen from time to time. But one thing that he's wrong about is that credit=debt. Now for a majority of his audience, that statement is true. If you have a bunch of CCs, and you always have the habit of over-extending yourself and maxing your CCs out and getting into debt, then it probably is best not to have any CCs. Tough habits are hard to break and not everyone has the right discipline.

You can have credit with $0 debt. If you use a CC, simply pay it in full when the statement comes. You don't pay any interest this way and you'd have no debt, plus your score will look better for it. Plus you don't have to buy everything with a CC. Use it for a cup of coffee. Shelve the card. Pay the balance in full when the statement comes in. And use it again in 3-4 months just to keep it active.

[Anonymous]

If I don't use my cc at all, will my FICO score drop? My score is around 800 now. If it will drop, how long before my score will reach zero (cannot compute)? Will FICO look at any other accounts, like my power bill, or cell phone bill, does it always have to look at debt to compute a score?

[brownee]

If your power or cell creditors are not reporting, FICO won't *see* it.

[llecs]

Since you have $0 balances, it won't look at the debt that you don't have, but rather FICO looks at whether or not your accounts are open. YMMV on when your accounts will close. You may take a significant hit within 6-12 months of non-use as FICO may see those accounts as "inactive". After a year or two or three of not using them, your score will take a dive to the low to mid 600s if you have 0 CCs reporting as open. If you have no open accounts by that point, you won't have a score.

FICO only reads what is reporting on your CR. Most items like utilities, cell phone, phone bills, etc do not report at all (unless you default).

Again, you don't need to have debt to have a FICO score. You can be 100% debt free with a super high score. Just use your CCs for a pack of chewing gum every 3-4 months and PIF when the balance hits your CC.

Message Edited by llecs on 04-06-2009 04:17 PM