This is a question that a few people have asked me. "How is closing all of your credit cards and paying off all of your debt affecting your credit score?....Doesn't it hurt it?".
Well, so far it really hasn't done much to our credit score as we still have a mortgage. We had a great (I Love Debt) score when we started this program and I am sure that as time goes by and we have no credit sitting out there, it will go down. How sad that our credit score is based on how much credit and debt we have out there and not on how much we DON'T have? Your FICO score is based on having debt and making regular payments to the bank, not how wealthy you are, or your ability to repay a loan.
However, we are not worried. Why? Because we will NEVER take out another loan besides a mortgage and we will have no problem with that. That is your goal with doing this program: pay off your debt and never have any again!! How sweet is that?
What about a new car? New furniture? We are planning to drive our cars for as long as we can and until that time, we have a "Car Replacement" fund in our budget and a "Furniture Replacement" fund. We just keep building it up and someday when we need a new car (or should I say slightly used car) or some new furniture we will hand over cash. And, we hear that paying with cash can sometimes get you a nice deal!
So, if you are truly wanting to become and stay debt free...don't worry about that dumb I Love Debt (FICO) score!
Click here for a video about driving free cars for life
We had an unfortunate summer when we lost BOTH our paid-for cars within 2 weeks of each other, JUST AFTER we'd paid $2000 in cash to put a new transmission in our van. (It was totaled 2 days after the new transmission.) So, we had to take out a small loan from our credit union to buy a used car (the insurance from the totaled van was enough to cover a new-used van). Anyway, the point is, when we got out the loan, the clerk was dumbfounded when she ran a credit check. "You don't have any credit card debt!" She said it was extraordinarily rare to have anyone come in with such a clean credit report. THANKS to Dave Ramsey! Three years before that would have been a totally different story.
ReplyDeleteThanks for the comment! Great to hear. I loved reading that you bought two USED cars! Way to go. So many people would go for a new one, but we have learned better...haven't we? :0)
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