Do You Have An I Love Debt Score?
This is one area where Dave Ramsey completely changed the way I viewed my credit score. Your FICO score does not say how smart you are with money. Instead, it is nothing more than a “I Love Debt” score. It is all based on how much debt you have, what types of debt you have, how much debt you have had in the past and how many debt payments you have made.
Now what happens when you are debt free and don’t take out any more debt? That’s right, you credit score drops to zero. This causes a lot of people to remain in debt and take out more debt just to keep their credit score up. They get scared about their credit score and unemployment or their credit history.
The main benefit of checking your credit report is to make sure no one has stolen your identity. You can get a free annual credit report from the three major crediting agencies through AnnualCreditReport.com since you can only do it from each agency once a year I recommend you get one from each of the three agencies every 4 months.
Don’t worry about having debt just to get a good FICO score. You can get a mortgage with manual underwriting when you need one (they don’t consider credit score). Anything else like auto loans that require a credit score should be avoided anyway.
Progress Overview
Seriously, on this one I 10000% agree with you.
My grandmother has over 100K in her CHECKING account (I have no clue about savings) and no credit score because she comes from an era when they didn’t use credit for anything unless they had to. The only thing she’s ever made payments on is her house, which she has owned outright for over 30 years.
With the advent of debit cards and one-time use MC & Visa cards. No one really needs credit. But boy do we rely on it.
Amy, it is true, I became debt free in January and I also cancelled credit cards, business credit and my FICO score has taken a plunge. But I don’t care because my savings is going up, i’d rather have money than a good FICO score and a ton of debt.
Thanks for Living like no one else Amy.
Fabian (Debt Free Hispanic)
Hi there Amy. I was just wondering, when you first realized you had to something about your debt, did you ever consider using a debt relief agency, and what were you reasons either way? I was just wondering your opinion. Thanks!
Krystal,
It is always best to handle your own money.
Stay away from debt relief agencies. They will bleed you dry.
Thank you!
I appreciate your honesty and words of advice!
I’m not in love with my FICO score, but I also don’t set out to destroy it! I agree we, as a society, put too much emphasis on these three numbers, and ought to spend more time investigating the quality of the individual.
Transunion gave me a bad score because I chose not to have a large credit and that I didn’t go out an buy a house already.
If I did that then I would have ended up like the rest of the people, so I told Transunion to go screw themselves!
You are mistaken if you think that you must pay interest to have a good credit score. I use my credit cards and pay them off before interest accrues. They are really a negative interest loan. Installment loans are not required for a good score. In addition, credit cards make budgeting much simpler.