The "Get Out Of Your Car!" Fund

Monday, August 11, 2014

Rethink how important credit scores are

Today, the company that created the famous FICO credit score announced that they are changing the way they calculate your creditworthiness. They made changes to help people with medical debt, no credit history, or debts sent to collections. Of course, the bottom line is that bankers and lenders want your money and your less-than-ideal credit scores were getting in the way.

A lot of emphasis is placed on having good credit scores. Do you know what the purpose of a credit is? The purpose of the credit score is to help you get debt. If you have a good credit score, you can get the best interest rates on car and mortgage loans. That measn you will still pay thousands of dollars in interest, just not as much as the next guy.

You know what’s better than a credit score? Paying cash.

Maintaining a good credit score requires some work (checking credit reports for errors, getting credit cards (but not too many and not too few), using the cards without maxing them out, etc, etc). Before you go through a lot of trouble to build credit scores, determine if you want to focus on credit scores or if you want to focus on being debt-free. According to the verse above, it has always been God’s will that we would be lenders and not borrowers.

Some people who work for financial institutinos, the military, or the government need good credit scores on their jobs, but that’s by far not most Americans.

If you’re still concerned about a less-than-optimal credit score, just keep this in mind - by becoming a better steward, paying off debts, and paying bills on time, your credit score will improve anyway.

1. Ask yourself what you think you will need credit for in the near future? A new car? A mortgage? Some other loan (furniture)?
2. Think of ways you can prepare to make future purchases without needing a loan and credit score.
3. Ask a banker what is the process for obtaining a mortgage without a credit score (using manual underwriting). You may be surprised to find that it is possible to get a mortgage without a credit score.

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