My Fico score means nothing to me
Filed under: Borrowing, College, Debt, Wealth, Relationships
I've been working with a personal finance coach as part of a magazine assignment. As a hand-to-mouth freelance writer (with two kids), my finances are pretty basic. I earn it, I pay my bills, I buy the groceries, put gas in my car...and hold my breath until the next paycheck. But personal finance coaches, by definition, think big. And after telling me there's no reason I can't fund my "retirement," pay for my kids' college and/or buy a house if I invest wisely, she recommended I get my FICO score.
I didn't tell her that my "retirement" plans involve moving to a cheaper state when the kids are grown and putting my name on the list for low-income senior housing.
I played along and went to MyFico.com, where I bit the bullet, put $47 more on my credit card, and bought my credit report.
Turns out I have better credit than 90% of the country; in the 765-785 range.
Culling my credit reports from the Big Three credit reporting companies, Experian, Equifax and TransUnion, lenders see me as a good risk for all sorts of benefits, from the best rates on home loans to high credit card limits, just for the asking.
My personal finance coach was thrilled. Me, less so. This information doesn't change my situation a bit.
Who cares if I can get the best rates on a home loan when my income is too low to qualify for one? Houses in Southern California, where I live, are still hovering in the $500K arena, although prices are dropping every day. And with no parental help, no rich uncles to inherit from, and no doctor husband, the chances of me saving a 20% down-payment are pretty much nil.
Of course, in 2004 a mortgage broker told me I could get up to $400,000 in loans to finance a house. "If you don't get in today, you'll always be a renter." She said renter with all the disdain one might use for the word pedophile. But I was apparently one of three people in the country who didn't think it was such a good idea, considering my income, and declined. And today I may indeed still be a renter, but at least I'm not being foreclosed upon.
I will never be turned down for an auto loan either, according to my report. This could be handy one day down the road, when my paid-for 2004 Toyota stops running, in about 20 years. I'm hoping to be in a better cash-flow position then, which means I still won't need a loan.
In other words, I'm pleased I have such great credit. But despite all the talk about how direly important a good credit score is, I fail to see how my boffo numbers affect my life or my finances at all. I can easily borrow money, it tells me. But why would I start now? It's like the whole financial game is rigged toward leverage, so when a consumer fails to borrow, they're not in the game at all. And they don't know what to make of you.
Anyone else out there got their credit scores just to see?
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Reader Comments (Page 1 of 1)
9-05-2008 @ 5:36PM
Mike said...
Great article! Some financial gurus claim FICO scores are everything but I have never heard why it’s such a big deal for those who may already have their home paid for; have a good low fixed rate or plan on not borrowing to get into debt.
I believe the banking industry has started this drum beat to make people believe borrowing money is a key to financial success. I think it’s a scam and people like Suzie Orman should be ashamed. I heard some employers use FICO scores in their hiring decisions, if that really happens on a significant scale then to that extent it matters (unless you are retired.).
I wish financial planners spent more time with American’s explaining that we are a nation of debtors, it’s ruining us and that the best situation to be in is one where you have a secure job, owe nothing on the things you possess and swear off debt at every opportunity you can.
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9-05-2008 @ 8:14PM
Tracy Coenen said...
Teresa - The United First Financial scam isn't going to help Julie "save for a house." All it's going to do is cost her $3,500 that she could use for something better... Like saving it.
The UFF scam is costing consumers a lot of money. It's nothing but a software program that costs you money, puts you more in debt (with that HELOC it wants you to get), and doesn't put consumers any further ahead than if they just paid extra each month on their mortgages. AND THAT'S FREE!!
I already know what you're going to say - I'm ignorant. I don't know about the program. Americans don't have enough discipline to pay down their mortgages early on their own.
Wrong on all counts. I've done plenty of research and investigated the program enough to know exactly how it works and why it's a waste of money. Newsflash for you: Wasting $3,500 doesn't magically make consumers become more disciplined with their money.
Now please quit trying to advertise your crappy, overpriced product here.
And for consumers who wish to know more about why UFF stinks, check this out: http://www.sequence-inc.com/fraudfiles/2008/05/16/what-does-dave-ramsey-think-about-united-first-financial/
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9-06-2008 @ 9:28AM
Yari said...
Great article. I applaud you for making two great points. (1) FICO score don't mean much. (2) Renting is not evil. I am back in school working on a new career. Buying a house is not possible now, but I am renting a $400,000 house for less than $1000 per month.
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9-06-2008 @ 10:21AM
Tippi said...
The great thing about renting is that if something needs repair...like a new heating system, water heater, roof....I don't have to pay for it. Alot of my friends own their home and thats where most of their money goes. They don't have money to go on vaction and enjoy their life with their family because they have to worry that something at home will break, or that property taxes will go up, or their mortage interest rate will sky rocket and their payment will go up. If I can't afford my rent because of an increase I have the option of finding another place. Believe me with the economy the way it is...rent prices are very stable, even declining as people search for ways to make sure their investment property is rented so it does not get forclosed on. People say what happens when you retire...you'll still be renting....no my money is going for a motor coach so I will be RV'ing. Why do we accumulate property in our life...so our kids can inherrit something. I would rather they inherit a bank account then a house to be burdened with.
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9-06-2008 @ 10:25AM
Allison said...
FICO score was once in the 700s for me too until I incurred legal bills stemming from a false lawsuit from my stalking neighbor and a year latter I was laid of from my job of nearly 10 years. Because of my unfortunate succinct events, I even lost my rental property to foreclosure. It will be many years before I can begin caring about FICO scores again.
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9-06-2008 @ 1:45PM
Paul said...
I once had a 750 FICO score and everyone wanted to lend me money. I had 8 rental properties, and never missed a payment, even if my tenants didn't pay on time.
Now that I am finished with my 5 year divorce, my FICO is around 500, which assuming, I am now a bad risk. Unfortunately, the court systems allow things to happen and were out of my control, and subsequently cannot borrow money from a flea. I'm now considered a high risk and scum bag, due to a vindictive ex wife. The judge ordered her to move into one of my rentals and refinance it in her name. It took her over 3 years to do it and in the meantime, had 30,60, and 90 day late payments consistently on a first and second mortgage, which was in my name only. Needless to say her and her scum bag divorce attorney had a plan to ruin my credit score to a point where I couldn't borrow any money, even if meant borrowing money to pay child support. Now, that the dust has settled and everything is out of my name and I can now control my finances, it will probably take me years to fix my FICO back to the high 700's. In the meantime, I pay everything by cash and I actually like it.
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9-06-2008 @ 6:48PM
looseal said...
Love the article...yep FICO is rigged for us to increase personnal debt...phooey!
Consider the Southern Tier of NYS. A decent house can still be bought for UNDER $100K. Car insurance is 1/3 of what I paid when living on Long Island. Most other stuff is lower too. The neighborhoods are safe. There is an abundance of golf courses, state parks, colleges. A nice inexpensive place to retire.
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9-09-2008 @ 4:01PM
Andrea said...
Great post, glad I found it. FICO matters, of course, but not if you can't afford to buy anything in the first place. Wouldn't it be great if the word fell out of the lexicon for a while though, if only to not have to hear Orman say it over and over again? :)
Theresa - do you work for UFirst? Cuz seriously, what a racket:
http://www.foolsandsages.com/?p=572
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