This sentence is where you went really off the rails. No credit is the worst thing you can have - much worse than moderately bad credit. You don’t get a score at all in that case and that means that you can’t get any type of credit from a large creditor including most car dealers and almost all mortgage companies. It is like trying to live off the grid.
Last time I checked most car dealers still take cash, so do most house sellers.
I don’t know about you but I don’t usually keep $50,000 - $500,000 sitting around in case I need a new house or car. It is just easier to sign up for a low interest loan and then pay it off as quickly as possible which may only be a month or two. There are lots of other benefits to having a high credit score though. I think you are misunderstanding the whole concept.
I currently have 819 at both Equifax and Trans-Union. I never use any credit except for credit cards, for the past 20 years, and currently have three credit cards., but regularity use only one. Average monthly balance about $2-300, mostly for utility bills, groceries, and air tickets, always settled in full before due date.
No debt of any kind. Credit cards are used as a convenience and as payment protection and are paid off each month.
We are pretty frugal and have kept a modest sized house for most of our married life and only bought things and had kids when we can afford it. Moderately well paid jobs together with some redundancy settlements sensibly invested mean that we aren’t likely to encounter any massive outgoings any time soon, we can survive nicely on very little and in our 40’s I think we have almost settled into a semi-retirement way of life. Some previous company pensions, state pensions will kick in later and income from rental property can sustain our lifestyle as it is now.
We haven’t put any money away for the kids university as I’ll be encouraging them to take out student loans as much as possible because in the UK it is pretty much the cheapest and lowest risk money they’ll ever get access to.
I don’t know what any of that means for my credit score because, hand on heart, I don’t know what mine is, don’t know really what it is or how it is calculated and have never had any cause to find out.
No. We still have some debt.
The house, cars, truck, and boat are all paid for. We have a loan for the RV (for some tax reason I don’t understand) and some remaining on a college loan for my youngest. We could easily zero these out and I’m tempted to occasionally, but our FA says no.
I’ve been solvent my whole life, thanks to a pathological fear of being in debt.
No student loans, mortgages, car loans, credit card, or anything. Didn’t even have a bank account until I was 23 years old. Kept my life savings under one of my floorboards, until I realized how dumb that was.
I tried really hard to be debt free, and managed it for a very long time. Then life went tits up. The money I owe is to family only, but I still consider it a real debt that I want to pay back as soon as I am able.
No mortgage or credit card debt right now, happily.
We have had a mortgage for years and years and just moved to a bigger home and extended it to basically retirement age. We locked in rates for the next five years, so we’re set until then. By the time we get there, I should be making more money, so higher rates shouldn’t matter.
We have lived through the lowest interest period in decades and it’s actually a bit silly to be completely debt free when interest rates are less than 1%. You should be taking on some debt to invest in the market at that rate. Having money sit and earn 1% is not a good investment decision.
That said, I’m basically the same as the majority of the posters. My wife and I are both financially conservative and both work at secure, well-paid jobs. My dad was an entrepreneur and made a ton of money by risking it all on his crazy idea. Many of my friends and neighbours who are well and truly rich took risks with their money and made it pay off. While I live a very good life, the people I know who are wealthy all took ‘foolish’ risks with their money to pursue their dreams. In my experience, being proudly debt free is a great way to the middle, but a poor path to the top.
I have debt. My mortgage, which will be paid off in 15 more months. I acquired a rental property 6 months ago. The mortgage on that is for 15 years, and I have about 50% equity in that house. And , (hangs head in shame) I have a credit card debt that I’m aggressively paying off. Dog needed surgery, house had a tree fall on it ($1000 deductible), car needed repairs. All at the same time. That debt should be gone soon, barring any more rainy days. A rainy day fund can only shelter you from so much rain.
StG
That’s that Dave Ramsey nonsense. Bear in mind he is to economics what Oprah Winfrey is to journalism. Debt is a tool like any other. Yeah, you could build a house without using a hammer, but there’s no point and it would be less efficient.
The same with debt. You could live your whole life without debt, but it’s less efficient. Dave Ramsey has some use to the people out there trapped in a cycle of debt and hooked on payday and title loans, god knows they could use the help, but for the vast majority of us that aren’t he’s talking nonsense.
I always paid my credit card in full, so that only leaves my mortgage.
I paid that off when I was 55, so have been debt-free for nearly 10 years,
I have a mortgage and a car note. No credit card debt though.
I am 40. At the moment my only debt is less than 10k in student loans. I could easily pay it off but the loan officer I spoke to about mortgage pre-approval advised against doing that since a 100% on time payment is good for the credit report and my debt to income ratio is already more than acceptable even with that monthly expense.
Well, no. Without a credit history, how am I to know if you pay your bills on time or not? Kind of hard to assess you as a credit risk without credit history. There’s absolutely nothing wrong with credit, and I pay for everything I can with my credit card, since I pay it off and get 1% of all my purchases back. It’s quite nice having an extra $500 kicked back to you every couple of years.
No debt.
Own two vehicles that have been paid off for years.
Currently downsizing material possessions and clutter.
In the past I borrowed for an education and to buy my vehicles, I’d borrow to buy a house. I do sometimes but things on a credit card but it’s paid off at the end of the month if that happens.
I like having no debt, but I’m not afraid of debt, either, for the what I consider the right reasons.
True. They are not looking for people who hate debt, they are looking for people willing and able to pay off debt on time and not accumulate too much.
The interest rate quoted to me by this car dealer plummeted after he got my credit report. Not that I took him up on it.
I have gotten 0% interest credit card debt - and carefully paid it off on time or before. I suspect that helped.
For various reasons my level of savings has increased a lot over the last few years, but it doesn’t seem to have affected my credit score, so it looks like it isn’t directly relevant.
You get 1% interest in low risk investments like savings accounts and money market funds. I don’t think many consumers can borrow at 1%, so perhaps I misunderstand you.
Like anything, borrowing at X% when the return from what you get with the money is > X% is a good deal. A house is like that. A car is like that when it enables you to earn money. A vacation or some junk is not like that.
Debt free but currently paying rent which is just like having a bill.
I have been without debt since 1972, a period during which my assets dwindled to near nothing at least twice. I could not think of any reason at the time to burden myself with debt, and in retrospect, I still can’t. I have had absolutely no problem whatsoever arranging the last 45 years of my life without resorting once to debt.
Explain to me how my life would have been “more efficient” with the used of debt. or the “vast majority” of the rest of us who could have built perfectly suitable houses without your hammer…