A Life Without Debt: Freedom from FICO

One of the benefits of a life without debt is (some) freedom from the gods at FICO. Because I don’t do debt, my FICO score is not as important to me as it is to some and that takes a lot of worry out of my life. I see many people freaking out about their FICO scores because they know they will need a loan in the near future. They worry about every little thing that could ding their score. Sorry, but that’s not a worry I want in my life.

Obviously, I do have to keep tabs on my score. In a world that is ruled by that score, even the debt free have to know their scores. I don’t want to be penalized on insurance rates or denied a job because of a low score. So I check my credit reports three times a year (using the free AnnualCreditReport.com website) and my FICO score every other year, to make certain that no identity theft has occurred or that some other error has messed up my score. But that’s the extent of my worry.

And it’s a good thing that I don’t worry about it too much. Just the other day, I got a notice from a credit card that they were lowering my limit. Fine and dandy. I only use that card when I travel and I’ve never come close to the limit. It gets paid off every month that it’s used, so the lower limit is not a worry to me. However, I have no doubt that my FICO score will now drop a couple of points because I now have less credit available to me. If I were a slave to my score, I would be freaking out right about now because that ding, through no fault of my own, will lower my score. And I’m sure it will happen again. More and more credit cards are closing cards and lowering limits and even the debt free are not immune to the madness. My score will no doubt drop a few points in the coming months, and not because of actions I take. But I can live with it.

I know many people who are at their wits end because their scores are dropping through no fault of their own as credit lines are slashed and even eliminated. This practice dings the all important “utilization of debt” ratio that comprises a large part of a credit score. When you have lower credit limits and your outstanding debt creeps closer to the maximum, your score goes down. And it’s happening all over the country right now. Some people, desperate for a car loan or a home equity loan are being denied because their scores have dropped, even though they have done nothing to deserve it. It’s cause for concern if you require debt to get through life.

I don’t agree with FICO’s methods for determining a score and I don’t agree with the way a lot of insurance companies, employers, and others use the score to determine who gets what. It’s a flawed system that takes away the human element and places all the control on a computer algorithm that has no concern for you as a person, your special circumstances, or that the credit card companies jacked you around. But it’s the system that the world uses and, like it or not, they’ve managed to make it so that even those of us who don’t use debt have to concern ourselves with this score. But at least someone like me who has no debt and no plans to incur any can take the system in stride. My score does not rule my life and I do not panic when it changes. It’s one less thing I have to worry about in my life and I can only get that peace because I choose to remain debt free.

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7 Responses to A Life Without Debt: Freedom from FICO

  1. Paul says:

    Very well written and being debt free myself,your have done an excellent job of putting words to how I approach my “DEBT” score.

  2. Brendon says:

    Yes, Irrespective of you are indebted or debt-free, its better to keep a close tab on FICO. Prevention is better than cure.

  3. justme says:

    I have always sat back in wonderment as people try to manipulate their FICO

    I have always had a great FICO , my secret I have always paid my bills

    that fico crap is a sweet racket for the collection companies, and people who want to loan you money

    my son somehow got a great job and great insurance rates without a Fico score 😉

  4. Molly H says:

    Um, clearly you do not understand that your credit score affects your life even if you don’t have debt.

    Do you have car or home insurance? Your credit score was used to set your rate. If you have crappy credit, then you are paying too much. Want to open a bank account? Banks check your fico score.

    Oh, and what if you have been a victim of identity theft and there are some accounts in your name, that you never opened on your credit report? You would never know it.

    So yes, you have to keep tabs on your score unless you want to pay too much for everything.

    Don’t be so smug. Clearly you have a limited understanding of what FICO scores are used for.

  5. Spokane Al says:

    I agree on your comments concerning living debt free and FICO worry free. We have been totally debt free for over 10 years now. I equate debt to slavery in that without it, one is freed up in many ways to live life through more choice and less demands.

    I am also one who rarely checks our FICO score. We have locks on our credit which causes less worry, and less to no chance for ID theft.

    P.S. As a result of your post I did check our FICO score yesterday just for the heck of it. Our score is 807.

    I guess we are doing something right.

  6. Bobbi says:

    Just imagine a world where everyone lived this type of life. Wouldn’t the table then be turned on all the insurance companies, etc? They would need us. :)

  7. Pingback: The Death of FICO? - SavingAdvice.com Blog

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