I know that many people believe that you have to have debt in order to have a high credit score. Many people keep their debt just so they can keep their score up (so they can get more credit later). They fret every time a credit card is closed or the available limit is lowered. They take out more credit cards to try to increase their available credit to boost their score. But I am living proof that you don’t need debt, or even a lot of available credit, in order to have a high score. My credit score is 835, just fifteen points shy of the maximum, and I have no debt.
My credit report consists of a couple of credit cards that I pay off every month and a long ago paid off short term mortgage that just hasn’t fallen off the report yet. I don’t have open lines of credit, lots of credit cards, car payments, or student loans. I don’t profess to know exactly why my score is as high as it is, given that I have very little credit available to me and no debt. I don’t understand all the workings of FICO’s secret scoring. But I do know that you obviously don’t have to have a lot of debt or available credit to get a high credit report score. By conventional thinking, my score ought to be close to zero. Why isn’t it?
My payment history has a lot to do with it. In all the years I’ve had those few credit cards and that mortgage, I’ve never missed a payment. Ever. I may not use a lot of credit, but I’m reliable with what I do use. I haven’t applied for credit in years so I don’t have a lot of inquiries dragging down my score, either. The credit cards I do have are old, which gives me a long history. The longer your credit history, the higher your score. I guess in theory the fact that I have about $10K in credit available through my credit cards and a zero balance on them means that my debt to credit ratio is quite high. In other words, I have a large sum of money available to me and I’ve used very little (well, none) of it. I laugh though because my $10K is a pitiful amount compared to what many people have. It doesn’t seem like it should be enough to register on the FICO scale. I’ve also never had any bill become delinquent, such as utility or rent payments, so nothing like that has ever lowered my score.
It may not seem like much in a culture that is obsessed with debt and credit as a means to a good credit score, but simply living responsibly and below your means can result in a good score. Yes, I do use credit cards, but I keep the use to a minimum and I pay them off every month, on time, without fail. That does give FICO some basis for creating a score for me. Maybe if I had no cards at all I’d have a much lower score. But I don’t have to carry tons of debt or open a credit line every year to keep my score high. I can be debt free and still have a great credit score.