| Worthless Credit Scores |
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| Written by Charles Lamm |
| Monday, 22 February 2010 13:54 |
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Credit scores and credit bureaus and FICO look like a three-headed monster living under your bed. Pull back the covers and see if you even care what your FICO score is this month.
Credit scores and credit bureaus and FICO look like a three-headed monster living under your bed. Pull back the covers and see if you even care what your FICO score is this month. I often wonder why the average American worries so much about their credit. Why do you even care? A high FICO score can only lead to the possibility of high debt. Credit. Buy things you don't need with money you don't have. Sounds like a country I know. A FICO score can only help you get into debt, not become wealthy. Here are 5 reasons why FICO does not really matter: 1. Your FICO Does Not Cover the Nut. I admit. Having a line of credit does give one a sense of security should Junior break his arm or the transmission falls out of the family ride. What's of more concern is that most of us live so close to the financial precipice that we have no savings to cover an unexpected expense, much less the recommended 6 months income for real emergencies. 2. No Real Control Over Your Score. Trying to raise your credit score, as the countless credit repair books will teach you, is a thankless task. At any time, the credit bureaus can alter their algorithms and change their emphasis to change your score - all beyond your control. For instance, not all bills are created equal. Pay your standard landline phone bill - FICO good. Pay your cell phone bill (often much higher) - FICO doesn't care. Don't pay any bill that gets reported to the credit bureaus and you get slammed. No one said FICO was fair, no matter what the name of the company is. 3. Inaccurate. Credit bureaus are not human, but boy can they make mistakes. And usually not in your favor. What's missing? Your income. Someone who just landed a big paying job gets no higher FICO score. Someone who pays cash (credit ghost) who has no debt is treated like a leper. Mistakes also happen. Credit bureaus are notorious for confusing similar names and keeping bad information on file even after notification by effected consumers. 4. Too Much Debt. Without a high credit score, it's almost impossible to take on too much debt. If you cover your bills each month and live within your means, you don't need credit anyway. Use your credit card, carry a balance, and pay on time, and the banks will increase your limits and give you countless opportunities to take on more debt. Lose your income or suffer a personal financial crisis, and all that built up debt just increases your woes. 5. No Legacy. Death and taxes are inevitable. You can't successfully avoid either. On the other hand, your credit score is left at the graveside. Living a prosperous and wealthy life is a desire of most humans. I don't mean just spiritual wealth, but real dollars. No man or woman can live to the fullest without money. Having a debt master will surely burden your life. Eat well. Get a full night's sleep. Make love to your wife. And live within your means. Don't lose sleep or thousands of dollars protecting your credit. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Look for more contrarian financial strategies at Burn Down the Freaking Mission. |