Frugal Village Forums banner
1 - 20 of 72 Posts

·
Registered
Joined
·
58 Posts
Discussion Starter · #1 ·
First off I did not attend FPU, but I am reading and listening and absorbing what I can and so far it seems to me that Dave's thinking is to remove credit from your life, pay cash for everything and live a better life which I agree with in general, but my wife and I have talked about this a few times how our credit score IS still important, unless you have an awful lot of $ saved like Dave, if your like most (at least in our case) if your planning on buying a house, getting the best rate on your car insurance we do still need a good credit score.

I love the baby step concept, and so far we have funded a basic emergency fund $1000 and closed and paid off 3 lines of credit $7500+ in the last 2 months alone. We are working on our 4th card 7K, and still have a car loan 9K to finish then just the house 25K.

But my wife and I have talked this over a few times (she deals with credit all day at her job) and have decided to keep that last credit card alive, pay the balance down to almost zero yes but not totally close that line of credit. Both of our scores are in the mid 700's and we haven't had any blemishes, this helps not only our car insurance but the rates we did get on the house vs our neighbors (wife knows the numbers because she sold the houses) hehe.

Our future goal is to buy another house or a piece of land to build on, so knowing this we want to keep our credit score up, even if we do buy a washer and dryer on the card then pay it back from presaved cash funding in a few chunk payments, I realize this may make no sense or alarm some who are living the full DR plan, but I just haven't read anyone's thoughts on this in terms of those who may still want or need to buy a house or land and not have all that cash saved in the bank to do it (would I love that freedom YES but will that happen within my lifetime probably not).

Overall from everything I have heard and learned from the DR methods I have to say I agree at least 90% with it all but a few areas seem off base for me (closing off all credit, not paying creditors if it isn't in your budget, emergency fund i feel should be higher, backup/life expenses id like to see at 1 yr for our personal plan, well a few other small tweeks and I won't even get into the giving part even though we do give).

Just curious what others think of this in terms of keeping your core belief of removing debt (mainly CC and cars first for us) and keeping your credit score from dropping (for real life major purchases and benefits like reduced car insurance rates etc) while still getting out of debt which is what we are doing.

I can say if i didn't find and hear/read about the DR way of life i would still have those 4 credit cards and probably even higher balances in a year, and overall man it's changing our lives, but it almost feels like there are some things within the program I just can't get my head around (as mentioned above) and I am wondering is it just me on some of those things?


Bill :)
 
  • Like
Reactions: bumplett

·
Registered
Joined
·
58 Posts
Discussion Starter · #2 · (Edited)
I have read this btw

The Truth About Your Credit Score - Credit Cards - daveramsey.com

and although it does seem to say the opposite of my thinking I am so not trying to be negative but whether I like it or not, I see the real world being quite different especially with my wife selling homes for almost 20 yrs and dealing with many lenders and situations and knowing what people end up paying...

What about keeping that one card, using it for items you are going to pay for with cash, paying it off each month and still keeping a solid credit line open and alive for the benefits it gives you in todays world?

I am not here to bash the DR program as I agree with most of it and it is changing our thoughts lifes patterns for what I feel are the better longterm.
 

·
Registered
Joined
·
8,566 Posts
For mortgage rates, as I understand it, anything over a 720 or maybe a 740 is overkill. They don't lower rates for good credit, they raise it for BAD credit. Having an 800 won't get you better than having a 740 - but having a 650 will get you worse...
 

·
Registered
Joined
·
58 Posts
Discussion Starter · #4 · (Edited)
OK I get that totally, but if you go off the grid so to speak, zero lines of credit open and in works, after a certain time you will be off the chart 1-2 years on credit score from what I understand.

I double checked a few mins ago and in the 20 yrs of selling homes in 3 states my wife has not had a single lender she works with (multiple lenders) who will do a home loan without a cosigner for someone with no credit history/score even with a huge down payment and long work history with lots of income, and assets - she said it just doesn't happen, and now more than ever they require MORE for even less of a loan.

Dave says so what to having a zero credit score, and I see that being the case for him, but my bank account and list of assets don't support that line of thought, our plan is within 5 yrs to buy a piece of land to build a home on.

Could be in the dark on this but just going by what I have read / learned so far and from wives experience in home loans/sales.
 

·
Registered
Joined
·
8,566 Posts
Your credit history sticks around for 7-10 years after your last account closes, not 12 months. Your credit score may lower - but that's why you find a bank that does manual underwriting.

Manual underwriting is the process of reviewing ALL of your financial info - not just your credit score. It's relatively rare in this market but it used to be the standard model before FICO came around.

A bank who won't lend to you for land/house when you've got thousands in the bank and no other debt is just stupid, after all. ;)


BTW: I'll wager your wife works mostly with *brokers* - who aren't so much lenders as they are mortgage sellers, selling their loans to the big banks who mainly use FICO lending.
 

·
Registered
Joined
·
58 Posts
Discussion Starter · #6 ·
For mortgage rates, as I understand it, anything over a 720 or maybe a 740 is overkill. They don't lower rates for good credit, they raise it for BAD credit. Having an 800 won't get you better than having a 740 - but having a 650 will get you worse...
Talking to wife about their lenders and their rates/credit score charts have changed in the last 2 yrs, now for the absolute best rate a credit score minimum of 760 is required at her two largest lenders.

They shop lenders constantly to find the best rates and companies to work with, yet most are becoming more strict due to so many defaults.

This is in Michigan btw, not sure about other states or regions.
 

·
Registered
Joined
·
58 Posts
Discussion Starter · #7 ·
Guess I got more learning to do but in general altho I hate the game, I think we are going to try and keep a decent credit score while also paying down our debt, at least till we lock in a decent land loan, at that point it will just be us paying that down and then hopefully living debt free 100% which will be a fun day..

I do know they shop for the best loan based on the persons situation, they do have relations with a few lenders but all of their terms are changing on what they consider a reasonable risk...

Just wish I started all this 20 yrs ago as I would already HAVE that house and have it paid off too! hehe
 

·
Registered
Joined
·
2,411 Posts
I think the whole issue with keeping a cc to keep your credit score up is not abusing the cc. I have always had a credit card; never paid interest on it and will continue for keeping my credit score up. I also think at some point when you are out of debt and would like to drive a nicer car (not meaning brand new) w/o having to pay $15,000 cash (which would take a loooooooong time to save you could get a loan w/good rates.

If you cannot control yourself with a cc that is a totally different story.

JMO
 

·
Registered
Joined
·
52 Posts
I'm not on board with DR and FICO because of insurance premiums. Like it or not, insurance companies use it because there is a correlation between credit score and the likelihood you will file a claim.

I have kept 2 credit cards open and have my phone bill auto charged to one and my car and renter's insurance auto billed to the other. In my online billpay, I have the bills labeled as phone and insurance. I otherwise pay them each month like I normally would. The cards are used for no other purpose.
 

·
Registered
Joined
·
469 Posts
I understand the logic with maintaining credit score by monthly active use of a credit card, but I think DR's take on it is that when you do that you play with RISK, which is something he mentions all the time on his radio program. You risk whipping out that card when the first "emergency" pops up, then start adding to it, since you "fell of the wagon" anyway. You must also take into consideration that ANY time you have a credit card you RISK having to deal with what Dave calls "snakes," and I WHOLEHEARTEDLY agree with him. The major banks that issue credit cards are HUGE and are often very dysfunctional. It's difficult to have a human conversation with one when you call in with a question or an issue. I shudder to think of having to deal with an issue like unauthorized charges or identify theft. I have slept so much better since I closed my accounts with my credit card company. I have a debit card with my local bank, where they know my name, my kids' names, my husband's name, and my dog's favorite flavor of dog biscuit (he gets them when we go through the drive-through).

Follow the DR plan to the letter. You won't be sorry you did. If you pay off your mortgage, like you have said is coming up to do, then you're really not going to need a credit rating anyway. We have Hartford car and home insurance and don't pay extra for our lack of credit rating. I haven't used a credit card in over two years and my credit score is still sitting pretty at over 700, so it must take quite a while to go to zero anyway. By the time mine gets there, I intend to not need a credit score for ANYTHING anyway. Best wishes to you.
 

·
Registered
Joined
·
58 Posts
Discussion Starter · #12 ·
We still have our house payment for a while at least, but yeah learned hard on the credit card end, just never paid attention to it all honestly and now knowing what they can do for us I think the balance of not using them having the $ to pay them back when we do use them and maintaining the credit score while not being 50K in debt will be the best combo for us personally.

Just took a wakeup call to realize a lot of all this, won't be buying another car on credit, won't be getting that new tv or furniture on credit, (all of which i had done in the past), really making some positive changes in our thinking and budgeting with the DR plan and telling anyone who will listen even, i think as in everything in life tho balance and moderation are the key words.

Bill
 

·
Registered
Joined
·
58 Posts
Discussion Starter · #13 ·
I'm not on board with DR and FICO because of insurance premiums. Like it or not, insurance companies use it because there is a correlation between credit score and the likelihood you will file a claim.

I have kept 2 credit cards open and have my phone bill auto charged to one and my car and renter's insurance auto billed to the other. In my online billpay, I have the bills labeled as phone and insurance. I otherwise pay them each month like I normally would. The cards are used for no other purpose.
I think this will work for us too, we no longer even carrying our last card, and have our emergency fund in place, paying it (our car and cc debt) all down and have grown up an awful lot in the last few months in terms of what credit can and has done to us and many others, but like anything its not the existence of credit that is bad, it's the abuse of it that causes the problems.
 

·
Registered
Joined
·
2,038 Posts
Once all is paid off except the house, we plan on using my cc 3 or 4 times a year for a single purchase we will pay right off, like a fill-up or groceries, to keep the card open. I feel confident we can do this as we are already 'used to' not adding on to it as we've been snowballing. We will NOT be aggressively attacking our mortgage, we hope to move in 3-5 years or so, we'll see what we can get saved up for a move and down payment on the next place in another area! After paying off all but the house, our goals are an 8 month ef (I think the 3-6 months Dave suggests is too little theses days) and saving for our next home. I think keeping a good credit score will be in our best interest in line with these plans, so we don't plan to close down the cc once paid off....I am with you, I think FICO plays into too much these days to write it off completely....but on the flip side I see how having usable cars would be too great a temptation to some- but I am confident with our EF in place, which is only growing, that we will use our cc when we 'want' to over feeling we 'need' to.

I follow a lot of Dave's plan, but tweak it to what I feel fits us- our BEF is more like $3k and slowly growing, we still add to our retirement and a little to the kids' 529s...I know that makes our 'snowballs' longer, but NOT saving at all makes me a bit queasy...as home owners with 2 cars, kids, and one bread winner, the $1k baby EF seemed too low to me...and being in my early 30's, I thought NOT adding to -something- to retirement and taking advantage of the time it has to grow would be foolish. Some follow Dave to a 't', some do not, you have to take an HONEST look at what works for you, including the prescribed eschewing your credit scores.
 
  • Like
Reactions: MrMom

·
Registered
Joined
·
2,375 Posts
I think this really is a matter of personal preference and that too many people get hung up on it. How big of a deal is it to leave one card open when they're all paid off? Maybe you would be tempted to run up the card again, but then again maybe you won't. If you did want to run up a bunch of debt, you could get credit pretty fast and easy even if you don't have a card. If you hate the idea of credit cards that much then it would make sense to get rid of them all, or maybe if you're bipolar and prone to spending sprees.

I'm going to leave my credit card open as well because I'm not willing to part with it and I do want to maintain a high credit score. I don't plan on financing anything and I hope to pay cash for our first house, so I don't even think I'll need it.

My card is an American Express Zync and the total is due monthly, so even if I wanted to run up a bunch of debt, I couldn't. Getting it still increased my credit score. If you're worried about the possibility of running up your cards, you could always look into one that doesn't allow you to carry a balance.
 
  • Like
Reactions: gmarie

·
Registered
Joined
·
715 Posts
Thank you for starting this thread.

My credit score is 750, DH's is in the 600s. I am concerned about his since we are planning to buy our first house in the next few years.

I have not yet decided what I will do, but I have not closed any accounts while I make my decision. I did, however, cut up the cards (and made Christmas ornaments out of them for DH).
I know that I will not use them, and similar to what Nishu said, if I had some kind of manic episode and wanted to go on a spending spree who is to stop me from running out and getting new credit anyway? Closing them because I don't trust myself is just silly.

Edit: I realize that value of closing them b/c of identity theft, and if you don't "trust" the credit card companies... but again I really am just waiting it out to make up my mind about which (if any) to keep.
 

·
Registered
Joined
·
13,930 Posts
I think you'll find many people like a modified DR. We took the course last year and it was extremely entertaining. It was $80. thru a church for the materials for us. We shared a book/workbook. We still keep a major CC and Mobil open. The diff. is I track both online at least every few days. We haven't paid interest since Aug. 2010 by paying the whole thing. That said- "Know thy self".

As far as credit score goes here we diff. I go w/ the "doesn't hurt". DS will go off to college. We will not give him a CC and discourage his opening one but will open an acct. w/ the CU we can transfer into instead. But Doesn't hurt to have a CC for emergencies. If he gets hurt I will fly unexpectedly up.(as an example.
 

·
Registered
Joined
·
469 Posts
I've read all the arguments for keeping a credit card, but I also listen to Dave Ramsey's take on that and I chose to follow his plan to the letter (for the record, he says there's no such thing as a "modified" Total Money Makeover; either you're working "the plan" or you're not).

More and more credit cards are starting to charge yearly fees. The articles I've read say that, in time, most of them will go to that and may even eliminate the cash rewards (which I've never had). I am neither "bipolar" or "prone to spending sprees," I just completed the DR plan to get out of debt, and I'm loyal to its principles. I do not want a relationship of any kind with a mega-bank. Absolutely, you should do what's right for you, but don't call it the DR plan. :)
 
  • Like
Reactions: MrMom

·
Registered
Joined
·
58 Posts
Discussion Starter · #19 ·
OOwl,
Don't be surprised when these banks start charging for the debt card too, per year and per use as well as capping the spending limits of it. I was at chase the other day trying to deposit a check the machine outside would not take, i had to sit thru the "talk" about their dumb visa and how i was pre-approved etc, said nope i use cash and my debt card thanks, that's when they started to explain the debt card is changing bigtime, no more rewards programs, fees coming, caps coming, again pushing their dumb visa, still said no thanks and left but seems there is talk of that stuff potentially coming.

LOVE that you have completed the program that's awesome and inspiring and I do appreciate everyones input and advice here.

Bill
 

·
Registered
Joined
·
52 Posts
How about TMMO-based plan?

It's like the tomato-based soup of personal finance. Yeah, Manhattan clam chowder isn't a tomato, but you can't make it without tomatoes.

Yeah, keeping CCs isn't TMMO, but you can still use TMMO as the base for your own financial plan.

Okay, the simile may be a bit tortured, but I think it makes my point.
 
1 - 20 of 72 Posts
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Top