Your credit score is used to make decisions about almost every aspect of your life, from buying a house to getting car insurance. It has become such a key factor in decision-making by businesses and lenders that you could say it almost defines you as a person in many instances. But do you really need a credit score? If your credit score defines you, would having a credit score of zero, mean you don’t exist and couldn’t buy a house or get car insurance, or any of the other daily things that we use our credit scores for? Experian defines a “good” credit score as one being above 700.
Of course you would physically exist without a credit score, if you wouldn’t, there are some people I would like to try it on. My personal feelings aside, the only way to have a zero credit score is to pay off every single debt you have. This means be 100%, completely and totally debt-free. Not owe anyone a penny. You will hear some personal finance and debt fighters say that having a zero credit score is part of your end goal. I think that having a zero credit score is one of things that scares some people off from some of these debt-free programs. This along with the complete destruction of their credit cards seems to throw people into a panic and I don’t blame them one bit.
I can hear you now, “But credit cards are what got me into debt in the first place.” Yes, credit cards may have had a huge impact on your debt, but did the credit cards sprout legs, steal your car keys, drive themselves to the store, and buy all of those things? No, you did. The credit cards are not the problem. The problem is the person in the mirror and their spending habits. The goal of any good debt-free program is to identify your spending habits and change them.
The fact is yes, you can survive and live your life with a zero credit score and no credit cards. Will you pay more for insurance premiums, possibly not get the job you really want if they check your credit score, not get that mortgage on your first house because you don’t have $100,000 to lay out in your early 20’s? Yes.
My take on the credit card/credit score issue is that, if your debt-free program is working and you have identified your spending habits and triggers, you should be able to handle one or two credit cards. These cards should be used sparingly for small purchases and the balance should be paid off each month. This will keep your credit score in check and you will still exist as a person to all of the important agencies and businesses that need you to be defined by your credit score in order to give you all of those wonderful rates and discounts.
On the flip side, if you do decide to keep a credit score, please make sure you keep it as high as possible. If you are looking to get a mortgage, you will not get a FHA loan with a credit score lower than 580 in most cases. So, in reality, having a low credit score is almost worse than having no credit score so maintain the one you have.
Your mileage may vary depending on your spending habits and how well you did or are doing on your debt-free program, but I know you can do it.