The best credit score is Zero! After you get completely out of debt, meaning everything is paid off, including the house, your credit score will go away. Virtually Zero.
I know, there is no such thing as a 0-credit score. The lowest number on the FICO scale is 300. But I will refer to not having a credit score, or in the credit industry’s terminology, your credit score is indeterminable, as being Zero.
So, here is the deal. It is exceedingly difficult to find any information on getting your credit score to the state of indeterminable. You can Google all day and find very few results that help you get there. Most of the information you stumble upon is about not letting your score disappear. That’s no surprise.
As a side note, have you ever seen an industry like the credit scoring industry, where people will fight to maintain something that makes themselves poorer and makes others rich? The only parallels I can think of is cigarettes and pornography.
How to Get the Best Credit Score
One freelance author who worked at FICO and is “a credit scoring expert” with decades of experience says, “even when there is a credit report full of information, the contents of that report still may not meet the minimum scoring criteria for calculating a score, unless, for a FICO score, the credit report contains at least … one credit account reported within the past six months. “ (Source).
WARNING: This article is actually trying to help someone who doesn’t have a credit score get it back! And here is the sad part, the person is a 57 years old gentleman, desperately trying to get a loan and was denied due to having a Zero Credit Score.
A story like this precisely presents the reason why I am writing this article.
My hope is to convince you to stop building credit and stop broke habits and start building wealth and start passing wisdom on to the next generation. Let’s change our family trees.
Loving the Credit Free Life
After we are free from being measured by a little 3-digit score, what will we ever do?
I’ve heard people ask this question many times. “How will I get a job? What will I do when I need to rent a car? How will I ever buy a house?” And many other questions arise.
The answer is by using the credibility you now have and those that are broke do not.
Right now, my family doesn’t use credit cards (or any other form of credit) for anything, so I can attest to how life looks without the use of debt. We use a debit card for some purchases, and we use cash for others. It really helps retain wealth when you are spending money that you have.
When I was a normal person using credit, I used to buy things that I couldn’t afford at that moment, with the expectation that I would be able to pay it off later. You may be able to relate. The only problem was life would happen.
After I claimed bankruptcy, I was very successful in rebuilding my credit from the 400’s to 800’s. I thought I was doing great until I looked at the ledger to find that I was back in $126,000 of debt again. It happens so subtly.
That’s the point in which our debt free journey began.
Today, I rent cars with a debit card. And guess what, I don’t get penalized because I don’t have a credit card. Sometimes a company will require a deposit because it is a debit card, but when you have money, it’s no problem.
We even save money when we use cash. Did you know that you can bargain when you have cash? It’s difficult for someone to turn down a stack of Benjamins right in front of them. Plus, retailers don’t get charged a swipe fee when they take cash, so some of them may give you a discount just because you are paying with real money.
In Chicago, there are still gas stations that have a CASH price and a CREDIT price. I love that because you can see the penalty for using credit right there on the sign. Maybe your city has pumps that reward you as well. I laughed out loud when I saw that I could get 5 cents off when I use the gas station’s credit card, but the cash price was 7 cents off per gallon.
By using cash, we feel the money. We see it leave and the coins come back. It makes purchasing decisions more intentional and therefore we save more money. That’s why my family uses cash for categories like clothing and dining. If you use cash the next time you are in a restaurant, I promise you will order differently.
Now, there are the big three, as I like to call them. Employment, apartments, and mortgages.
Getting a Job When Your Credit Score is Nil
As far as an employer that won’t hire you because you are responsible with your money and have a Zero Credit Score … Find another employer. I mean seriously. I’m sure with any respectable employer, if you can speak to the hiring person face to face, you should be able to explain why you don’t use debt and they would understand. I hope. If not, as I said, there are other jobs.
Before I move on, think about it. If you were an employer, would you want someone who was desperate for payday and always looking for a raise because he lives paycheck to paycheck but has a 750+ credit score? Or would you want an employee that had a fully-funded emergency fund, no open lines of credit, a lean budget, and no credit score? As a bonus, the data shows that the latter employee is far less likely to steal than the first.
Renting an Apartment with The Best Credit Score
Next, there are apartments, which I can speak to as I was a landlord for several years. When you have the privilege to speak to a landlord or manager directly, you only need to provide statements like a utility bill, a cell phone bill, bank statement, and pay stubs, to validate that part of the background check. Any landlord with half a brain will love to see that you have money and no debt. This also goes for the employer situation above.
Once again, if you were a landlord, would you want someone who has many payments each month because she has to pay her credit card bills, student loans, car loans, … but has an 800 credit score? Or would you like a tenant that has no payments, and therefore has money to pay the rent with ease, but has no credit score? I’m sure you can guess which one is most likely to have a late rent payment in their future.
Buying a House with No Credit
Lastly, there is the mortgage, the objection that almost every single person I have ever met uses when defending their sacred FICO score. People really get uptight about this one.
The truth is: the best way to buy a house is without debt.
For example, let’s talk about Karen. She is 22 years old and is graduating from college soon. She will have no debt because she has never had debt. Therefore, she has never had a credit score. When you are 22 with no debt, do you know what you can do with the income you are going to have?
Let’s say she stays single for the next 6 years and lives with some friends. She has a $2,000/mo budget and gets a job making $60k. Now she can save at least $2,000 per month, and if invested, it could grow at 10%. She will have $204,000 at age 28.
Or, say she gets married in a year, to a handsome young man who is not in debt. They could save the same amount even easier with 2 incomes or they could save even quicker. Either way, she will have a house that she paid for in cash before she is 30 years old!
So, what do you need a credit score for?
Every person’s situation is different, so these scenarios are certainly not going to match yours. Find a financial coach with the heart of a teacher, and discuss a plan to Zero In on Your Financial Target.