As someone in the financial field, I am obviously very aware of financial expert Suze Orman. I have seen her on tv a few times and heard her referenced many times. Until recently, I had never really read any of her stuff. That changed as I am currently reading her book “Suze Orman’s 2009 Action Plan:Keeping Your Money Safe and Sound”.
The book was written as a response to the 2008 economic collapse. She gives an action plan (hence the title) on how to handle your finances in these tough economic times. I agree with about 95% of her advice. The part that drives me insane, however, is that she is obsessed with credit score.
If you know me at all, I don’t really care too much about my credit score. I am not sure exactly what I need a good one for. I don’t plan on borrowing money ever again. We are slowly, but surely, paying down our mortgage and once that is gone: good riddance debt forever! The only real reason you need to have a good credit score is to borrow more money.
I do realize that since I already have a mortgage that I don’t have to worry about it. But you may be asking: “what if we currently rent and plan to buy a house in the future?” Here is the dirty little secret: if you can demonstrate that you have a 20% down payment, have been employed for two years or more, and you have paid your current landlord on time or early for two years, you will qualify for a mortgage.
In fact, if you think about it, who wouldn’t want to lend money to you. Picture you are a loan officer at a local bank or credit union. A nice, young couple comes in for a $100,000 mortgage. They show you that they have $25,000 for a down payment, they both have been employed for the last three years, they have ZERO debt (no credit cards, no car loans, no student loans, NOTHING!), and they have a letter from their landlord confirming that they always pay their rent several days early. I bet that would be a tough decision.
Now I realize there are some cell phone companies or insurance companies that may charge you a higher rate because of your credit score. My advice is to find a reasonable company that you can explain your situation to just like you could to the mortgage broker. It may take you shopping around to several companies until you find someone reasonable, but it is well worth it.
I understand that people are obsessed with their credit scores. I truly believe Suze Orman knows that people want to hear about it, so she gives them what they want. I just can’t imagine opening a credit card and using it once per month just so I can increase my credit score. I have met with way too many clients who started with a card just for emergencies or used it just for gas and it spiraled out of control.
The problem with the system is that it doesn’t even take into account your income or net worth. So, someone making $250,000 per year with a net worth of $5 million, but who has always paid cash for everything could have a credit score of zero. That’s right: zip, zero, nada. What a loser this guy is! That’s what FICO wants you to believe, anyway.
So, here is my point. Don’t get so worried about your credit score. Now, if you have a crappy one because you have way too much debt, are behind on payments, etc. then you need to get that cleaned up. But, if you either have a low score or none at all simply because you have never had debt or it has been a long time since you had any, PLEASE don’t get into debt just to increase your score. That is insanity and a number FICO gives you does not determine if you are winning with money or not. Your net worth is a much better indicator.