Attention Credit Gurus

[lawdude]

A couple of years ago I decided to shed debt. Paid off my house. Cars paid for. Other than two credit cards, the balance of which I pay off each month, I have no debt showing on any of the three reporting agencies.

 

I assumed once debt was paid off I would peg the excellent rating. To my surprise, not only did my credit score not rise, it actually fell from the excellent range to the good range. Not that I care since I no longer borrow money, but who can explain the seemingly counter-intuitive drop in my credit score at all three agencies?

 

Almost makes me feel like they think I'm less trustworthy without significant long-term debt.

 

Thoughts?

[SGT/SC2873]

A couple of years ago I decided to shed debt. Paid off my house. Cars paid for. Other than two credit cards, the balance of which I pay off each month, I have no debt showing on any of the three reporting agencies.

 

I assumed once debt was paid off I would peg the excellent rating. To my surprise, not only did my credit score not rise, it actually fell from the excellent range to the good range. Not that I care since I no longer borrow money, but who can explain the seemingly counter-intuitive drop in my credit score at all three agencies?

 

Almost makes me feel like they think I'm less trustworthy without significant long-term debt.

 

Thoughts?

lawdude,

you are right on point with this! First off, I think you were very wise to take these steps in the economic blunder we face right now. The scores in my opinion are no longer a true reflection of one's ability to repay and they seem to be based on how well you manage your monthly payments and not your debt. I believe that in the near future this is something that needs to be readdressed as someone w/ an excellent score could be carrying a ton of debt as compared to the ratio of income but seem to manage their overall monthly payments, i.e. pay on time and pay more than the minimum due. I think credit scores are more important to those who are in their 30's and 40's however, once you get into your late 40's and early 50's it becomes less important unless you have waited to make major purchases. I know mine is going to drop from the excellent range as well as I am working to reduce debt and accounts. One idea is to keep the accounts open that you have had for the longest time. You can keep them paid down and/or off, but use them occasionally for hotels/gas, and don't forget mods to the car. Then make payments of the min. plus a $100 for 3-4 months and payoff again, but leave the account open. This is one area where some make a mistake by closing these older accounts as they do create history. I mentioned that this score needs to be adjusted and here is why. Right now, money as it relates to credit is so tight that about the only people able to get loans are the ones w/ excellent credit. This includes home loans, car loans, etc. Also, we have learned that over the years, excellent credit gets the better rate on these loans. That has recently changed as most everyone who owns any credit card has seen the game change w/ the credit companies going up on the accounts APR for no reason at all other than to help them make more $$$ and offset the bad debt they are getting stuck with. By doing this I think people are going to start doing a better job of managing THEIR debt and basically screw the credit companies and what they think. So eventually, many will see their credit scores drop. If they don't quit looking at the excellent range only instead of the actual situation of the person, I feel this will really stagnate our economy. It's like a vicious circle, one that needs to be addressed. JMO.....Craig

[4632R]

You are dead on, this whole credit score thing is figured bass ackwards. In a way the more financially responsable you are the lower your score is. da.