We screwed up.
As we paid off our debt, we closed our accounts. This shifted our ratio of debt to available credit.
Before we had $170,000 in available credit and $59,000 in non-mortgage debt. We had a credit score of 780.
Now we have closed all of our accounts and paid off all but $2000 in debt. (Thank you Dave Ramsey!) Now our credit to debt ratio is about 90% maxed.
Our credit score is in the mid 600’s and we couldn’t get a loan if our lives depended on it.
I don’t mind. We never plan on having debt again, but we would like the option to refinance the house in a few years.
I gotta say, it was a serious shock when we realized that we were going to be punished for doing the right thing. Had we kept those insane lines of credit open, we’d have a score above 800 right now.
Honestly, I believe that FICO scores are designed to screw us so we can be charged higher interest rates.
I do have a question, though . . . If you were disciplined enough to pay down all of that debt, what would be the danger of you keeping, say, $15,000 in open lines of credit available? This would keep your debt-to-credit ratio low, and would help protect you in the event you needed money in an emergency.
Now we have closed all of our accounts and paid off all but $2000 in debt. (Thank you Dave Ramsey!) Now our credit to debt ratio is about 90% maxed.
Way to go! As for getting credit with a low (or even a ZERO credit score), I think Dave has mortgage ELP's that lend to ultra-low debt to income folks like yourself. Have you checked his website?
When an account is closed, all the big 3 credit bureaus see is that an account was closed.
Having said that, you absolutely did the right thing and should be proud of that.
Amazing, isn't it? The whole damn thing is a racket.
The entire system is set up to gang rape and economically screw the little guys...
Ya can't pay your bills and what do they do? Raise your interest rate and penalize you with loan shark style penalties. lol...
See # 26
It's why a lot of people said, "Screw them too".
“..believe that FICO scores are designed to screw us..”
DING DING DING!!!
The entire system is set up to gang rape and economically screw the little guys...
Ya can’t pay your bills and what do they do? Raise your interest rate and penalize you with loan shark style penalties. lol...
See # 26
BTW.............
If the entire banking system/loan/credit industry were physical, like boxing, it would be perfectly fine to beat your opponent to death with a baseball bat once you’ve knocked him out.
Wow..what an incredible story. Although it is sad that your credit score went down, it is good that the debt is gone. I wish I can be so fortunate one day to be completely debt free. I have been listening to Dave Ramsey and like what I hear.
You’d think the System would want to reward those who pay off their debts instead of penalizing them!
Ramsey is a classic example of throwing out the baby with the bathwater. His advice is great for GETTING OUT OF DEBT but not for overall financial well-being.
Of course they are! What better way for an industry to fix prices and move them upward together than to have a supposedly neutral "rating agency" which generates a number they can use to set the price. The banking industry benefits when they can charge a higher interest rate to a customer, since the loan is more profitable. So obviously every effort is made to push down FICO scores, and raise the FICO score thresholds needed for loans at good prices.
In reality, banks have lost way more money on bad derivatives trades, mortgage bond speculation, and commercial loans than they have on credit cards or even sub prime mortgages. Have you seen them getting out of those markets? Of course not. Commercial banks go right back to the riskiest markets and do deals with guys that put projects into bankruptcy months ago. But driving a lot of people's FICO scores down is nothing but good news for banks since it lets them collectively increase prices on retail customers.
Imagine if other businesses had the equivalent. How about a "conservative" index. If you have a score over, say 600 you get discounts at Walmart, gun shops, gas stations, restaurants etc. Since after all you are less likely to sue over hot coffee spilled in your lap, right? But folks who are registered Democrat, or are more liberal have to pay more when they shop. And if you start acting like a liberal your score shrinks and you have to pay more at the stores. How long do you think the government would tolerate such a thing? Not long, which tells you a lot about the political power of the banking industry, and also their pals in the insurance industry who use FICO scores the same way -- as a means to do price fixing and price discrimination.