Why I Quit Caring About My Credit Score

If you believe everything you read about your credit score, you’d think it was the most important component of your financial health. Without a good credit score and history, the experts say, it’s more difficult to qualify for a mortgage or car loan – and more expensive, too, because you won’t get the best interest rates. In many states, bad credit can even raise your insurance premiums, cost you a rental apartment, or make it harder to get hired.

While all of that is true, it doesn’t tell the whole story.

First off, there are several credit scores out there. While it’s important to nurture your credit scores by using credit responsibly, your FICO credit score could be different from the one VantageScore reports, and lenders may use a different one entirely — so obsessing over one score can be a fruitless exercise.

More importantly, as Dave Ramsey famously notes, your credit score is not a measure of your financial health at all. “All it tells you is whether you are good at borrowing money and paying it back. That’s it,” says Ramsey on his blog.

Think about it. There are few ways to build credit without borrowing money. While your credit is undoubtedly important — especially when it comes to achieving certain life milestones, like buying a home – your credit score doesn’t necessarily dictate whether you’re “good” with money or wealthy at all.

Six Reasons I Stopped Worrying About My Credit Score

With that in mind, I stopped caring about my credit score a few years ago. I do track my score and new accounts opened for free on Credit Karma, but that’s mostly just to prevent fraud and identity theft – not to judge my score.

Here’s why I just can’t care anymore:

I would rather be debt-free than have a perfect credit score.

FICO, the most popular credit scoring agency, uses several weighted factors to determine your credit score, including payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%). Believe it or not, these rules make it so you can be penalized for becoming debt-free!

My husband and I have enjoyed steady credit scores above 820 for a while now. But when we paid off one of our rental properties earlier this year, we both saw our credit scores drop by 20 or more points. The sudden drop took place because we paid off a 15-year loan and reduced the average length of our credit history tremendously. In other words, because we paid off and closed a line of credit, our scores took a hit.

That’s a racket if I’ve ever heard one, and yet another reason I refuse to worry when my score fluctuates. I would much rather be debt-free than keep my credit score hovering in the 820 range.

Related: What I Wish I Knew Before Buying Rental Property

I want to make decisions based on what’s best for our family, not on what is best for my credit score.

Taking that one step further, I refuse to let my credit score dictate our financial lives. If I had been overly worried about my credit score, I may not have worked so hard to pay off our rental property early. Perhaps I would worry about prepaying our home mortgage as well, and quit making extra payments there, too.

At the end of the day, I know what’s best for my family — and it’s not carrying around a bunch of debt for the next 20 to 30 years. So, I say to heck with my credit score; now that one of our rentals is paid off, we’re working hard to pay off our primary residence and our other rental as quickly as we can. If our scores drop when we pay off our primary residence, so be it.

If I don’t have the cash, I can’t afford it.

Admittedly, I realize it’s easier to ignore your credit score when it’s a good one. A lot of people might question what I would do if my credit score took a sour turn once we become entirely debt-free. What happens if I need to finance a new car, for example?

The thing is, I have zero intentions of borrowing money ever again. If I don’t have the cash, I can’t afford it… period. That rule applies to vehicles, vacations, home remodeling projects, and any other expense you can dream up. And really, I would rather drive a skateboard than have a car payment ever again.

Related: The Dead Minivan Experiment: How We’re Trying to Become a One-Car Family

I own my own home, and have no plans to move.

While you should pay special attention to your credit score if you plan to buy a home, those of us in our forever homes may not need to worry too much. We’re in the home we plan to raise our children in, and we now owe a lot less than half our home’s value. As a result, we never plan to move. And if we do move in the very distant future, we should have the cash to pay for our new home in full.

Related: Buying a Home? Put Your Credit on Lockdown

We have a healthy emergency fund.

When it comes to maintaining debt freedom, having a healthy emergency fund has been huge for us. While the size of our e-fund ebbs and flows based on our earnings and the time of the year, we frequently have more than six months of cash expenses to use in emergencies.

Because of our emergency fund, I don’t need a boatload of credit at my disposal. I use credit cards to earn rewards, but we’d be fine if our accounts were cancelled for any reason, including lack of credit or a waning score.

A FICO score over 720 has diminishing returns.

To qualify for the best rewards credit cards, a home mortgage with the lowest interest rates, or personal loans with the best terms, you usually need a solid job history and income, a record of responsible credit use, and a FICO score of 720 or above.

You know what you get for a FICO score of 800? Or 850? Honestly, not a lot more.

When it comes to your credit score, there’s a point of diminishing returns. While earning and maintaining a good credit score is absolutely a smart move, there’s no award for a perfect FICO score – no cookie, no trophy, no nothing.

Final Thoughts

Your credit score is important – especially when you’re first starting out. But once you’re fairly established financially, it’s much easier to see credit for what it really is. As Ramsey says, your FICO score is nothing more than a measure of how well you borrow money. That’s why it’s possible for people with mountains of debt to still have extremely high credit scores.

As for me, I just can’t care about my score anymore… and I refuse to play the game. While an 850 FICO score is something to be proud of, I’d rather be wealthy and debt-free.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.

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