What is the ideal credit score?

[budgetmom]

I've been talking with DH tonight about our credit and discussing all the ideas I've seen to help cut costs in our home. He said his score was about 550. I have no idea what mine is. What is a good credit rating considered to be? Is it combined when you are married? How exactly does that work?

[safari]

Credit score is calculated based on your individual credit history. Your husband's credit history does not affect your credit score in any way, unless you have joint credit accounts. 550 is a very poor score. Ideal credit score should be above 740. It varies by lender though. Some lenders consider the scores above 700 to be excellent.

[disneysteve]

A perfect score is 850.

If you go to myfico.com, you can learn all about the score, how it is calculated and what it means to have a good or not so good score.

[budgetmom]

Wow, that about makes me want to cry. If his is bad, even though I don't know the exact number on mine, I know mine is worse! I have actually paid off some of the bad credit on my report (a couple of years back) but I found that some of the people I owed were extremely difficult to get in contact with. Some of my debt on that report I had no idea where it came from and did not know how to contact, so there it sat some more. Is there a way to find out that info? When I talked to the credit reporting agency regarding they said that it was my responsability and that was that.

[budgetmom]

Ok, I just went to myfico.com and it says that they can't pull up any info for me. I went to the reporting agency web site and they can't either. Would this be because I am using my married name? The last time I check my credit was several years before I was married.

[puck36]

My ideal credit score is 0.

The FICO score is comprised of five elements:

35 percent of the score is based on your debt payment history

30 percent is how much debt you have

15 percent is the length of your credit history

10 percent is the type of credit/debt you have

10 percent is any new credit

Based on these five elements, Ramsey calls the FICO score an "I love debt score." In other words, he says you cannot have a high score unless you carry debt.

My idea credit score... Not a clue. I have a join credit card with my father (Underage... Yes) and I used it wisely. I always paid full.

[abowers]

Originally Posted by puck36

Based on these five elements, Ramsey calls the FICO score an "I love debt score." In other words, he says you cannot have a high score unless you carry debt.

My fiance has a mid 700 score (as of last October) and he does not have debt. He has good credit because he was tied in on his parents credit card since he was about 18, and they always pay it off. He opened his own credit card at some point during college and also pays it off in full whenever he uses it, which is rare - except for big things like his laptop.

[kristinecfp]

Great discussion. One more note - to get your free annual credit report go to www.annualcreditreport.com. There are other websites being promoted on tv right now, but the site I just listed is the only legitimate site to get your free report each year.

Also check out the articles on myfico.com. They have a lot of great info on what goes into a credit score and how to (legitimately) improve your credit score.

Good luck,
Kristine

[amberfocus]

Originally Posted by puck36

35 percent of the score is based on your debt payment history

Unless I'm mistaken, this is just whether or not you pay *any* of your bills on time. This includes rent, utilities, as well as loans and mortgages. And I wouldn't call credit cards "debt" unless you actually carry a balance from month to month.

Originally Posted by puck36

30 percent is how much debt you have

Again, unless I'm mistaken, I think this is actually your debt-to-credit ratio. So the less debt you have compared to your total line of credit, the BETTER off you are.

Originally Posted by puck36

Based on these five elements, Ramsey calls the FICO score an "I love debt score." In other words, he says you cannot have a high score unless you carry debt.

I think Ramsey is a bit extreme here. You actually need a high score to go *into* debt. You'll find difficulty getting approved for loans if your score is low, and you end up with higher interest rates if you do get approved.

A high FICO score is good--much better than 0. It doesn't mean you 'love' debt. It means that you are responsible in managing it.

~mimi

Originally Posted by amberfocus

I think Ramsey is a bit extreme here. You actually need a high score to go *into* debt. You'll find difficulty getting approved for loans if your score is low, and you end up with higher interest rates if you do get approved.

A high FICO score is good--much better than 0. It doesn't mean you 'love' debt. It means that you are responsible in managing it.

~mimi

agreed, my score didn't get anywhere near where it is now until I got OUT of debt.

the score matters because it isn't used just for credit based decisions anymore and I imagine that trend will expand in the future.

[disneysteve]

Originally Posted by puck36

My ideal credit score is 0.

Based on these five elements, Ramsey calls the FICO score an "I love debt score." In other words, he says you cannot have a high score unless you carry debt.

Good luck opening a checking account, getting any type of loan, getting many jobs, renting an apartment, etc. with a credit score of 0. In fact, even buying a car for cash could be difficult. When we bought our last car, we were waiting for an insurance check to be issued. The dealer ran my credit, sold us the car and let us take it home right away. We didn't actually pay for it for over 2 weeks when the check finally arrived. If we had lousy credit, I'm sure they wouldn't have released the car to us.

As for what Dave Ramsey says, I totally disagree. Credit cards are a valuable financial tool. We have no CC debt. Never have. Hopefully never will. And we earn hundreds of dollars each year in rewards. How is that a bad thing?

Not all debt is inherently bad either. If it wasn't for properly managed debt, how many of us would own homes, cars, college degrees?

[autoxer]

Originally Posted by amberfocus

Unless I'm mistaken, this is just whether or not you pay *any* of your bills on time. This includes rent, utilities, as well as loans and mortgages.

But the utilities & landlords won't report if you do pay on time. They only report when you are late or owe them money that you aren't paying.

budgetmom,

When you do get your credit report, don't just try to contact all of the creditors & try to pay them back. That won't improve your credit score. Those accounts will still report as late or charged off. And if they are older & you bring them current by making a payment, that could even lower your credit score. Only pay the old accounts if they agree to delete the records and get it in writing before you pay them. Credit repair isn't easy, but it can save you tons of money in interest rates. Check out www.creditboards.com for help.

[puck36]

I have never had any problems opening any accounts or getting any loan with a score of 0.

[safari]

Originally Posted by puck36

I have never had any problems opening any accounts or getting any loan with a score of 0.

There is no such thing as 0 score. You probably just don't know your score. Every person has some kind of a score, no matter whether they have any debt or not.

[meaghanchan]

Though the FICO score is extremely faulty, IMHO, in many ways- particularly when it is used for non-credit related things like car insurance or job hiring, I have to disagree with the people who say the ideal credit score is zero.

When I got out of high school and turned 18, I was determined to never get into debt, and not to get a credit card. Not having a credit card was a huge disadvantage to me when I tried to rent an apartment. I wish I had had the foresight not to accumulate debt, but to get a credit history.

Yes, it is theoretically possible to get around without a credit score... If you're rich enough that you never have to rent, you just buy a place. Or if you're willing and able to put down 2-3x the normal security deposit. Or you're bankable for a traditional mortgage using manual underwriting- which means that you have a steady job, you're not one of those unstable freelance types whose income is a bit erratic. Sorry, but none of those apply to me. I listen to Dave Ramsey all the time, but not having a credit score only hurt me.

Do I regret racking up a little debt? Sure. But I am in a much better position in life with a little debt and a credit score than I was with no debt and no credit score.

[Ima saver]

I agree with disneysteve. Having a high credit score is important. I too have purchased a car in one day because my score is good. 850 is the perfect score, mine is 817. The credit bureau told me my score would be higher but I had no mortgage. ( I do have a paid off 1/2 million dollar house but they don't know that) I have not had a mortgage since mid 70's.
I pay my card off each month and this year I got $550 back from the credit card company.

[puck36]

Originally Posted by safari

There is no such thing as 0 score. You probably just don't know your score. Every person has some kind of a score, no matter whether they have any debt or not.

I don't use credit cards.

[disneysteve]

Originally Posted by puck36

I don't use credit cards.

You don't need to use credit cards to have a credit score.

[Ima saver]

My guess is no one has a score of 0.