There used to be a time when a FICO of 728 was considered very good, today, you need a 780 or better to be considered for luxury things like RV’s at the lowest rates. A little over a year ago Ronda and I decided to close the credit card accounts knowing full well the affect it would have on our FICO score because lets call a spade a spade, the credit card companies got the rules into place to hurt your ability to get credit if you not only closed a credit card account but even if you paid it off.
Paying it off reduces the amount of credit you have, high balances, balances that are close to your limit, debt to income ratio, all can have a negative affect on your FICO. Our combined FICO 60 days after closing all of the accounts was a dismal 620, since then mine has climbed back up to 728 but because of what American Express did to an account that was in Ronda’s name, her FIOC plummeted back to a 622. Is this unfair, yes, I can understand that things affect credit but when our history of payments is perfect one charge off that we had no control over shouldn’t have the ability to tank your credit like this but because of these rules it can and does.
In 6 months to a year her FICO can recover but guess what, we had 4 American Express accounts and we now believe as we pay them off they will do the exact same thing tanking both of us back into bad scores. They as much as admitted the policy and also stated they do this to help you. We know better since we see the result. Our big credit card was with Chase, I can only imagine what they will do when we are close to paying it off but I can’t wait for when it is!
There are people who pay cash for everything, God love them and I wish I were one of them. I’m trying to be, but do you know what their credit score is? Who cares is the answer, when you pay cash for everything then who cares. There will be a problem however if they ever try to use credit, but that’s another topic.
Life is a balancing act, the huge percentage of us use credit because there would be no way to buy our house with cash, or our car or heck maybe not even a TV. When we start out on our own we want these things and use credit to get them. Man how I wish I was smarter when I was younger. My best friend will be in great shape come retirement time, he, has been smart.
Ronda and I are 50 and darn near 50, it took us a long long time to realize that we don’t need all of this stuff. I have my own business and to stay in business I had to purchase the gear to be competitive, it’s a hard balance to compete and not use credit. Anyway we no longer want all of this stuff so a little over a year ago we decided to scale back. I have diabetes and it’s a battle, even people who have better control over it than I do have a lower life expectancy than the average person so this is why we decided to buy an RV in 2010 when we should have waited until we were in better shape. Still, we should have waited until this year anyway, again lesson learned…
Our income is very good, but when your debt is as high as ours is, you can’t tell that your income is very good. Ironic isn’t it. I learn lessons the hard way but I learn them. Unfortunately I pretty much know with my sports injuries and diabetes I probably won’t make it to retirement age and if I do my ability to do many of the things I do now will more than likely be greatly diminished. I am walking a lot, trying to get into better shape and lose weight, I’m making progress on all of it but I know what I know, don’t ask me how. I would explain it but I can’t do that here, as much as I’d like to. That’s as far as I can go.
Regarding the Dutch Star, I spoke with the finance guy and he explained that he was shooting for a top tier rate of 5.2% and declining offers of anything higher. So, right now he is working on seeing what these same banks will offer. Funny isn’t it, they deny you a lower payment because of risk, but will qualify you for a much higher payment because of the higher rate that makes it harder for you to afford. The deal is dead as far as I’m concerned but if he thinks he can get us in at 6%, we would think about it.
Have a great day folks and thanks for stopping by “As the Erik’s Rantz Blog Turns” soap opera, tune in again tomorrow for the next episode!