Do you, or someone you know personally, have a ZERO credit score like Dave Ramsey talks about? - Mothering Forums

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#1 of 172 Old 03-16-2011, 02:24 PM - Thread Starter
 
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I've never met anyone who has.... and I'm wondering how it effects their life if they're not a billionaire.

 

I'm nowhere near being able to have a blank credit report, but when I pay off my mortgage, I think I want to take the plunge and close the credit card and be 100% credit free.  But it's a big leap of faith!

 

So, does a zero score really exist?!?


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#2 of 172 Old 03-16-2011, 02:51 PM
 
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Oh, man!  Someday...

 

I think all the time how wonderful it would be!  DH and I have little debt.  We did have to recently take out a small car loan, but once we have our debt paid off and finance a house, we'll hopefully never use credit again.  I would totally cancel my credit cards right now if I didn't have to maintain a good score for when we buy a house.  Unfortunately, as a SAHM married to a public school teacher, I don't anticipate being able to buy a house outright, especially as we haven't even begun saving for a house at all yet. 

 

Once again... someday!

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#3 of 172 Old 03-16-2011, 03:14 PM
 
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Well, we got down to just a car lease and an Amex card (so no revolving balance) and our score dropped.  It went back up when we bought a new house and had to take out a mortgage.

 

Really irritates me that your credit score suffers if you pay off a mortgage. 

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#4 of 172 Old 03-16-2011, 03:26 PM
 
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I do not know of any personally but I imagine Amy Dacyczyn does from the Tightwad Gazette.

 

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#5 of 172 Old 03-16-2011, 03:55 PM
 
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Don't insurance companies use your score to determine your rates?

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#6 of 172 Old 03-16-2011, 04:13 PM
 
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Some insurance companies do.


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#7 of 172 Old 03-16-2011, 05:08 PM
 
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Quote:
Originally Posted by cristina47454 View Post

Don't insurance companies use your score to determine your rates?



You can go through a company that uses an underwriter. It's a longer and more complicated process, but it's doable. You won't be able to use Progressive or companies like that without paying a lot for your insurance.

 

I've thought a lot about it, and while I detest the system, I also fear having a blank credit report (and it's not a zero, it doesn't exist for people in this situation) in case of a catastrophic event that would cause us to *need* credit desperately (medical emergency, someone stuck in a country with a major disaster and needs money to get home, etc.).  


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#8 of 172 Old 03-16-2011, 07:03 PM
 
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Actually it is not a lot more for insurance that is a myth. A credit score is based on the fact you are paying interest. So you might be paying for cheaper insurance but in the long run you are paying a lot more.

I still do not see the need for credit when one plans and has an emergency fund in place for unexpected emergencies.


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#9 of 172 Old 03-17-2011, 06:06 AM
 
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Originally Posted by mum4boys View Post

...

I still do not see the need for credit when one plans and has an emergency fund in place for unexpected emergencies.



Because no matter what, something could come up that would exceed your emergency fund.

 

Let's say you have $2M in cash (money market, stocks, whatever - easily made liquid) and you have a catastrophic medical issue.  You can no longer work and in a couple of years you've hit your lifetime cap on insurance.  Your medical costs are....let's say $300K a year.  What do you do once you run through that $2M?  If you can't borrow against your house or finance those medical costs where will you be?  Yes, you can declare bankruptcy but you still need something to live off of, as does your family.


Smaller scenario - you are on vacation, stuck without access to a commercial flight and your only option is to charter a plane.  Can you do it?  Do you have the available credit?  We came within about 20 minutes of doing this once.  It was going to be $8K.  You aren't going to have that much cash on you and they aren't fueling the jet without payment.

 

We've been without income for about 18 months now.  Our cash reserve is probably a bit more than most but we still have expenses.  Knowing we have a lot of equity in the house we could tap into if needed is comforting.  In fact, before we sold our old house, that was part of our long term "SHTF" plan - pull a mortgage on it.  If needed, that would have solved a lot of problems.  Knowing we have the means to finance a car if something happens to ours is good.  I don't want to write a check for a car right now, I'd rather have the cash until we have income again.

 

No matter how much you have (let's say within reason, assuming you are not independently wealthy in the over 20 million in cash category) there are scenarios where you may need to finance something.

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#10 of 172 Old 03-17-2011, 08:28 AM
 
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I would never ever borrow cash without a job. We have lived without credit now for 10 years. We have had some really hard times but have never ever resorted to getting a credit card or tapping into a line of credit. When I say hard times I mean, less then $10.00, no gas and a child in the hospital. If something comes up that exceeds are emergency fund, we do without or we think of some other way to get by. It is a different mindset.


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#11 of 172 Old 03-17-2011, 09:47 AM - Thread Starter
 
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I am confident in my ability to live without credit (goal: BS #7 by 12-31-2014!!) but I am really curious if people will actually achieve a zero credit score if they have no accounts open.  I just reviewed my credit reports (like I do every year) and a mortgage that was closed 8 years ago was somehow in the "active" accounts again on one of my 3 reports (Experian, I think).  Now unless I've missed that for 8 years running (which I doubt; I go over it with a fine toothed comb every year) it mysteriously went from closed to not closed (but not reported on since 3-03).  I disputed it; wonder how long it'll take...

 

There's a lot of old stuff on there.. like a Victoria's Secret card I opened in 1997 and used once, date of last "activity" 2001, still under my closed accounts.  I have 7 of those still lingering. 

 

Supposedly after 6 months of all closed accounts it goes to zero.  Dave Ramsey is the only one I've ever heard achieve this, and I wonder how much time he (or a staffer) took to manually get every single thing off of there so he has zero score and a blank report... he claims there's nothing on there, just a blank sheet.

 

Maybe I can find the elusive owner of a zero credit score on Dave's messaging boards.  I've never heard a caller who has one (and I've been listening almost daily for years).

 

Continuing my snipe hunt...


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#12 of 172 Old 03-17-2011, 11:15 AM
 
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well if you have ever opened any kind of account (utilites etc) then you will probably have some kind of credit score.  at any rate x and I didn't use credit for 10 years and we did great, even bought our house with cash


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#13 of 172 Old 03-17-2011, 11:21 AM - Thread Starter
 
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Wow, good for you!!!  Must be a nice feeling...

 

I've never seen utilities/ cell phone report to my credit report; I know they check it but I've never seen them listed...


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#14 of 172 Old 03-17-2011, 11:38 AM
 
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We did until we bought our current house.  Our previous mortgage was paid and other than utilities and monthly bills (we pay our own health insurance) we had 0 debt.  It is possible!  We saved as much as we could for the down payment on where we live now.

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#15 of 172 Old 03-17-2011, 11:52 AM
 
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Yeah, I don't know if it's really possible to have a 0 score. We have no debt at all (mortgage paid off) and my score is still in the 600s. 


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#16 of 172 Old 03-17-2011, 11:53 AM
 
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I don't know if it's "zero" but when we filled out loan paperwork to get a mortgage (we didn't end up buying) the lender said my husband's credit made it look like he didn't even exist lol.gif He said it wasn't a bad score, there was *no* score. I guess that's what it means?

 

We don't use any kind of credit at all, although I personally am not debt-free. The one large debt I have is removed from my credit (it's dropped off) but I still 'owe' it. Although, I don't pay it due to principle (I didn't incur the debt but it's mine, long story).

 

Anyway, we don't have a problem not using credit and I pray we will always be able to avoid it. I really, really dislike the idea of financing anything except possibly a house someday.


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#17 of 172 Old 03-17-2011, 12:04 PM
 
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No score is the same as a bad score. You get bad rates, they require huge deposits and getting credit is very difficult.
 

Quote:
Originally Posted by cristina47454 View Post

Don't insurance companies use your score to determine your rates?



Somewhat, they also use your history with them so your rates do drop as the time you've held the policy increases. But you're tied to that company. I don't understand why having no credit history would be a good thing. It's like people who don't get birth certificates for their children, you don't realize how much use it is because it's so automatic. The utility deposits with no credit score are no fun. It's just plain irritating to have more than $1000 tied up in nothing at all.

 


 

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Originally Posted by mum4boys View Post

Actually it is not a lot more for insurance that is a myth. A credit score is based on the fact you are paying interest. So you might be paying for cheaper insurance but in the long run you are paying a lot more.

I still do not see the need for credit when one plans and has an emergency fund in place for unexpected emergencies.



A credit score is not based on paying interest. You can have a great credit score without having any debt at all.

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I would never ever borrow cash without a job. We have lived without credit now for 10 years. We have had some really hard times but have never ever resorted to getting a credit card or tapping into a line of credit. When I say hard times I mean, less then $10.00, no gas and a child in the hospital. If something comes up that exceeds are emergency fund, we do without or we think of some other way to get by. It is a different mindset.



First, I didn't say no job, I said no income.  Not everyone's income is tied to a traditional job.

 

Second, so if you have $10 in the bank and a child in the hospital and your emergency fund is depleted so you have access to $10 in all the world BUT you have a house valued at $500K just sitting there, you wouldn't take out a mortgage to access that cash until it sold?  Really?  You'd be without transportation of any kind, scavenge for food and allow the ....state?  ...foster system?  ...other taxpayers?  to take care of your sick child because you won't take out debt?  That's a very naive, black and white view of the world.  Works for making absolute statements on a message board but not so much in real life when you are faced with tough choices.

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#19 of 172 Old 03-17-2011, 12:59 PM
 
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How is no score the same as a bad score when my husband has zero debt? We just don't use credit (thank God). We don't believe in buying things you can't afford with the only exception being a house possibly. We did get the mortgage btw, with a great rate...(we chose not to buy at that time though).  We've never had a problem getting insurance, utility with low deposits, and we even qualified for this apartment at the lowest deposit level (meaning, lowest 'risk'). We were told we'd have a higher down payment than typical when we looked into financing a vehicle but it wasn't insane or anything. Clearly choosing not to play the credit game hasn't hurt us but I'm not sure how it's "the same" as bad credit. I'm genuinely asking.

 

I don't see it at all the same as not getting a birth certificate for your child (though the credit card companies would have you believe it is lol). You need a BC to prove your actual identity. We haven't gotten that far with credit (yet) and I am very pleased to see people refusing to play the game, by choice.


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#20 of 172 Old 03-17-2011, 01:33 PM
 
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I know several years ago my dad needed to buy 5 figures worth of seed corn and the supplier did a credit check on him and it turned up nothing.  The supplier expected a cash deposit that he paid with no issues 

He hasn't had a bank loan since the early 1970's and has never had a credit card.  He lives life just fine and since my mom would be the one to book a hotel (and she has a credit card) it has never been an issue any other times.

 

DH and I have had no debt since 2007 (and haven't applied for any new credit since about 2004) but when I ran a report a couple of months ago it still plenty of items that show up.  On mine utilities did show up and so did the name of my cell phones provider. Since I don't plan on getting rid of either of these anytime soon I don't think I'll get to Zero credit like my old man.

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Originally Posted by mnnice View Post

 

DH and I have had no debt since 2007 (and haven't applied for any new credit since about 2004) but when I ran a report a couple of months ago it still plenty of items that show up.  On mine utilities did show up and so did the name of my cell phones provider. Since I don't plan on getting rid of either of these anytime soon I don't think I'll get to Zero credit like my old man.


Good for your dad!  Gotta love those old farmers.....

 

I think even if I closed the credit card and paid of the mortgage today, I'd never have a blank credit report... there's 20 pages of stuff on there!  And it's all from over 6 years ago!

 


 

Quote:
Originally Posted by Delicateflower View Post

 I don't understand why having no credit history would be a good thing. 

 

Someday my mortgage will be paid off, and credit card companies are such %#&$^@* that I'd love to close it based on principle (I only use it a few times a year to get a good FICO score).  So if my plan works out and I live by my principles I'll have no debt and no credit, not because I think it's great but because that's the end result of my plan.  Hopefully.  Too bad FICO can't see beyond their formulas for people who operate on 100% cash.  


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#22 of 172 Old 03-17-2011, 02:32 PM
 
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Originally Posted by Delicateflower View Post

No score is the same as a bad score. You get bad rates, they require huge deposits and getting credit is very difficult.
 



Somewhat, they also use your history with them so your rates do drop as the time you've held the policy increases. But you're tied to that company. I don't understand why having no credit history would be a good thing. It's like people who don't get birth certificates for their children, you don't realize how much use it is because it's so automatic. The utility deposits with no credit score are no fun. It's just plain irritating to have more than $1000 tied up in nothing at all.

 


 



A credit score is not based on paying interest. You can have a great credit score without having any debt at all.



 


Sorry I meant to say debt.

 

What your credit score is based on:

 

 How is your FICO score determined?

  • 35% of your score is based on your debt history.
  • 30% is based on your debt level.
  • 15% is based on the length of time you’ve been in debt.
  • 10% is based on new debt.
  •  10% is based on type of debt.


 

Quote:
Originally Posted by ChristyMarie View Post





First, I didn't say no job, I said no income.  Not everyone's income is tied to a traditional job.

 

Second, so if you have $10 in the bank and a child in the hospital and your emergency fund is depleted so you have access to $10 in all the world BUT you have a house valued at $500K just sitting there, you wouldn't take out a mortgage to access that cash until it sold?  Really?  You'd be without transportation of any kind, scavenge for food and allow the ....state?  ...foster system?  ...other taxpayers?  to take care of your sick child because you won't take out debt?  That's a very naive, black and white view of the world.  Works for making absolute statements on a message board but not so much in real life when you are faced with tough choices.



 No, I am not going into debt. Is that statement hard to understand? We only spend within our means. For us that means what we can pay for cash in hand. If we do not have the cash then we do not buy it. It is that simple. How do you equate that I was unable to take care of a sick child because I would not take out any debt? What we did is lived within our means. We not only managed we thrived because we did not have to worry about how we were going to pay back any debt we had incurred. We did not have declare bankruptcy because we could not afford to pay back what we had borrowed. If we could not afford to pay for those expenses then, how the heck can we afford to pay for them at a later date with interesting incurring?  It works in real life because we have been there before as we do have a special needs child. We did use to charge gas, food etc. when things looked grim. We ran up a lot of debt. Debt that was considered necessary at the time. We choose to no longer live like this. Not only are we not living like that we have done it now for over a decade. Not only that we have gone another step and have chosen to live off of one income. It is pretty hard for some people to fathom that we can make it without any assistance but we do just fine. There is a heck of a lot less stress in our life because of it.  It is funny how some people take this statement very personally like it is a direct attack about how they handle their finances. No where did the OP or I say that other people have to live this way. Again, we choose to live this way and it is very workable. 

 


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#23 of 172 Old 03-17-2011, 03:20 PM
 
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Yes and it sucks. :(  I moved abroad almost immediately after college (I went to a college that between scholarships and what I earned during summers I could pay off in full).  I did have a credit card in college but never used it.  Anyways, when we moved back to the US I had no credit  and DH had never lived in the US so he didn't either.  It was HORRIBLE.  We couldn't get cell phones (had to pay $400 in a deposit that they held for a year), no one would rent to us, and we had to pay all for furnishing an entire apt from scratch  out of over savings (i.e. we were really living with the bare necessities). 

 

I can see how this would be realistic if you lived in the same place all your life or if you had a ton of money but otherwise I'm baffled how other people could do this without a ton of added stress.  dizzy.gif

 

FWIW, we just went through THE EXACT SAME THING after moving to a new country recently.  It's great that we don't have any debt (and have never had any) but let me tell you sometimes I wish I HAD taken out a loan in college just so I would've had some credit (and isn't that ridiculous the way it works? but that's another rant).

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physmom, I have friends who have recently been in a similar situation. They're very frugal and have no debt, but they had to move out of their rental (it was sold) and were looking to buy a house themselves, but because they had no credit (also no debt) they couldn't qualify for a loan. They're renting for another year and trying to build up their credit rating so they can buy next year.

 


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#25 of 172 Old 03-17-2011, 04:24 PM
 
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physmom, I have friends who have recently been in a similar situation. They're very frugal and have no debt, but they had to move out of their rental (it was sold) and were looking to buy a house themselves, but because they had no credit (also no debt) they couldn't qualify for a loan. They're renting for another year and trying to build up their credit rating so they can buy next year.

 



That's almost our exact situation at the moment.  We'd actually save A LOT of money if we could buy  but we have no credit so it won't happen for awhile.  So in the meantime we're working on saving up a hefty down payment.

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#26 of 172 Old 03-17-2011, 04:26 PM
 
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You do not need credit to get a mortgage. You just need to use a place that manual writes their mortgages. Yes places like this exist in the USA.

 

We rent (we will pay cash for our house if we do buy) and we have lived in 3 different areas of the USA. We have had no problems getting a rental because we have never rented from a corporation since we have gone debt free.  There are a lot more landlords out there that do not prescribe to a credit score as a way to determine if you are worthy to live in their home.

 

Being debt free/credit free requires a different way of thinking. It is not going to work if you still keep your traditional beliefs about debt. You also have to want to do it.  It does not take tons of cash to be debt free. It just takes a desire.


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#27 of 172 Old 03-18-2011, 06:37 AM
 
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You do not need credit to get a mortgage. You just need to use a place that manual writes their mortgages. Yes places like this exist in the USA.

 

.



I'm curious about these places.  Can you be more specific?  Are they established companies or bank?  I'm wondering how it works, interest rates, etc.  Before the housing crash, no-doc and low-doc mortgages were common, which I guess is different from a strictly no credit mortgage proposition, but I don't think those are very easy to obtain any longer, and are generally frowned upon.

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#28 of 172 Old 03-18-2011, 07:23 AM
 
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I'm curious about these places.  Can you be more specific?  Are they established companies or bank?  I'm wondering how it works, interest rates, etc.  Before the housing crash, no-doc and low-doc mortgages were common, which I guess is different from a strictly no credit mortgage proposition, but I don't think those are very easy to obtain any longer, and are generally frowned upon.




FWIW, we have yet to find any banks that would do that.  We also lived in a part of the US that would not rent to you if you didn't have credit (well, you could but you'd have to pay a years worth of rent ahead of time, which was definitely NOT feasible for us).  I would guess you'd probably have this more in smaller towns or if you had banked at a certain institute for a number of years.  For a couple coming abroad without any banking history there would've been no way they would've done that for us. 

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#29 of 172 Old 03-18-2011, 08:20 AM
 
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Originally Posted by karne View Post





I'm curious about these places.  Can you be more specific?  Are they established companies or bank?  I'm wondering how it works, interest rates, etc.  Before the housing crash, no-doc and low-doc mortgages were common, which I guess is different from a strictly no credit mortgage proposition, but I don't think those are very easy to obtain any longer, and are generally frowned upon.



Churchhill mortgage is the one Dave Ramsey recommends: From his site:

 

  • Put at least 20% down on your home.
  • Choose a 15-year, fixed-rate conventional mortgage.
  • Have a strong employment history and personal income to support the loan.
  • Demonstrate 4–6 trade lines that span 18–24 months. These are just regularly recurring expenses such as rent, electric bills, water bills, cell phones, etc.

 

Also, your old credit history has to be in good shape. Even if you have a zero score, the old history is still there and impacts the loan decision. If you have an old history of late or missing payments, then you could have some problems.

 

We knew a couple that did this locally. I am pretty sure they used a local bank in Seattle, Home Street Bank. They had VA and did not have to put anything down. I have no idea what their credit score was but they were debt free and no credit cards.

 


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Quote:
Originally Posted by beanma View Post

physmom, I have friends who have recently been in a similar situation. They're very frugal and have no debt, but they had to move out of their rental (it was sold) and were looking to buy a house themselves, but because they had no credit (also no debt) they couldn't qualify for a loan. They're renting for another year and trying to build up their credit rating so they can buy next year.

 



We have a friend of the family who is also in this boat.  Niether husband or wife ever had a loan. They rented a house, utilities included, from someone they knew.  According to the bank, they have zero credit history.   They are looking to buy a house but can't get approved for a conventional loan.

 

Now they are looking at small, local independent banks (there are still a few in the area) that keep mortgages in-house.  Unfortunately, they will be paying a higher interest rate and will have a shorter amortization period then if they could qualify for a conventional loan.

 

Off topic rant - I used to work at a bank and would review credit reports daily and I think the systems is crap.  I would see people with very high incomes and little debt with medium scores and then someone with $35,000 in credit card debt with an income of $50,000 with an over 800 score.


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