You Can't Half-Ride The FICO Horse

Hannah wants to know if they should close their credit card accounts. Her husband is hesitant to do it because he's afraid it will hurt their credit rating.

QUESTION: Hannah in Los Angeles wants to know if they should close their credit card accounts. Her husband is hesitant to do it because he’s afraid it will hurt their credit rating. Dave says it will, but if they’re going to stay out of debt, it doesn’t matter.

ANSWER: It will lower your FICO score. But I got confused here. I thought this guy was enthused about doing a Total Money Makeover and was not worried about being in debt. If you’re not going to go into debt, why do you need a FICO score?

He has a disconnect here. What happened is he kind of reverted back to his old self, which was a FICO worshipper, and I’m not a FICO worshipper. I don’t want you to set out on purpose to destroy your credit. That would be silly. But if you do something in the name of getting out of debt and staying out of debt that is financially healthy and that dings your credit a little bit, big deal. My credit score is zero and has been for many years. How do I survive? Financial health. I have money. How do I have money? I quit giving it to the bank to keep my FICO score up.

If you quit borrowing money, your credit score is going to go down. Your credit score is 100% based on you borrowing money and paying it back with interest on time. It’s not based on you doing smart things financially. It’s based on you loving debt. When you quit playing kissy-face with the bank, your credit score’s going to go down anyway. If you close all your accounts and quit borrowing money right now, in 18 months, your credit score will be zero. How distressing is that? It’s not distressing unless you’re going to go borrow money using your credit score.

I would close the accounts. The problem is you can’t half-ride this horse. You have to decide which way you’re going. You either have to worship at the altar of the great FICO or decide that you’re not going to borrow money and the FICO score is going to go away.

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