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We know a simple way to improve your credit score that might surprise you : Pay off your debt, don’t add any new debt, and let your credit score go extinct. It’s time to improve your credit score by getting rid of it.
But don’t worry—having absolutely no credit score is a good thing!
Intrigued? We’ll break it down . . .
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What Is a Credit Score?
When it all boils down, a credit score is just a measure of how good you are at spending with debt. Your credit score doesn’t mean you’re winning with money. Not even close!
Related: The Truth About Your Credit Score
How Is a Credit Score Calculated?
According to FICO, your credit score is calculated like this:
- 35% is based on your payment history
- 30% is based on your debt level
- 15% is the length of time you’re in debt
- 10% is new debt
- 10% is the type of debt
You don’t see anything there about your bank account. There’s no mention of your monthly budget or any cash you have saved for emergencies and retirement. Your credit score is solely built on how much debt you have, what kind of debt you have, how long you’ve had it, and how you’ve paid on it. Anyone can borrow money and end up with a good credit score!
You Don’t Need a Credit Score to Win With Money
To put it another way, let’s say you inherited $10 million from a long-lost relative. Would that help your money situation? Absolutely! But your credit score wouldn’t change. Not even one point!
Staying away from debt means you are using cash to pay for your purchases and saying no to what you can’t afford. As a result, your wealth can grow through saving and investing. Instead of “needing” a credit score to validate how well you’re doing, your bank account balance can do that for you.
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Related: 3 Myths About Credit Scores
You Don’t Need a Credit Score to Buy a Home
Despite what your real estate agent says, you can buy a home without having a credit score. Find a company that still does manual underwriting, which is simply the process of making sure you’re a human who pays bills and has a job. They’ll verify employment, income and your payment history on things like utilities and rent. Remember, there are other ways to prove you pay your bills that don’t require you to have debt.
Not Having a Credit Score Is a Good Thing
Over time, growing your wealth and eliminating your debt will mean you have a lot of money and not a lot of bills. By then, your credit score should be just about gone. It’s countercultural, but who cares? You’ll have serious cash stocked up. And it’s a lot better to have a high bank account balance than a high credit score!
Related: Living Without a Credit Score: Your Top 3 Questions Answered
You CAN take control of your money! Getting rid of your credit score is just part of the journey. Not sure where to start? Check out Dave’s Financial Peace University for a step-by-step plan to eliminate your credit score and manage your money. Find a class in your area today!