Your credit score doesn’t make you cool

I want to both cringe and laugh uncontrollably when I hear someone tell me how “high” their credit score is. I put the word high in quotes because it is a completely subjective term. Most people start getting pretty proud around the 700 mark, and once they breach 800 it seems they want to shout their score from the roof tops. Sorry to burst your bubble peeps, but your credit score doesn’t make you cool.

I honestly have no idea what my credit score is. I’ve never checked it. I use to have student loans and a car payment, and I currently have recurring credit card accounts. I have a pretty good track record of making my payments on time so I’m gonna take a shot in the dark and assume I have a pretty okay score. You can get a free credit report score by doing a quick google search.

Do you know what the primary purpose is of your credit score? It tells lenders how likely you are to make your payments on time and pay back all that you borrowed. The higher your score, the better rates you get. Pretty straightforward stuff.

But what if you don’t like borrowing money? What if you are going to pay cash for your next car? What if you don’t care what the interest rate is on your Credit Card because you pay the bill in full each month? Hmmmm, suddenly your credit score becomes exponentially less important.

Instead of thinking you are super cool for having a high credit score, maybe you should be asking yourself why you even care? Are you really that excited about being deemed “qualified” to take on more debt?

Don’t get me wrong. I know the difference between a 6% interest rate and a 4% interest rate on a mortgage will save you tens of thousands of dollars over the life of the loan. I’m not at all trying to say people shouldn’t care about paying their bills on time, of course everyone should do their best to be fiscally responsible. But instead of manipulating my spending habits in hopes of them having a positive impact on my credit score (by doing things like taking on a car loan), I’d much rather pay cash and not even have to worry about it.

Long story short: I will NEVER, EVER, EVER put myself in further debt just for the sake of improving my score. And personally, I don’t think you should either.

We’ve allowed the credit score to become far too important in the way we evaluate one’s character (people can actually get denied employment because of a poor score). So today I take a stand and say “Bite me FICO score!” I’m not changing a darn thing.

Are you with me!?  Do you know people who appear to be pretty proud of themselves for having “great” credit? Do those people make you want to cry inside? Do you care about your credit score?

Too good to overlook.

Yesterday I asked you readers to get a little vulnerable and share what kind of debt you had. Many long time readers finally came out of hiding and decided to contribute to the conversation (special thanks to my creepy lurkers). At last glance there was nearly 150 comments left. Some utterly awesome, some terribly depressing, and of course, there was even some drama. I swear this blog could be its own soap opera…

Anwhoozle, I seriously read through every single comment –took me something like 2 hours (don’t make fun I’m a slow reader)– and I was fascinated to see where people stood. Some kicked debt in the uterus (my alternative blog name if I ever get sick of punching debt in the face)…

My debt punching experience began in 2008, when my husband and I got married and had $48,000 in debt. We were debt free in 11 months! In 2009, we bought a house for $95,000 and paid it off in one year. Flash forward to today and our net worth is $245,000. Our average income since 2008 has been $110,000 and our strategy is to live off one income. In your face, debt!

While other’s discussed how they use it to leverage investments…

I think I win for the most debt, about $800k total.

$100k @ 3.5% with 8 years left for rental property #1
$300k @ 3.5% with 15 years left for rental property #2
$400k @ 3.75% with 30 years left for current home

It’s a lot of debt but we break even on the rental properties and housing in our area is expensive so $400k for a home isn’t bad. We paid off about $100k of debt last year.

It’s funny how different people’s perspective on debt can be. Some love it, some hate it, and others are impartial. I’d put myself somewhere between hate and impartial.

Instead of distract from all the nuggets in yesterday’s comment thread by posting something unrelated up today, I simply want to encourage you to go back to that thread, if you haven’t already, and see how other people are doing. If you’re anything like me, you’re nosy and love getting in to other people’s business 🙂

Anything from yesterdays comments surprise you? I personally was surprised by how much debt some people have. I use to complain that my $28,000 student loan debt was overwhelming, but compared to many, I guess it ain’t so bad.

What kinda debt you got?

My blog’s name is Punch Debt In The Face. I use to talk about punching debt in the face quite a bit, but over the last year and a half or so the frequency of debt related posts has decreased, while my posts about marriage, savings, and unicorns have increased.

I’m assuming most of you don’t come here looking for profound financial wisdom (there are other blogs for that), but instead you read PDITF to see my silly stick figure drawings and to hopefully laugh at my attempts at being funny. My blogs biggest asset however, is unfortunately something that I really have no control over. You, my friends (and enemies), are my biggest asset.

The comments section of PDITF is off the hook exciting, it’s often educational and recently it’s been full of drama. Although I am the author of this poorly written blog, it’s your opinions and contributions –via comments– that keep many people coming back for more.

I titled this blog post “What kinda debt you got” so that you all could learn more about each other. So that you could see where your fellow PDITF reader stands. Some of you have hundreds of thousands of dollars in the bank and not a debt to your name. While others, have hundreds of thousands of dollars of debt, and not a penny to their name.

You hear my story a lot. You know pretty much everything there is to know about me (except my real name that is :)). It’s time for you to come out of hibernation and contribute to today’s discussion.

What kind, and how much, debt do you have?

p.s. I’m really hoping this posts gets upwards of a hundred comments. The more people that share, the better our understanding will be of where we stand against the masses. How ’bout it? You willing to be vulnerable today?

The best thing about being NOT broke.

Over the last seven days I’ve purchased seven round trip plane tickets, and I might be purchasing two more. Alaska Airlines has been running some crazy deals lately and we’ve been snatchin’ em up like a boss. It’s insane.

We knew when we moved to Seattle we’d be making trips back to San Diego pretty frequently. All three of Girl Ninja’s sisters live there. The oldest two are getting married and the youngest is graduating college. Between showers, graduations, and weddings, we knew we’d be dropping some serious coin on flights. We may be $1,500 poorer because of it, but are gaining “riches” in life experiences…right? That’s how I like to think of it at least.

And that my friends, is probably the best thing about being not broke. Having a little (or a lot) of cash in the bank can afford you some pretty awesome opportunities. It allows you the ability to take advantage of incredible deals when they pop up. It gives you stability in the event of an “Oh $#@!” emergency like a job loss or car crash. It gives you the freedom to experience things you may have otherwise missed out on like weddings and graduations.

There really is nothing else to be said. Financial freedom rocks my face off. Don’t be discouraged if you aren’t there yet. Stay the course. Work hard. Focus on the end goal. You didn’t get in debt overnight, and you probably wont get out if it overnight. Patience and perseverance is the name of this game.

Being not broke is awesome. I hope you are either right there with me, or plan to join me soon.

On a scale of broke to loaded where do you fall? Has your financial freedom allowed you to take advantage of any incredible deals or opportunities lately!?

p.s. I’ll be in Vegas all weekend so if you don’t hear from me on Monday I either struck it rich, or am dead.

How you doing? $63K in debt with a six figure income.

Last month I asked for PDITF readers to submit stories about how they’re doing. I was amazed by the feedback I received, overwhelmed even. Far more people expressed interest in contributing to the series than I anticipated. I couldn’t keep up with all the emails and submissions I was getting, so I avoided them instead  (Haha, like a true Ninja right?). I added the emails to my “To Do” list and haven’t paid much attention to them. I’m just now taking the time to look ’em over and get things worked out (sorry for the procrastination).

Today we are kicking the series off with  BR, a woman who doesn’t necessarily agree with her husband on how their six figure income should be allocated…

My name is BR, and I have been married to DH (dear husband) for about 18 months.

Together, DH and I make $100,500 before taxes. After taxes, 401(k) contributions, insurance and all that come out of our checks, we usually take home just over $62,000 a year. We both can get yearly bonuses (last year, I didn’t get one, but my husband got $8,000) and my husband gets a Christmas bonus at the end of each year, usually the amount of one paycheck, but again, this isn’t guaranteed, so I don’t count it as income.

Our debt:

  • Car loan- about $12,000
  • Truck loan- $16,000
  • My student loan- $8,900
  • Husband’s student loan- $26,700
  • Total debt: $63,600

When we got married, we had about $15,000 of credit card debt between the two of us. We set a goal to pay it off before our first anniversary, and actually did it two months ahead of schedule (thanks mostly to my husbands bonus)! We were both really relieved to be out from under that debt, but we completely disagreed on what to do next.

If I had my way, we would never go out to eat or buy anything that we don’t NEED until we have everything paid off. It would only take a year and a half, and then we would be free and clear! My husband feels like this is not reasonable, since all the debt is low-interest (what he calls ‘good debt’) and both our vehicles are worth more than what we owe on them. His bigger priority is saving for a house, since he feels that paying rent every month is throwing away money. He also thinks that going out to eat is fun and relaxing (I think he’s just trying to get out of doing the dishes :)) and he loves to go to the movies.

So, we compromised. We put $900 a month in our house fund, and then I pay whatever extra I can find in our budget on my student loan. We go out to eat once a week, and we each get $20 a week to spend on whatever we want. My $20 usually goes toward my student loan, but I also use it to thrift shop or get a haircut occasionally. While I would love to have my way, I am able to compromise with this, because our debt is no longer at a point where it keeps me up at night, like it did when we first got married. If push came to shove, we could sell our cars and reduce our debt to only student loans. Also, watching the balance on our savings account go up is super fun, and it is comforting to know that right now we could live for two months with what we have.

Really, we are not in a bad place at all. We spend much less than we earn, we save a decent amount, and we are working on paying off our debts. I get impatient, and really want to ‘punch debt in the face’, but at the end of the day I would rather have a peaceful marriage than no debt.

 

Ninja’s comment: If you want to submit your story for the “How you doing” series, shoot me an email.

The most comprehensive guide on “how to become debt free” ever written.

And now, as promised, The most comprehensive guide on “how to become debt free” ever written…

Spend less than you make.

-The end.

Are you hardcore?

A week or two ago, I wrote an article titled “You’re not debt free if you have debt.” It was a relatively successful post, receiving just shy of 70 comments. I’ve been meaning to address one of the comments left in the article….

My Rebuttal:

Stu, you sir are a Dumb-Dumb head. I can’t really argue with your logic since I see no flaws, but I can call you all sorts of hurtful things, like booger face, so I feel better about myself.

Even though I pay my credit card off in full each month, it’s still a debt. We’ve talked about “good” debt, and “bad” debt, but we haven’t talked about how YOU specifically use (or avoid) debt in your life. So today, I thought we could do just that. I’ll go first 🙂

Credit Cards:

I, Ninja, will continue to use my credit card as long as I pay the balance in full each month. I’ve made a personal commitment that if I ever miss a payment (yes, even by one day) I will immediately pay my balance off, cancel my card, and switch to a debit only system. Credit cards, if used responsibly, are a great tool.

Vehicle:

As for a car, although I don’t plan on buying a brand-new car anytime soon (never say never right?), I would be open to the idea of taking out a loan if I did. The loan’s APR would have to be less than the interest I earn on my personal savings (basically looking for a 0% offer). If I either had to pay $20,000 up front for the car, or could pay $20,000 back over the course of five years, I’m taking the 0% loan every time. Remember, liquidity is king, especially when it doesn’t cost you anything.

Home:

Although I am no home owner yet (praise the Lord), I do plan to be one within the next few years. Girl Ninja and I are plugging and chugging away at our goal to save $100,000 before we buy a house. We don’t know if we’ll end up putting $10k down, or $80k, but we sure as heck like the flexibility a big cash pile affords us. Ultimately our down payment amount will depend on our income, purchase price of the house, and interest on the loan (none of which we can predict at this point). I can tell you this though, unlike some PF gurus, I am totally comfortable taking out a 30 year mortgage. I’m also open to the idea of paying it down much, much sooner than that. I don’t have a firm “Our mortgage will be no more than 30% of our net income” policy like you might. All I know is I do NOT want to be one of those home owners that ends up hating home-ownership because it becomes a financial burden.

And that pretty much sums up what debt I personally find tolerable. I’m not a fan of second mortgages. I would never borrow money to invest it elsewhere. I would never take out a loan to start a business. I would never finance a luxury item like a boat, motorcycle, or vacation. I will never take out another student loan again. And I will never co-sign a loan, or lend a substantial amount of money, to a friend as long as I live. Never. Ever. EVER.

How does debt fit in to your life currently (what types of debt do you have)? What types of debts do you plan to continually utilize (auto loans, responsible CC use, mortgage)? What types of debts have you sworn off for good? Anyone sworn everything off?