Life on the edge — Living with a credit score of 0 (zero)

Forget skydiving…if you really want to live life on the edge, try living with a credit score of zero.

In March of 2009, I checked my credit score to make sure Kate and I were ready to apply for a home loan when the time was right. At the time, I had a decent credit score (718) and assumed all was well.

In June of 2009, I applied for a mortgage online. Our loan representative called me immediately and said something like this:

I’m looking at your credit history, and it’s excellent.
During the last few years, I can see that you made all of your payments on time, in full.
Your credit score is currently a 0 (zero).
That’s a problem.

My first thought was “You’ve got to be kidding me. You’ve got the wrong guy.”

Here’s what happened.

When I graduated from college in 2006, I paid off my student loans very quickly. Even though wonderfully generous loan companies give you money for your education, they expect you to repay the principal (fair enough) plus interest over a long period of time (not so fair). Since I took a few math courses in college, it seemed like a good idea to pay off the principal as soon as possible to avoid paying thousands of dollars in interest.

I guess I was wrong.

I later learned that my quick loan repayment meant that my credit score only had a 12 month window to benefit from my financial responsibility. By the time we applied for a mortgage, I hadn’t made any debt related payments in over 12 months and the credit bureaus “could not determine my ability to make payments on a loan.”

What a joke.

Other factors also brought my credit score to its proverbial knees:

  • We live within our means.
  • We only spend money we actually have.
  • We pay for everything in full.
  • We do not have a credit card.

Even though these credit bureaus had all of my credit history at their fingertips (college loans completely paid off in less than a year, no late utility payments, etc..) they still assigned me a credit score of 0 (zero).

The message: You must have debt to get a good credit score.

I was actually being punished for my financial stewardship. Because I did not adhere to the system (the same system that drives millions of Americans deeper into debt each year), I had to jump through hoops to get us approved for a home mortgage.

Good thing I enjoy jumping through hoops.

I spent the entire month of June contacting past utility vendors for “letters of alternative credit.” Most of them wouldn’t provide these letters, in spite of the fact that I paid them thousands of dollars over the course of my short adult life. I guess it’s unreasonable for the consumer to actually request something from the corporation.

Let me recap some of the ironies so you can learn or repeat my mistakes:

  • You should have lots of debt if you want a good credit score. Debt is good.
  • Don’t pay things off quickly. That would be unwise.
  • Get as many credit cards as you can. They will help you.

In retrospect, what I’ve really learned is that Fair Isaac Corporation (responsible for FICO scores) wields a dangerously powerful and highly illogical control over lending in this country. If you’re not willing to adhere to their system, you may end up with a credit score of 0 (zero).

Life on the edge.


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  1. 1

    Its not been a full year yet, but saw a post come in through email, so I thought I would update my journey towards a new truck once more.
    Using the Credit Union loan plan mentioned above to work my score (from 0), and getting the $30/yr card (use 10 to 20% max and pay off each month), the score jumped enough that I got a call back from my C.U. on Friday: Im approved for $35K with 2.6% for a new truck (the new employment is helping as well!).
    Oh, and I just checked, Cap1 just recently (this week?) boosted my limit from $400 to $750, without me even asking. That adds to the “available credit” and helps when they calculate the score.
    Had a scare though when I was applying for the truck loan. I looked at my score and it had dropped 100 points in about a week. Turns out the wife had added me to her Home Depot card account ($500 limit that she got about 3 months ago, to help rebuild her credit, and we used for a new front deck), and it had a $300 balance, which affected my score (balance vs avail credit). I paid it up and once it all worked through, the score jumped back to a 729. Thats what got me the 2.6% interest rate on the forthcoming loan. Once I get the truck loan done, though, I will zero out all balances and lock all cards away in the safe, right next to my .45, as I consider both equally dangerous and for use only in emergency situations. Then I can go back to living on cash (except the new loan…cant quite save up $30K quick enough to buy one all cash, but I will be paying more each month to pay it off quicker).

  2. 2

    I am currently in a jam! I have a credit score of zero! I’m 51 years old, and I am looking for an apartment to rent. I have been living with my in laws for 6years and I want out. But the ads I’ve been seeing is if my credit report qualifies??? What?? So i decided to look at my credit report and oops, it’s a whooping ZERO. I don’t have a credit card, no loans, nothing. I just pay for what I need, I have a savings account. But that’s it! Geeze I’ve never had it so hard. I’ve applied for a few credit cards but obviously I don’t qualify. Whats wrong with not having debt??? I hate this how they try to force us to get in debt. I don’t even know how to fix my credit, everyone wants money to fix it!

  3. 3

    I see here many people with ‘0’ credit score are looking to borrow money. The way I see it is, if you are debt free and have no credit cards, you ABSOLUTELY need an emergency fund. Many of us, in the past, have used credit cards as our emergency fund. If you are trying to live debt free, how else can you pay for emergencies, buy and fix cars, appliances etc. with no cash? For some reason, we have all been brainwashed to think we have to use debt (credit card, heloc) when an emergency rises! Isn’t that just UN-common sense?!

  4. 4

    I ended up with a ‘0’ score after moving out of the country for nearly ten years. My only credit card went to collections, and they haven’t heard from me again, so it must have come off my record. I closed my bank account in the US about eight years ago. And my student loans have been paid off about four years ago. From what people are saying, I guess there is a crazy logic to it after all. Basically, in order to have debt, like taking out a loan, a mortgage, or financing a car, you must be able to show that you are good at maintaining your debt. So being good at having no debt does not mean that you can handle new debt, and being responsible in paying off debt quickly does not show that you are good at holding on to it for long periods of time while making good on your payments. And from what Josh is saying, he is not a good investment to creditors because he pays them off too quickly for them to make much money on the interest. So a debtor who pays a minimal amount of interest is almost as bad as the borrower who defaults on his loan completely. It seems like an all or nothing deal. You either plan on carrying debt and handling it properly or plan on never borrowing and always pay in cash.

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