You will never be as good as you are as when you are broke. ~ Carl Weisman
I recently went to purchase some bedroom furniture from one of the national retail chains. They had a deal that was too good to turn down. The deal was, if I applied for their in-store credit card and put my purchase on that card, I could take up to one year to pay it back, interest free.
I did not need to the put the purchase on credit, I could have paid cash. And I certainly did not need another credit card, but several thousand dollars interest free for a year, I would be crazy not to, so I did. Of course before I could get the credit, I had to give the sales clerk my social security number and she had to run a credit worthiness check on me—you know, the FICO score.
The score came back 845 or some such number. I did not pay particular attention to the number. But I do recall the sales clerk telling my that my credit score put me in the hundred percentile. Basically, I was as good a credit risk as there is.
Now with a score like that you might think I had the wealth of Bill Gates. Regrettably I don’t. Which just goes to show you that it is not you wealth that gets you a high credit score, but your (historically derived) trustworthiness.
What is interesting is not that my credit score is so high. What is interesting is that I “earned” that score during the worst financial period of my life. I had little to no income and owed thousands of dollars to the IRS and a few credit cards. It was how I chose to deal with those debts that created my “trustworthiness.”
At the time of my deep indebtedness, it was during a period, like now, with low interest rates. There were a lot of credit cards that offered twelve month teaser rates on balance transfers. Some offered 1.99%, but others offered 0%. Now there was almost always a transfer fee of $50 or so, but when you owe five or ten thousand dollars on a credit card, paying $50 for 0% interest is a steal. So that is what I did, year after year. Always transferring the balance to a new card just as the old card’s teaser rate was about to expire. And all the time paying whatever I could, usually a couple hundred dollars, month after month. During all those years it took to pay off my debts, the very last thing on my mind was my credit score. I was trying to get out of debt, not take on more. It just so happened that a byproduct of my financial gymnastics displayed to the financial gods my trustworthiness and boosted the heck out of my credit score.
I never expect to be in that financial condition again, but it taught me a lot. If I owed $50,000 to fifty different creditors and all I had in my checking account was $50, I would send each of them a buck toward my debt. It may not save my credit rating, but it would let them know I am alive, I have not forgotten them, I care about what I owe them and that I can be trusted to pay them back, eventually. After all, credit worthiness is not about money, it’s about trust.
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