Done with credit

I recently posted about the evil side of credit cards (you know, the true side).   I also recently made the decision to no longer concern myself about credit.

This decision didn’t come lightly, after all there are a lot of issues to consider before decided to take myself out of one of the biggest American pastimes.

Why I decided to stop using credit

I had a problem a few years back; I wanted to buy a new home and car, and my credit sucked.   This is not an unusual problem.   Many people deal with bad credit scores.   But I felt my score was specifically unfair.   I make over 5X the national average in income, I’m educated, and I pay my bills.   The problem is that at that point in my life, I had already kinda taken myself out of the credit game.

I was one of those people who just didn’t use credit.   This wasn’t an active decision, I just got a few bills while in college that I didn’t pay on time, and my credit was damaged.   When I applied for credit, I was turned down.   So I started a life of paying cash.   For the first 25 years of my life, the only credit card I had was the one Chase gave me when I was employed with the credit card division.

For over 30 years I paid cash for cars, used check cards, and was used to the idea of paying any extra deposits for not having established credit.   But now if I wanted a home, and a shiny new car, I had to fix my credit score.

Fixing my credit

I started the way most people start, I pulled a credit report from one of the “free” services that of course end up charging you for something.   I pulled all three major reports and was shocked by what I saw.   My FICO score was around 570, which was in the “Poor” range.

This was shocking because I pay my bills every month, and I don’t carry any lines of credit.   It ends up that’s not really the case.   I had several negatives on my credit report.   First, a collections from an old apartment that I rented.   Evidently they felt that I owed more than I thought when I left, and they were unable to collect, so they sold the debt to a collection agency.   Of course I can fight this, if I want to get an attorney, and file a lawsuit from another state.   This is one of the great things about credit reports, anyone can file anything, and it’s up to you to disprove it.

I also had something from FedEx who claimed that I owed them $21 for a package I sent.   I’m not sure how that worked out.   Then I had some reports from places I never heard of, but ended up being collection companies for things like small doctor billings that my insurance didn’t cover, mostly just routine stuff for my son’s checkups.   All in all, there were about 8 negative pieces of information on my report.

I did not have a single piece of good credit on my report.   I’m not naive, I worked for a credit card company, and as a loan office.   I know credit reports don’t report things like my electric bill, or rent, or my car insurance, unless of course I don’t pay them.   But looking at a credit report devoid of any sense of responsibility on my part was a bit unnerving.   Looking at this report, I would be suspicious of this person too.   The person this report paints is someone who just avoids paying bills, and evidently leaves his landlord high and dry.   It didn’t say anything that would tell a bank, “he pays his bills, makes a decent living and has traditionally paid cash for his cars and other purchases”.

Hiring a credit repair company

So I decided to research and hire a company to help me repair my damaged credit.   I knew enough to know that I had to start getting some positive credit.   So first I applied for secured cards.   A secured card lets you deposit money into an account (usually a CD) and they then give you a credit line in accordance to the amount you have in the CD.   I opened a few of these.

I then tackled researching and paying any debts on my report.   I started with the small stuff.   I tracked down phone numbers to the companies and inquired as to what the debt was.   I quickly found that these people don’t know what the debt is, they just want me to pay it.   I would love to have stood on principle on this, but since the amounts were so low, I just started paying them off.   I knocked out 4 of these debts in one day of research and phone calls.

I then hired the credit repair firm to do their thing.   These firms basically keep denying every negative on your report repeatedly, making the creditor file things to legitimize the claim over and over.   I quickly found that credit bureaus don’t like these companies.   The first letter I received back from the credit bureaus were all stall letters, things like “your social security number is incorrect, please verify”, or “we think someone might be trying to make fraudulent changes on your report”, and “please verify your mailing address”.   I responded to every one of these letters, and all the other stall letters they sent.

After 4 months I started to notice these items disappear from my credit report   And my score was starting to rise.   After 6 months, I only had two negatives, remaining, both showing as paid off.   I also had several positives with my new credit cards.   My score had risen to 615, nearly good enough to get approved for a FHA home loan.   This was encouraging, except for the fact that I learned my girlfriend, who was still a student, had a score of 720, with no real income and a ton of debt.   I was shocked by how much debt she actually carried, and her ability to get a car loan instantly while I was spending so much time to just get to the “fair” rating on my credit report.

Finally my score broke through.   I was able to get my car, with a lot of hassle, and my house, with almost as much hassle.   I accomplished my goal, my credit was fixed.   I was even sent a nice shiny gold Amex.   My wallet bling reward for working hard to repair my credit.   I also picked up a WaMu Visa with a decent limit.   After 18 months of work, my credit score was an average of 638.   Not as stellar as my unemployed, debt ridden girlfriend, but solid to be in the “fair” column.   But it was not meant to last.

Amex kills my card

After a few months of using my Amex for everything possible, in an attempt to earn a lot of frequent flier miles, I got a call about my card.   I had been pushing my spending to the limit, and then paying the card off early, so I could use it more.   Since I paid Amex 100% each month, there was also no credit ratio to worry about for my report.

The Amex person was very nice and told me that I could apply some of my balance to a revolving line.   I decided this might make sense, so I transferred a good amount of my current balance to that line, and paid off the rest as usual.   I kept this going for a while, until  I got an odd phone call.

I was driving from my home in southern Oregon to San Francisco so that I could fly to Hong Kong for a two week stay.   I got a call on my mobile phone from a guy saying he was from Amex.   He told me my spending had been significant, and they were concerned.   I assumed this was one of those, “your card may have been stolen” calls that Amex gives me weekly, but it wasn’t.   This guy was calling to complain about my spending.   He said that my spending didn’t match up to my stated income.   I told him that I used the card for business, and that I expensed out to get paid.   He stated again that they had allowed me to go way over my limit.   I reminded him that I pay the card off on average of twice per month.   But that didn’t make him any happier.   He then stated that he wanted to see my taxes!   I asked what good that would do.   He felt that they could then lower my limit.   I let him know that I was uneasy about giving anyone else my tax information, and if they want to lower my limit, that’s their prerogative.   I added that I was unable to do anything at that point because I was leaving the country.   He then told me that I had 24 hours to get him my taxes, or he would cut off my card.   He did better than that.   18 hours later I was checking into a hotel in Hong Kong when I was told that my Amex had been cancelled.

I was furious, but I went on with my trip, paying with my other cards, and cash.   When I got home my mail included a demand from Amex for me to pay everything, even my rotating line, immediately.   A couple months later, my credit report showed the account as being closed by creditor, and that I owed a significant amount of money.   Again, a very one sided story.

My other cards fall

I was pissed at Amex for blemishing my newly blessed credit score, but I quickly got over it.   I would just pay off the Amex, and go on with my life.   Over time the negative impact of the card cancellation, in which I had no part in, would go away.

But then I got a letter form another credit card, a smaller limit card.   They were lowering my limit.   I was surprised by this, since I never used the card.   But I just ignored it.   Over the past 18 months, I have had all but one, including my secured cards, cancelled on me.   And with each cancellation, my credit gets hit more and more.   My score is now lower than it was when I first started to repairing it.   If I needed to buy a house now, I would be screwed.   If I needed a new car, I would be paying cash. My credit is simply awful.

The medical billing effect on credit

I pulled my report again recently, and noticed it wasn’t jut credit card companies having their way with my credit, but doctors were having a go too.   I noticed two new negative pieces of information from collection companies.   One ended up stemming from a dentist, the other from a company that I had never heard of that evidently ran some blood test for my doctor.

I’m sure I’m not alone in the fact that when I go to the doctor, I get bills from a myriad of places telling me that they’re billing out my insurance for something.   But of course I don’t know who half these companies are, or what they want from me.   Evidently they want me to pay something my insurance did not.   And of course, these end up on my report as not being paid by me.

Do I need credit?

All this bothers me.   It’s a public slap across the face, a scarlet letter branding me as a deadbeat.   Even though I paid my bills, even though I make more money now than before, and even tough I have taken on more debt successfully with my house and car, I am branded as someone of poor financial character.

But then something occurred to me… it does not effect my daily life.   I already own a home, and it’s likely I won’t be upgrading soon.   And even if I wanted another mortgage, no one is getting them approved right now.   I don’t need a new car, and I will likely just pay cash for my next vehicle.   I don’t buy things on credit, I like to pay cash.   I’m much more focused on paying off my current car and house than looking at buying anything else.   So why would I care what the credit bureaus say about me.

Sure it may affect me if I change cell phone companies, I’ll just have to pay a deposit.   But I can’t think of a single other thing in my immediate future where I would have a personal credit report run.

I use my check card, and even opened up a separate debit card account for Internet purchases I don’t want connected to my checking account.   I have a small savings for emergencies, so I don’t need an emergency credit line.   So in a very real sense, I don’t need credit.

The high road in the credit game

After my epiphany on my lack of need for credit, I found myself feeling very self-righteous about the whole thing.   Not to get too politically subversive, but in a very real way, are credit cards not just another way for the “man to keep us down”?   Are they not just a way to pay for things we really cannot afford?   Most American’s are in debt.   This is not just due to the cost of living, but more to do with the cost of spending.   We are encouraged to spend money we don’t have through credit cards.   We are encouraged to buy cars we can’t afford through credit lines, and we are encouraged to buy houses beyond our limits through a financial system that has lead us to an economic collapse.

I feel good about my decision.   I no longer concern myself about the game of who thinks I owe them money.   The threat of what someone will do to my credit is no longer   an issue.   I simply don’t care.   I pay cash, I use my Visa check card for convenience, my debit card as a “credit card”, and will just focus on paying off what I have instead of acquiring more.

Why should I concern myself with Amex or WaMu (who got acquired and then canceled my card)?   They need me more than I need them.   So do your worst Experion and Transunion, and FU FICO.   I’m out of the credit game.

Let me know your thoughts about this.