I canceled all my credit cards. I had five open accounts: CareCredit, Kohl’s, Macy’s, Fifth Third, and Discover. All have had zero balances for months or even years, except Discover which I paid off for the last time in September 2013 (and CareCredit which I never even used).
But Caitlin! You need credit cards to build good credit!
It’s true, having an open line of credit and making on time payments leads to a high credit score. However, your credit score doesn’t actually tell you you’re good with money. It is effectively your I Love Debt Score. It tells creditors how effectively you can borrow and pay back money.
Your credit score doesn’t factor in your income, or even your debt to income ratio. It doesn’t account for your savings accounts, investments, liquid assets, or net worth. All the credit score cares about is your debt.
When you say, “I need a credit score to buy a car,” what you’re really saying, whether or not you realize it, is: “I need debt so I can get bigger debt.” That is the wrong kind of debt snowball. To have a good credit score, you must go into debt, stay in debt, and pay your debt like a good debtor. This used to be my plan. This is no longer my plan. I am getting out of debt, entirely. I am going to be DEBT FREE.
How will you buy things? Egads! Do you know what pays for things, besides money you don’t have (debt)? Money you do have! Do you know what, besides credit, tells people how effectively you can pay money? A big pile of money. If you can pay cash for a car, I guarantee they don’t give a crap about your credit score.
I think my car was around $18,000. I really don’t remember. My payment was $325/month to start. If I had saved up that much money monthly for a year, I would have had enough money to buy a $4,000 car. Then I could drive that for another year while I did it again, sold the car, and bought a better car. And since my sister is still driving the car I had BEFORE I bought this one, I am confident I could have made it another year to save up for a car without a payment.
I assure you that if you walk in with a pile of hundred dollar bills, you will walk out with a car. Negotiate. And pay cash.
Same with a house. You don’t need a credit score to get a mortgage. There is a process called manual underwriting, which is basically when they take a look with their human eyes and human brains at your finances and determine your ability to repay a loan based on actual things like how much money you make and how you have managed it in the past. No I-Love-Debt score required. Not everyone can get a manually underwritten mortgage. You must:
- Have a 20%+ down payment
- Get a 15-year, fixed rate, conventional mortgage
- Have a strong employment history and personal income to support the loan
- Demonstrate 4-6 trade lines that span 18-24 months (regularly recurring expenses such as rent, electric bills, cell phone bills, etc.)
You CAN live without a credit score!
On to my pre-op plastectomy:
A plastectomy is the process of cutting up your credit cards. In “Pre-op,” I called all my credit card companies (I had five) to cancel my accounts.
First on my list: CareCredit. I opened this one because my Chiropractor suggested it to make my supplements more affordable by paying small payments instead of all up front. Big mistake! I never used the damn thing, and I am disappointed I even opened it.
Ease of closing: 9/10 – I was able to close the account via the automated message service. That’s handy. Minus one point for making me deal with an automated message service.
Next card: Kohl’s. Customer since 2010. I searched for “Close account” on the website, and got this:
Very helpful! I called. There was an automated message thing again, and I had to go through two menus, but they did offer an option for closing the account. I pressed two and was connected to a very helpful representative who took care of it without a problem. He did ask why I was closing it, and I said I was closing all of my accounts. He let me know that I could reapply at a later date if I wanted to open a new line of credit.
Ease of closing: 9/10 – talking to a human was good, but still minus a point because automated things are annoying and I had to look up their info on the website.
Next up: Macy’s. Cardholder since 2008. Searching for “Close account” on the website gets this:
None of those things are what I wanted. It was a chore to track down the right phone number, and the automated system did NOT provide an option for closing the account. It was one of the speech-based systems where you have to say out loud, “Operator” because pressing 0 like my life depended on it wasn’t working. The woman who handled my call seemed very sad to let me go and once again told me I could reapply in the future. She also asked why I was closing the account. I said, once again, I’m closing them all. Okay thanks, have a great day!
Ease of closing: 7/10. Minus three points for unhelpful website and stupid phone prompter. But it was pretty easy and quick.
Next: Fifth Third Bank. I think I’ve had it for a couple years. I called the customer service number and entered my card number. No option in the menu for closing an account, but I pressed zero and was immediately connected. The gentleman who took care of me was quick and very helpful, he just had me verify my name and zip code. He asked why I was closing the account, and I said “I’m getting out of debt and canceling all my cards!” He said “Can’t argue with that!” and took care of it immediately. He said that it would take 30 days for the account to be fully closed and taken off my reports, and that they’d report to the credit bureau that my account was closed at my request. Informative!
Ease of closing: 9/10. Really professional service, no arguments, but minus a point for the automated service giving me the runaround on a cancellation option.
Now, the one that has been with me through it all: Discover card. Member since 2008. This is the card I bought Egg McMuffins with when I was separated the first time. This is the card that bought my first set of Barenaked Ladies VIP passes. This is the card I dutifully ran up and paid off each month, the card that financed my first married Christmas “because we could afford nice things” (LOL), the card that is pretty and purple with a monogram C on it. The card that brought this summer’s Florida vacation home with me and allowed me to re-live all the money I spent while away from home.
Goodbye, Discover card. This one is tough. I saved it for last because it’s got the most history with me. It’s hard to give it up, because I still have a touch of the “Just in case I need it!” mentality, which is no good mentality to have. If an emergency puts me into debt, then I was just really unprepared. I now have a dedicated $1000 emergency fund. I have Aflac policies with cash payout in the event of medical emergencies (like cutting off my finger, or a cancer diagnosis, or a hospital stay). I have enough cash flow to handle it. I have to. If it comes down to it, I can sell my car and leave my apartment and go live with one of those dozens of people who opened their home to me when I asked. My credit line is not going to save me from anything, and credit is not to be used for emergencies. You’re supposed to save up and pay for your emergencies. I will save up to pay for my emergencies.
I had a feeling that Discover would give me a hard time about leaving. While they were very nice and courteous on the phone, they were the ONLY company that tried to get me to stay open.
“Can I ask why you’re leaving us, Miss Reed?”
“I’m getting out of debt so I’m closing all my credit accounts.”
“Getting out of debt. So no credit cards. Not even for an emergency?”
“What if you need to travel and buy something online?”
“I have a debit card.”
“Oh, well that would work, I guess. What if I could give you 0% for the next 6 months?”
“No, thank you.”
“Not enticing enough, huh?”
“Miss Reed, did you win the lottery by chance?”
“You do understand that by closing this account, you will have to reapply in the future to take advantage of the many benefits of Discover card?”
“And you still want to proceed?”
“Okay, well your account is closed, Miss Reed. Maybe we’ll see you again down the road.”
Ease of closing: 6/10. I mean, he did it easily, but he made me work for it.
Look at that. I now have no credit cards. Wow!
How does it feel to have no credit cards? It feels good, honestly. It feels really good. Now I have no ability to buy anything I can’t afford.
It is now IMPOSSIBLE for me to purchase something beyond my means.
I’m one step closer to being free!