Do I need good credit scores if I want to remain debt free?

[mappierce]

Just a thought... If I have no revolving credit card debt, and don't want any new loans ( I'm happy in my current home and have two paid for cars ) Should I go through the trouble of clearing up about $20K in old collections accounts? Would I be better off keeping the cash I now have as an emergency fund? I live on a cash only budget and don't want another credit card ever so does it matter what my credit score is?

[Amerikaner83]

well - if you don't need another car or house in several years, it's possible. But if you have 20K in collections, what's your state's SOL? They might come after you.

[Ahntara]

Bad credit and low credit scores impact more than just your desire to obtain new loans. Utility and other service providers pull credit, as do Insurance companies, potential employers and those screening for security clearance. The Insurance part will hit you the most, because of legal/contractual requirements. The others may just be occassional annoyances that ARE possible to avoid.

"...cleaning up...keeping the cash..."

These two are not exclusive of one another. Perhaps you are under the misconception that paying bad debt 'cleans' up your credit. This is not necessarily true. A paid collection is as bad as an unpaid one, to the score. While many lenders, and other concerned parties, like to see defaulted debts paid off; there gets to be a time when you have to weigh one factor against another.

And, since you own real estate, avoiding any legal encumberances (judgments) should be a high priority.

[LNY]

Excellent advice, Ahntara!

[mappierce]

Thanks all,

So, If I have a home I can afford, cars to drive and high quality, affordable insurance and cash in the bank, I should be able to continue to save my extra income and have it available to pay off old debt as I am able or as is necessary ( ie if judgements are threatened) In other words, no need to run out and expend all my energy and resources paying off old debt if #1 doing so won't help my score much, and #2 if I am not planning on seeking new credit anyway.

I do however want to be truly debt free though, so when I am able to pay off a debt where should I start? Oldest or youngest? Highest balance or lowest? Charge offs or collections?

Thanks!

[momof5]

Once again, you didn't answer the question about the age of the old debts nor what your state's SOL is. We need that data to advise you. Also...you need to read a learn about certain 'tricks' of the trade.

At times it is possible to get an OC to pull an acct back from collections and you pay the OC. That would get the CA off your report while you pay it.

My personal rule of thumb....If I pay a bad debt and you delete it, you are on the top of the heap of who gets paid. If the OC will pull it back from CA but leave their own derrogatory TL, they are in second position. If the OC won't pull it back from CA and CA won't PFD, then they DON'T GET PAID. It doesn't benefit me to pay. I will let it sit there, dispute it every 6 months until it ages off. I suppose if any ever filed a lawsuit, I would pay that immediately, but the 3 CA's I have left are only on TU and they are dormant. 2 - 3 years more and they are off the CR.

I lived cash and carry for a long time and my financial life was peaceful. No creditors or CAs calling the house! Ahhhhhhh! So nice. But, at the same time, I had nothing for large emergency expenses. I had no CCs to rent a car if needed or pay for an exhorbitant car repair. That was stressful at that time. It was nice to get my first debit card because even car rental companies treated it like a standard credit card (they don't anymore and hit you with a huge hold on your funds!).

In the end, you do what works for you.

[whocares]

we have been debt free, just one stupid Orchard secured card..I did not think I'd ever need credit...I had my house paid off, my cars paid off and all my bills were paid as they came in...BUT

When things changed in life I thought I would need a little credit...Credit is NOT debt...debt is when you use credit.

I had a score, low 500's and was refused for a job becuase of my bad debt.

I would advise cleaning up the mess, you never know hen you will need credit and it can have alot of adverse consequences if you don't

[LNY]

This advice is for everyone, not just the OP:

You have no idea what the future holds, no matter how sure you think you are right now. Your relationship may change or end. You may have or expand a family, and need a different home. You may lose your job, want a new one or be relocated. You may want to change cellphone or utility companies. Your car may die... you may need a new one or need to rent one. You may run into medical expenses not covered by your health insurance. You may want to do something as simple as ordering something online.

These things may not apply to you, or they might one day. And you will most likely need credit and/or a decent credit history for all of them. That's just the reality of modern life.

Look past today. And like whocares said, having credit is not the same as being in debt. And like *I* always say... you can have credit cards. You don't have to run them up.

[ShortBus]

I had a score, low 500's and was refused for a job becuase of my bad debt.

Just curious... what type of job were you refused and how do you know it was because of your credit?

[whocares]

The job was 157,000 a year, It was an IT job...required a security clearance...I could not get it because I had bad debts...I looked like a security risk...Like I might trade secrets for money.

But that is just one downfall of bad credit...Like someone said...utilities, deposits, even insurance is more costly.

You may not need it now...but having a clean credit record for a long time gives you a higher score...I recommend a few cards paid in full them sock drawer them...that simple act could last a long time

Good Luck