My friend’s mother is probably rolling over in her grave. “Mom” was a very frugal lady. She didn’t buy a vehicle unless she had cash, she invested in real estate and she counted her pennies. Everyone was surprised to find out how much money she had when she passed away three years ago. My friend (let’s call her) Nancy was shocked when she discovered Mom had left instructions in her will for a home to be purchased for her. Free and clear.
Nancy and I lived in the same mobile home park six years ago – back when I was poor, on welfare and paying off my credit card debt. Actually we were both very poor. She has a permanent disability and at the time had not learned the skills necessary to venture out into the world on her own. Her husband had taken care of all her needs and taken her everywhere and passed away when he was fifty. Then her mother had settled into the position of helping her. About the time we met, she had pretty much been homebound for four years, but had finally gotten so sick and tired of her mother micromanaging her life that she had sought training to learn to venture out on her own and was finally starting to become independent.
We spent time together every single day; Nancy grew more and more independent and I was hired at my current job. We started growing apart a little, and after a year of working I moved out to the country. When her mother passed away she also was able to move from the mobile home park because her stepfather bought her a brand new condominium. She only had to be responsible for the yearly insurance and taxes.
Nancy and I lost touch for a couple of years, but then we settled into a twice yearly “date” around our birthdays. Mine is in May, hers is in October. So it works out pretty good.
She asked me if we stop by her finance office and sign the paperwork on her new loan. Of course I didn’t have a problem with that. Little did I know the appointment would turn into blogfodder.
A couple of years after I moved away, Nancy’s mother passed away. Nancy’s stepfather informed her that he was going to buy her a condo and put it in her name, as stated in her mother’s will. Nancy receives disability and also works part time. She makes a halfway decent living, considering she owns her home free and clear.
Well, now she doesn’t own her home free and clear, because the papers she was signing yesterday were for a 15 year mortgage.
Apparently about a year ago she found this finance office which helped her get a personal loan to pay off her credit cards. She laughed as she told me her daughter told her the trick was to keep from charging up the credit cards again. Apparently she wasn’t successful as she had seven cards with balances on them.
About two months ago, she decided she wanted a new bathtub installed. She has arthritis and it is hard for her to get in and out of the tub, so she wanted one of those tubs that has a little door that you open and get in and then sit down and it has bubblers in the seat. It’s just like a jacuzzi, she said. And it works wonders on her arthritic knees. This little beauty cost nearly $17,000.
She says her finance officer called last week to tell her that they could help her out with a loan to combine her credit card debt and get her a lower rate overall. My friend told the lady she’d been meaning to call her, because she needed to get her new bathtub refinanced because the interest fee was 28%!!
So now my friend has a 15 year fixed mortgage on her previously free and clear home. She is paying 11% interest. Her finance officer called her back with the good news: “We can pay for your bathtub, pay off all your credit cards AND give you an extra five thousand dollars to spend however you like!”
Nancy responded, “Well, I don’t need the five thousand dollars” and the lady answered, “Oh, that’s part of the package!”
I was thinking to myself how I could best use that $5000? Like maybe pay down that mortgage by $5000 right away?
So now my friend was telling me all the things she is planning to do now that her credit cards are down to zero again. She needs a security screen door installed (Home Depot card) and there is a high dollar item she’s been wanting for years that costs right around $5000.
I didn’t say anything. Who am I to say anything? She is an adult, and capable of making her own decisions. She has enough money coming in to pay for her new mortgage, which is costing her just under $500 a month. She says that is less than the bathtub payment and her credit cards combined.
To top it all off, she charged our dinner to a credit card. I think I need to send Nancy to this Guide for Getting Out of Credit Card Debt.
I guess I just have to be thankful that I don’t view credit in the same way. She was not stressed out at all about this new debt. She actually seemed really excited about it. Especially since her credit score is so high. I read on a blog recently about high credit scores being a sign you have plenty of debt – and that Dave Ramsey’s FICO score is 0.
This post was included in The Carnival of Money Stories #63, in June 2008 by Bible Money Matters.
Oh boy. Taking on new debt usually makes me sick to my stomach. Literally! Unfortunately, my husband is alot like your friend! I want a credit score like Dave Ramsey’s!
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I feel sorry for those kind of people.
I doubt Dave Ramsey’s Credit Score is 0. That implies that he has missed hundreds and hundreds of payments.
Anyone who has had a credit score at some point in the past has some kind of score.
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@Bettsi – Me, too!!! I hate it! Thanks for commenting! 🙂
@Elif – I just did a quick Google and saw a few references to Ramsey having a zero FICO. Apparently he hasn’t bought anything with credit in 7 years? I wouldn’t feel comfortable with that rating myself, and we are in the process of building up Mr. A’s credit rating by using a secured card in his name for gasoline and paying it in full every month.
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I feel the same about a friend of mine and the way she handles her finances. Like you, I hold my tongue and don’t say anything but inside I’m screaming “what are you doing???”
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A zero doesn’t mean you have a poor credit score. I’m going off memory but credit scores range somewhere between 380 (Which is poor) to 830 (very good) give or take 30 points on either end.
There are also a few other numbers outside thar range, such as zero, and other numbers which refer to specific unique classifications (missing score, deceased, etc.). I think zero simply means the score is missing, though I can’t remember as I usually just look it up when I need to.
Ramsey would have a blank credit score. If you don’t buy anything on credit for more than seven years then there is nothing to compute the FICO. Your credit history will be blank, and experian, transunion, or whoever you asked to tell you the score would simply tell you they can’t.
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@frugal chick: Thanks for visiting and commenting!! It is certainly uncomfortable seeing people handle credit in this way. I know it wouldn’t have done anything but alienate my friend had I said anything. Too bad.
@outthere Thanks for visiting and commenting, and explaining the zero rating. I guess Mr. A had a zero rating because when I tried to do a credit check on him, there was no record at all. We are attempting to build his credit rating with a secured credit card that he charges gasoline onto.
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Great story, Mrs A. Well told, that is.
Yes, Dave Ramsey has a a FICO score of zero because there is not enough info for them to calculate a score. he quit borrowing money something like 20 years ago. Trust me, elif, he doesn’t miss the payments!
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That is a sad story. I love being debt free, and we’re working to pay off our 30 year mortgage in half that time – and we will not be remortgaging the house once it’s paid for!
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Oh my goodness! That’s really sad. I hope it goes well for Nancy, but her situation is just a disaster waiting to happen.
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You think like I do — I’d much rather pay down my mortgage! But a lot of people must do what your friend does; I remember being offered a home equity loan on the day we signed our mortgage papers. I said, “Why would we want to go into MORE debt right now?” Our realtor just smiled knowingly. I’m sure he’d seen many people take the offer.
Also, we have a high credit score, and that mortgage is our only debt. We use credit cards but pay them off every month on time.
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WOW. That’s just insane that anyone would take a mortgage out on a house they own free and clear without some horrific need for it.
However, I take umbrage at the notion that a high credit score means loads of debt. I have a very high credit score- and have never had any debt up until this year when I bought a house (so now I have a 30 year mortgage). My credit score was high before I bought the house because I have a long credit history- and use credit cards exclusively, but I have never paid a cent of interest or a single fee on them. It is possible to use credit responsibly.
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@not the jet set – thanks for visiting and commenting!
@frugalbabe – Like you, I want to get out of debt and then start working on our mortgage. I remember when I was 21, one of my friend’s mother’s home was totally paid for, I thought it was so awesome that she had this beautiful 4 bedroom home with a pool and no monthly payment!!
@kacie – I agree. It’s sad. I have another friend who has done something similar… but she’s very upset about her debt but can’t seem to dig her way out.
@Shannon, my credit scores are also very high and they were before I got into this credit card debt… funny enough, when I got done with my credit card debt the first time around, I was warned my credit would be “slow” but my scores were very high. I guess the credit card companies didn’t mind too much that I went through a consolidation company.
@skittl1321 – my credit score has been very high for years, like you I use my credit cards responsibly. I also don’t agree that a high credit score means a lot of debt. I think that is what Dave Ramsey says, iirc.
Thank you everyone for visiting and posting!!!
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What a story!
Someone I know very well bought their house for $120k and when the mortgage company foreclosed last month there was $317k in loans on it, and they had nothing to show for it.
Oy.
I have a very high credit score (top 1% in the country) and have no debt other than a small mortgage. I have credit cards that pre paid off monthly.
You never know what life’s going t o throw at you. If I do ever need to borrow money I’ll get a great rate as a result. Dave Ramsey probably won’t.
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I’m pretty sure you can have a high credit score without debt. I have no debt, have a card that I pay off every month and have a credit score of about 810 (top is 850 or so).
I never carried credit debt and had only a little student loan debt years and years (more than 7 now) that was paid off before it accrued interest…
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@BeThisWay – Wow, I’d cry if I ever found myself in a position like that. Before we got into this credit card debt my credit score was very high. The last time I checked, even with the debt it was just as high. Like you, I’d rather have the excellent credit score just in case. Like you say, Dave Ramsey probably doesn’t need to worry about that.
@Anon – Yes, I agree with you. I had a high credit score without any debt. I read someplace that Dave Ramsey equates a high credit score with lots of debt. I disagree.
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Just having any open credit card (even with nothing charged) means you have a credit score.
Getting financing aside, a solid credit history is increasingly important for many things from applying for a job to getting insurance.
You definitely want a good FICO score.
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