Life without credit

[FullBoost]

I'm down to 1 payment left after being in a 5 yr -100% plan. While its been painful, it will be so nice to be done..

I've lived the last 5 years without any credit, and honestly I like it.. I recently purchased a 2011 GMC Duramax diesel truck and paid cash (after working my bum off with lots of overtime). It felt rewarding to pay cash and know I don't owe anybody.

If I don't obtain anymore credit once I recieve my discharge, will my credit score get worse or better? I kept my home during the bankruptcy, but did a modification. For some reason now, Bank of America no longer reports my home to the credit bureas. So essentially, there will be no activity on my credit reports.

Just wanted to get advice from those who have traveled down this road.

[LadyInTheRed]

I am traveling the road a few months behind you, but I have read a lot about rebuilding credit. Your score will increase over time, but there is a limit to how high it will go if you do not use credit. To have a high credit score, you must show that you can use credit responsibly. For more on rebuilding credit, go to our rebuidling credit subforum.

[TXskyblue]

I used to think that living with cash meant I'd have perfect credit. I didn't owe anyone anything, so I must be an ideal borrower. That may be true, but the formula used to calculate your credit score doesn't agree. To have a good credit score, you have to use credit.

That doesn't mean you need to charge up shiny new credit cards and carry a balance, however. Some people fear credit cards, and rightly so in my opinion. My abuse of them is what lead to my BK. It's up to you if you want to get work on your credit, but getting credit cards is opening Pandora's box for many.

[Drazil65]

Truthfully if you are already in your house and do not desire to purchase one and love the cash thing, why do you care what the banks say your credit is? Your credit is what the banks tell you it is so if you are content where you are I would not worry how the banks rank you at or if they will give you credit (their power/strangle hold).

Living on a cash basis is exactly what you said "rewarding" to say the least, the richest freedom a person can have. Teaches you a lot about yourself and probably even more so about others. Don't worry about it and keep enjoying life....

[FullBoost]

Thank you for all the advice.

I like my house and have no plans to sell and move but I do want to refi it, since my ex-wife is still on the loan. Thats my only issue with trying to improve my score so I could qualify to refi.

[TXskyblue]

A mortgage or mortgage refi is one of the best reasons to care about your credit score. Even a tiny change in APR can mean thousands of dollars.

I think you should work on your credit. Once you are out of your plan, you can open some credit cards. For the best score, you should have three. Only one of them should ever report a balance, and the balance should be 1-9% of your credit limit. To report a balance, that just means they send you your monthly bill that says you owe $XXX dollars. You still pay it off in full and therefore don't pay any interest. If you start carrying a credit card balance, the savings you may realize through a mortgage refi will likely be more than offset by credit card interest. Do not carry a balance.

[jmac]

I have 10 months to go on my 13 and i got a $300 secured credit card few months ago, maxed it out and payed it off right away a few times and leave it at 0 now and my credit score jumped up to 600 which allowed me to get a better card unsecured with A $500 limit and no fee's, i use it to pay many things i would usually pay with my bank debit card, plus it gives me a free score when i want to look i think i up to around 688 last time i checked so i think its helping me build a little credit. I know opening up a credit line in a 13 is a no no but sometimes you got to do what you got to do.

[jmac]

I guess i should add i have been plenty happy with paying cash and living this way, but having good credit can't hurt and only cost you if you dont.

[switch625]

I have 10 months to go on my 13 and i got a $300 secured credit card few months ago, maxed it out and payed it off right away a few times and leave it at 0 now and my credit score jumped up to 600 which allowed me to get a better card unsecured with A $500 limit and no fee's, i use it to pay many things i would usually pay with my bank debit card, plus it gives me a free score when i want to look i think i up to around 688 last time i checked so i think its helping me build a little credit. I know opening up a credit line in a 13 is a no no but sometimes you got to do what you got to do.

What bank or CC company gave you the card while in a 13? This is something I'm interested in doing to raise my credit score and in case I need it to stay in a hotel or rent a car (would like to avoid the debit card use on that if at all possible).

[jmac]

First bank of omaha gave me the secured with a 29.99 annual fee, then i got a barclays card which besides pulling up numbers does pay points there is no annual fee. I did it pretty much off of the myfico web site.

[BNKRPTinNC]

I am currently in the process of re-building credit. During the 13 my score was in the mid 600's. Once discharged FICO score jumped to 714 with the other big three in the high 600 range. About 3 months after discharge I started getting offers from cc companies. Cap One offered no annual fee on two of their cards (Venture & Quicksilver) in which I applied for and received. A total credit limit was $15,000. Doing some research I found out that in order to increase your score you have to have some credit out there and the break point from a C to a B rating is above $15k. So I applied for a ChOICEprivileges card with a limit of $2250 which also offered no annual fee, plus I frequently stay at hotels that I can redeem points by using this card. Over the last couple of months my score has been creeping up a couple of points per month. My goal is to be able to refi and, after several failed attempts, should be able to get something once I reach that magic "2 years after discharge" point. My guess would be that is when the derogatory would disappear from my credit reports. My current FICO score is high enough for a refi but the banks are not looking to do anything before the 2 year mark. At least that has been my experience, so far, with several lending institutions.

JMHO, trying to rebuild credit while in an active 13 may be fruitless as it appears no one reports anything. Probably out fear of violating the law, but I don't know. I have not had a late payment on anything in over 5 years but none of that is reflected in my credit reports.

[jmac]

Yea BNKRPT i'm not sure it you can build while in a 13 or not, i figured i could try something small just to get my feet wet, i haven't had a payment on anything except rent and my BK payment for over 4 years.

[LadyInTheRed]

I have 10 months to go on my 13 and i got a $300 secured credit card few months ago, maxed it out and payed it off right away a few times and leave it at 0 now and my credit score jumped up to 600 which allowed me to get a better card unsecured with A $500 limit and no fee's, i use it to pay many things i would usually pay with my bank debit card, plus it gives me a free score when i want to look i think i up to around 688 last time i checked so i think its helping me build a little credit. I know opening up a credit line in a 13 is a no no but sometimes you got to do what you got to do.

For best credit-building results, keep your balances below 10% and never above 30% of available credit at the time the statement is generated. Never max out your card. If you pay it off before the statement is generated, then it shouldn't be an issue. But, you do want to show a small balance on the statement date or it won't look like you are using credit.

[jmac]

Thanks for the tip LITR.

[jange]

About 1/2 through Chase stopped reporting my home equity loan. Hopefully when I am done my ch13, they will start reporting again. I have never been late on a payment. Hopefully that will help improve my credit scores. At some point in time I will want to get another credit card to also help rebuild my credit, but I am not in any hurry. I will be coming out of bk with money saved and should never need to rely on credit again to live.