Elisabeth Leamy Answers Your Questions

Comment: I agree. Everyone should pay cash and let this "credit score" BS go. If you have cash to pay for everything, why do we want to be slaves to the credit card companies. If everyone would close their accounts, they might be crying the blues for our business one day, and my reply will be "stick it." Pay cash and let 'em go will make for a much happier population. I have canceled all mine with a balance and could care less about my "credit score" and if I cannot pay cash, house car whatever, then I simply cannot afford it. It is all a game and consumers have no control, except to pay cash and be on our own. This puts us in the driver's seat. PAY CASH OR YOU CAN'T AFFORD IT!

Comment: "This "pay cash for everything advice" does NOTHING for a person's credit score because cash payers do not get any brownie points with credit bureaus. People with NO DEBT, who pay cash for everything, are certainly "debt-free", but that doesn't mean that the credit bureaus hand them great credit scores."

Answer: My two columns on how to raise your credit score generated a lively thread in which people were debating whether to even use credit cards. As I said in my original columns, there are two ways to save on credit: by using less of it or getting it for less. Having a high credit score is how you get credit for less. Canceling your cards is a way to use less credit. The third commenter was right that canceling your cards will not help your credit score. A good credit score depends on having credit and using it responsibly. If you were a multimillionaire and paid cash for everything, you would have a poor credit score because there is no record of how you handle credit. That record is the key to future credit offers. We could all live without credit cards, but most of us cannot manage to buy a home without a mortgage. When it comes time to apply for a mortgage, the biggest loan of your lifetime, you will want to have a good credit score. (I'm aware that my consumer colleague Dave Ramsey counsels people to pay cash for a home, and if you can pull that off, fantastic. Many people can't -- or won't.)

Comment: Has this happened to you??? Work to obtain and maintain an excellent credit score -- only to find out that credit scores really don't mean squat?! Case in point, my credit score hovers around the 800 mark. A good credit score is supposed to provide better rates on loans -- my personal experience tells me that this doesn't occur. With our excellent credit, two house loans were at the average rate -- no discounts there, not even a .01 percentage point -- same with several car loans. I personally think it's all a hoax -- my excellent credit score has not provided any deals on loans.

Answer: Lenders look at credit score ranges, not each point in a score. To get the best mortgage rate, you need a score over 720 these days. (The cutoff was 680 in the bubble days.) Having an even higher score of 800 doesn't get you anything extra. But trust me, BackHomeCO would notice the difference with a score below 720. People in that range pay substantially higher interest rates. These days, if your score is below 620, you probably can't even get a mortgage. On a related note, I just learned this past week that most credit card companies are now requiring a higher score before they will even issue you a credit card. Equifax tells me that most cards are going to people with scores of 760 and above.

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