(or, “Things To Do If You Don’t Care About Your Credit Score”)
If you don’t need your credit score for a loan, it’s really not that important.
In America, there is a fetishization of credit scores. We celebrate people with “perfect” 850 FICO scores. We treat folks who have filed for bankruptcy like lepers. We warn that you shouldn’t cancel a credit card, lest it damage your score! Oh no!
Opening a new credit card? Watch out! That hard inquiry will ding your score.
Refinancing a loan? You better be sure you can get a better rate or the rate check will ding you.
Trying to rent an apartment? You bet your bottom dollar the landlord is going to check if you’ll be a Lannister.
Just borrow money, pay your bills on time, and your score will go up. Up is good! Be a good debtor!
But what if you don’t care about your score? Or you want to do all of the “bad” things credit score-wise that may be financially good for you? A “credit score cheat day” if you will? (more like cheat week or month!)
Table of Contents
Who Might Not Care?
If you wont’ need a loan for the next few years, there’s a good chance you don’t care about your score. If you just bought a home or just bought a reliable car or refinanced a loan, there’s very little reason to worry about your score.
As for the “other stuff” that need your score, having an average score is good enough. We’ve all heard stories of employers or cell phone companies or landlords looking up your credit before giving you a job, phone, or keys… but you don’t need stellar credit for that. You just need to have a decent one.
If you have an 800 FICO credit score… you pay the same interest as someone with an 850!
So if this describes you, you may want to consider a credit score cheat day!
What Crazy Things Can I Do???
First, I wouldn’t get too crazy. Much like a junk food cheat day, you still have to pay the consequences even if they’re relatively minor.
Don’t do something wild like declare bankruptcy.
Don’t start missing payments.
You want to bunch up a few of things that are “bad” for your score but still “good” for you:
Check Refinance Rates
This might not seem like it makes sense but see if you can get a better rate on any loan you have. There are some situations where you might not want to check your rates because you don’t think it’ll be any lower or it won’t be worth it. Since it involves an inquiry, you might have backed off.
If you don’t care about your score, then do this first. Hard inquiries might ding you but you have nothing to lose.
If you do this, make sure you get all the inquiries within 14 days. When you shop around, you’ve given a grace period of 14 – 45 days where all the inquiries “count” as a single one. It only makes sense because you aren’t opening multiple lines, you’re simply shopping around.
You want to do this first because your score will be at its (theoretical) highest before you mess it up with the things I mention next.
Cancel Unused Credit Cards
This is probably the most “useful” thing you can do – start cleaning house! You may have a few credit cards that you’ve since retired but stuffed in a desk drawer. Now is a great time to cancel them, especially if the credit card has a high dollar welcome bonus offer, because you want to start the clock on when you’ll be considered a new customer… so you can get the card, and the bonus, again. 🙂
Some issuers have limits on how many cards you can have with them. Some simply limit the number of applications. Chase is known for their unofficial 5/24 rule, which says you cannot have more than five card applications in a 24 month period.
This is also a good way to spring clean your finances. Having the active account can leave yourself open to potential fraud, albeit a very small chance, and it’s one less thing to think about.
Apply for Credit Card Bonuses
This is the obvious one – applying for new credit cards hurts your score because the issuers will pull your credit report. This hard inquiry reduces your score by a little bit for a little while. The hard inquiry will appear on your credit report for two years but most of its impact is gone after the first year.
This is going to matter if you’re getting a loan but if you aren’t, it will have little impact on your day to day life.
But getting 100,000 points from a new credit card can mean free flights, free hotel stays, and other nice perks – those will impact your day to day life (well, a few days anyway!).
A large purchase on a credit card increases your credit utilization and reduces your score. This is a double whammy if you make a large purchase on a brand new credit card just to get the bonus! You get the hard inquiry and the potential increase in utilization.
You also get a good bonus but that’s the carrot the issuers dangle. 🙂
Pay Off a Loan
I know, I know.
This one sounds counter intuitive but did you know that a lot of people’s credit scores actually go down after they’ve paid off a loan? A lot of people are surprised that their score can go down after you pay down a loan because isn’t the score a measure of your default risk? (it is)
So why does it go down? Because it’s probably one of your oldest loans and when you pay it off, it impacts the average age of your accounts.
So silly. 🙂
Check Your Credit Report
This post was all about all the “bad” things you can do but I want to leave you with something that is relatively responsible. It’s like eating your vegetables on a cheat day (your body will thank you tomorrow!).
Just give your credit reports a little peek to ensure they’re 100% accurate and correct. Errors pop up all the time. I once had two Social Security Numbers, which I thought was impossible but the report listed two in my personal information.
It turns out you can have multiple numbers because you might need to change your first one, in the event of identity theft or are otherwise in danger (witness protection, perhaps?). That didn’t apply to me though, it was just a simple error (two numbers were transposed).
Anyway, check your reports via AnnualCreditReport.com and get those errors fixed, even if those errors helped your score!
What would you do on a credit score cheat day?