The old school of building up high FICO score is CASH.
FICO score is credit scoring proprietary model created by Fair Isaac Corporation
It was first introduce in 1989. Banks and creditors use the model to determine the credit worthiness of their clients – in turn the appropriate rates for different types of loans.
Since then, FICO scoring is spread into the insurance industries where the scores play the key role in calculation of the premium of the insured.
Below is the distribution of the population in the Unites States from the FICO score from 300 to 850 over time.
The stable mean of FICO score is approximately ranged 650 to 699.
My wife and I came from the very backward families where our parents did not keep up much with the area of finance. They did not jumped on the bandwagon when the Credit Card revolution took off.
Growing up, we were conditioned to see them use CASH for all their needs.
When I first met my wife as a newly graduated engineer, she was more up to date with the trend than I was – she carried one master card.
We accumulated more credit cards along the way because the occasional deep savings we could not resisted. But, old habit died hard – we continued to use CASH for the majority of our purchases.
Way before debit cards came into the picture, we setup functional credit card to auto withdrawal directly from our checking to ensure the balance is paid in full at every cycle.
For example – we setup one card to pay for the “function” of gas only.
The rest of the cards, 3 or 4 of them, just sat there without much activities due to the CASH habits.
Our CASH using habits were such engrained in our mind over the years – we did not realize that our FICO score was in the “Very Good” range when we bought our first home.
Prior to our first home, we never pay attention to FICO score due to the simple fact – with CASH in hand as the ultimate reminder of the things we CAN and CANNOT afford; we do not have the need to solicit for additional loan or credit.
My distinct recollection of a memorial encounter with the loan representative was the joy expressed on her face when the result of the FICO scoring process came back – she was more excited us when our 765 FICO score displayed on her computer screen.
It made sense to me then – everyone wins when the FICO score falls into the Very Good and Exceptional ranges. The consumers get the best loan rates. The load representatives get their bonuses and the loan creditor profits with little risk.
By the time we achieved Financial Independence in our early 40’s, our FICO score was fluctuated between 815 to 825.
The primary factors that ultimately gave us the score were –
- The automatic payment from our checking to the credit card ensured the balance always paid in full without any missing payments.
- Ironically, we rarely paid attention to the FICO score because our lifestyle evolved only with CASH – the best strategy for the prevention of DEBT accumulation. Essentially, our old habit of using CASH paved the lifestyle where IT IS ALMOST IMPOSSIBLE FOR US TO LIVE BEYOND OUR MEANS!
Only in the last five years, we had successfully transition out of the habit of using cash.
For over 20 years of using CASH with all buys, we have succeeded in the conditioning of our mindset to unconsciously consume within the acceptable range of our financial capability. This unconscious behavior is similar to driving – most of the time you have no awareness of the drive itself.
Pair the responsible spending habit with auto draft payment directly from our checking account for the full balance at the end of the cycle – credit card using is no longer a mistake both of us can possibly make.
Using CASH is the one of the best financial habit that I am very proud of my daughter picked up from us.
It is one of the crucial financial advices I gave to my daughter when she first left the nest – this is a non-herd mentality behavior in contrast with other parents within our circle of friends.
All of us are much more biological governed than we can consciously aware. We are wired to move toward pleasures and shy away from ambition and the hard works that is in exact match with the true cost.
Any types of credits are of great temptations our brains have very hard time with resistance. The balance that we paid in interest to the credit card companies in the range of 14 to 20 percents in the below figure speaks itself – credit card business is lucrative and it is backed by the science of human psychological behaviors.
Figure below demonstrated that even the financial responsible segment of the population paid high interest rate for their outstanding balance at the end of each cycle.
As proved by many scientific studies, the frontal cortexes of most young people are not fully mature by age of 25.
Irrational and illogical in decision making is expected in 99 percents of them. As parents, get them on the credit card train prior to the age of 25 is like giving them a car without any brakes.
My wife and I did not fully migrate to the credit card revolution in our late thirties. Both of us are financially independence in our early forties – this is clearly demonstrated that CASH is a super moat that has protected our family from many financial mistakes that plagued the millions of Americans.
My daughter is not a financial wizard as most of us are when we first start out in the life on our own. I hope she continues with the simple financial strategy of using CASH for all her needs for at least another 10 years.
For all of you out there unless you are in the business of USING OTHER PEOPLE MONEY TO MAKE A LIVING – use CASH to finance your life and the high FICO score will just be a small beneficial side effect.
Let’s play the game of life!
