Does your fico score go to zero if you haven't used credit in 6 months?

[Unionville]

Dave Ramsey often says he has a zero credit score because he has no debt or credit card.  He only uses debit cards to buy things with. I always questioned the credibility of that statement but after I read this article,  I wonder if it's true.  I have no debt except using a credit card (I pay off every month).

This article from Nerdwallet says if you haven't used it for 6 months you can end up with zero score.  Has anyone experienced this? https://www.nerdwallet.com/article/finance/no-credit-score-zero-credit-score

[ixtap]

If Dave Ramsey has a low credit score, it is because he didn't do the things to rebuild it after his bankruptcies.

We use credit cards all the time, but our reports list a lack of installment loans as an impediment to our scores. They are actually in the 800s.

[dandarc]

If you're worried about this go buy a pack of gum on a credit card on the first of each quarter and pay it off. Regardless of whether it is true or not "guy with 9 figure net worth has no credit score" makes for good click-bait.

Also - the article title is "no credit score doesn't mean a zero score". If you have a credit score it is no lower than 300 according to the article. Six months without any credit activity at all is pretty rare - "You haven’t used credit in at least six months." - operationally that means that no bank anywhere has had any reason to report any credit activity for you for a full six months.

[nereo]

DR is lying, doesn’t know what he’s talking about, or both. A person with a credit history will never see his/her score drop “ To zero”. A score of 300 is the theoretical minimum, and would require some terrible metrics in all five categories (payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%)). Even if he closed every LOC it would push up the amount owed (presumably zero). Bankruptcies destroy your credit rating (as DR has) but that stops to drop off after a few years.

I wouldn’t be surprised to learn his credit is in the mid 400s to 500s (which is nothing to be proud about, regardless of his boasting). But it’s definitely not zero and almost certainly not even in the 300s. That low number is reserved for people deep in debt, completely maxed out and all of it in default/collection.

[reeshau]

DR isn't talking about a score less than 300; he is talking about zero as an error condition: not enough data to compute a credit score.

Not only is it banks who would not have transacted with you, but also anything that is post-paid: utility bills, cell phone, services...

https://www.experian.com/blogs/ask-experian/it-is-possible-to-not-have-a-credit-report/

[GilesMM]

Dave doesn't want his listeners to drown in credit card debt.

[nereo]

Dave doesn't want his listeners to drown in credit card debt.

Or:
Dave doesn't wants to monetize his listeners to drowning in credit card debt.

[roomtempmayo]

I'm not clicking on this, or any, DR link.

But I think there's a legitimate concern about the way credit scores have been integrated into online banking that borders on gamifying them to provide toxic incentives to the consumer, or at least to some consumers.

For someone with a solid credit score of, say, 750, the actions that will put them consistently over 800 are not necessary ones that will put them in a better financial position.  They will probably make the bank money, though.

The gamification of the score will sometimes work in the bank's benefit and to the consumer's disadvantage.

[nereo]

I'm not clicking on this, or any, DR link.

But I think there's a legitimate concern about the way credit scores have been integrated into online banking that borders on gamifying them to provide toxic incentives to the consumer, or at least to some consumers.

For someone with a solid credit score of, say, 750, the actions that will put them consistently over 800 are not necessary ones that will put them in a better financial position.  They will probably make the bank money, though.

The gamification of the score will sometimes work in the bank's benefit and to the consumer's disadvantage.

Can you be more specific? What actions (“gamification”) to raise ones’ score will work in the banks favor and against the borrower?

[roomtempmayo]

I'm not clicking on this, or any, DR link.

But I think there's a legitimate concern about the way credit scores have been integrated into online banking that borders on gamifying them to provide toxic incentives to the consumer, or at least to some consumers.

For someone with a solid credit score of, say, 750, the actions that will put them consistently over 800 are not necessary ones that will put them in a better financial position.  They will probably make the bank money, though.

The gamification of the score will sometimes work in the bank's benefit and to the consumer's disadvantage.

Can you be more specific? What actions (“gamification”) to raise ones’ score will work in the banks favor and against the borrower?

Anything that involves the logic of taking on debt, or opening lines of credit, in order to raise your credit score exposes the consumer to behavioral risks (forgetting to make a payment, delaying repayment, over borrowing, any sort of fraud, even if we get made whole eventually, etcetera) for minimal benefit to the consumer, but potential benefit to the banks.

Edit: For example, I just checked my credit score in my bank's app, and it's 824.  We currently have four credit cards open, two of which go back over 20 years with big credit limits but no fees or benefits.  We don't use those cards since they don't offer anything, and I'd just as soon close them both since they're a behavioral risk.  However, we leave them open because closing them (our oldest accounts and about 40k of available credit) would ding our credit score.  So I'm accepting risk just to avoid getting a ding on my credit.  That's pretty dumb, and I don't even know why I care.  What's the practical difference between a 775 and an 825, anyway?  And why should I want ~70k of available credit at a double digit interest rate?  Who's most likely to benefit from that situation?  Probably not me.

I never had a bank pushing me my FICO score until a few years ago.  Now it's everywhere, and I highly doubt they're motivated by altruism.

[reeshau]

I actually just had the infomstolen from my primary card, somewhere as we were attending the College Football Championship.  While the bank handled things well, it was nice to simply engage the backup card for the week or so it took to straighten things out.  Still a bother, but not a panic at all.

[nereo]

I'm not clicking on this, or any, DR link.

But I think there's a legitimate concern about the way credit scores have been integrated into online banking that borders on gamifying them to provide toxic incentives to the consumer, or at least to some consumers.

For someone with a solid credit score of, say, 750, the actions that will put them consistently over 800 are not necessary ones that will put them in a better financial position.  They will probably make the bank money, though.

The gamification of the score will sometimes work in the bank's benefit and to the consumer's disadvantage.

Can you be more specific? What actions (“gamification”) to raise ones’ score will work in the banks favor and against the borrower?

Anything that involves the logic of taking on debt, or opening lines of credit, in order to raise your credit score exposes the consumer to behavioral risks (forgetting to make a payment, delaying repayment, over borrowing, any sort of fraud, even if we get made whole eventually, etcetera) for minimal benefit to the consumer, but potential benefit to the banks.

Edit: For example, I just checked my credit score in my bank's app, and it's 824.  We currently have four credit cards open, two of which go back over 20 years with big credit limits but no fees or benefits.  We don't use those cards since they don't offer anything, and I'd just as soon close them both since they're a behavioral risk.  However, we leave them open because closing them (our oldest accounts and about 40k of available credit) would ding our credit score.  So I'm accepting risk just to avoid getting a ding on my credit.  That's pretty dumb, and I don't even know why I care.  What's the practical difference between a 775 and an 825, anyway?  And why should I want ~70k of available credit at a double digit interest rate?  Who's most likely to benefit from that situation?  Probably not me.

I never had a bank pushing me my FICO score until a few years ago.  Now it's everywhere, and I highly doubt they're motivated by altruism.

I don’t share your cynicism when it comes to FICO scores. If you open new lines of credit it will temporarily have a negative impact on your credit score as your average length of open credit goes down. Similarly, if you take on a great deal of debt your credit score drops, as the percentage of debt to available credit goes up. But the biggest impact of all (~35% of total score) is whether you have been late on any payments. So if you take on new lines of credit, run up a lot if debt and subsequently miss payments your credit score will plummet. Which is kind of the whole point.

I just don’t see the “gamification” you suggest: the most surefire way to have excellent credit is to have a variety of available lines of credit open for many years with a low debt-to- credit ratio and consistent on-time payments.

I don’t think the lenders are motivated by altruism at all - they are operating in risk assessment and loss aversion. It’s not perfect, but it seems far less flawed than other methods (ie a “credit and loans manager” deciding unilaterally your credit worthiness based primarily on a self reported form and his personal evaluation of the applicant).

[JimDogRock]

There absolutely is a growing element of gamifying credit scores.
Last year's Super Bowl had a commercial with John Cena singing and dancing in the street because he gets to pay his rent and raise his credit score INSTANTLY.

And check out the Experian Boost website.
https://www.experian.com/consumer-products/score-boost.html
A confetti graphic and congratulatory message displays to show what you'll get if you click this easy button to start using this product.
A classic gamifying tactic that anyone that can recall a video game with any form of progression of stats, levels, or points will be able to identify.

I've actually heard people talk about going into debt for the sole purpose of raising their credit score.
"I need to have an installment payment on my credit report or my score will go down," they said.
When I asked them for the reason they wanted a better credit score, they didn't talk about improving future rates that might be available to them. Instead they were only focused on getting a higher number for the score so they could feel better about themselves. They said they did not want to be embarrassed by their credit score.