Financial Freak Show

Recently I shared my personal goal of reaching the mysterious heights of the Zero Credit Score. I want to take some time to clarify a couple potential issues with reaching that goal and how they will or will not affect my life. For more info on this crazy goal of mine please read Zero Credit Score.

The first objection I always hear is the issue of buying a home. True a high credit score will help in financing a home but there is also a process known as “manual underwriting.” The way they used to do home loans before a number was used to determine your worthiness. In this process they do weird things like confirm you have a real income, confirm you have real bank accounts and that you have money in those accounts, confirm you’ve honored your other financial obligations appropriately (landlord, utility bills, medical debts, etc.). This process is still used today and it’s most often seen with people who are self employed, or others that may have trouble proving their income, or for those that have (get this) low or zero credit scores. So to debunk the myth, no you do not need a good credit score to finance a home. You can qualify for a Fannie-Mae mortgage with a credit score of Zero (if you’re not familiar with Fannie-Mae they are said to have over $800 billion in mortgages – if you can afford your house it’s likely they can afford to lend you the money). True this process can take a bit longer than just running your FICO score for approval but in the end if you’re proven to be credit worthy the rates and terms will be likely be the same. (Note, again, that a low credit score do to you mismanaging your debts is not the same as a zero credit score and will complicate your financing – as it should!)

The second place people argue a zero credit score will work against me is if I’m trying to land a job that requires a security and/or background check. Examples could be banking or financial jobs, some government positions and in some cases military security clearances. Here the credit report can be used as a judge of character or as an indicator of potential risk for the employer. A good credit score is not necessary though for this purpose…sort of. By law, companies are not allowed to pull your credit score though they are allowed to pull your credit report once they have your written permission.  Also, just in case your credit really sucks, due to the Federal Bankruptcy Act a company can use any information found in your credit report except information regarding as past bankruptcy, no matter how recent.

Though I defiantly support the military I don’t see myself needing a high level clearance any time soon so that takes care of that one. As far as a future employer goes I figure if they want to hire me, a credit report that displays an obvious long term track record of financial discipline should be enough to show them they can trust me. I figure if I can’t talk my way through that discussion to the point they understand and appreciate how I handle my finances and my life in general I doubt they’ll like many of the other things I have to say! So I guess at that point I’d have to find an employer that won’t judge me by how much money I don’t borrow and don’t have to pay back every month.