Comments on: Reasons Why it is More Fun and Logical to Monitor Net Worth not Credit Scores

By: RC Brooks

RC Brooks — Mon, 06 Apr 2009 18:50:41 +0000

I am unlike many on here, in that I have had a great deal of financial trouble in the past. It has taken a long time to get in control of my bills on my budget. In a funny turn of events, due to not having any credit, it taught me how to live off cash. While even today, my credit score is certainly low (haven’t checked in more than a few years) I can say that I could pay all of my bills off in a single month if need arose, save for my home which I bought on contract with a reasonable interest rate. While I may not have the nicest or greatest of anything, I know that in the worst case scenario I am capable enough to trudge through economic downturns. Further, I don’t feel enslaved to the places I work for the fear of becoming a transient.

With regards to calculating net worth, it is nice to know I have tangible assets as opposed to dancing to another’s music.

By: Personal Finance Links - Sept 6 | Wise Money Matters

Personal Finance Links - Sept 6 | Wise Money Matters — Sat, 06 Sep 2008 11:04:16 +0000

[...] Reasons Why Tracking Net Worth is More Fun and Satisfying than Credit Score [...]

By: Mr. ToughMoneyLove

Mr. ToughMoneyLove — Wed, 03 Sep 2008 18:26:27 +0000

Uncommon – Thanks for your visit. One of the problems here in the US is that banks and other financial service companies will often take a raw FICO score then manipulate it with their own algorithm to produce yet another internal credit score. The consumer has no idea that this is happening or how it is happening.

By: Uncommonadvice

Uncommonadvice — Wed, 03 Sep 2008 17:58:24 +0000

A good post, going against the grain of popular thinking. I agree with you – even if I know my credit score is 777, I don’t know what the “pass mark” with a certain bank will be on any given day. In the UK banks and building societies change their acceptance level daily as they try to control their business levels. I assume it is the same in the USA.

By: MasterPo

MasterPo — Wed, 03 Sep 2008 16:41:51 +0000

Good article.

While I agree with net worth being a better indicator, I would say that’s a personal tracking tool. The world uses your credit report and score for everything from mortgages to job applications (I don’t approve of that but it’s the way things work nowadays) to insurance rates. So you really can’t dismiss your credit score.

By: Mr. ToughMoneyLove

Mr. ToughMoneyLove — Wed, 03 Sep 2008 16:02:17 +0000

MGL – A growing net worth is the goal as long as you don’t fret too much over dips caused by paper losses on your investments.

WiseMoney – Your comment supports the argument of some that equity in your personal residence should be excluded from your net worth as a young adult, because it is not an asset that you are going to liquidate in a crisis. That is why I do not favor rapid paydown of your home mortgage loan until you have enough liquid assets to sustain you through a financial crisis.

Also, my middle son (age 23) is financially independent, debt free and has no credit score. He was turned down trying to open an online savings account because of it, if you can believe that.

By: WiseMoneyMatters

WiseMoneyMatters — Wed, 03 Sep 2008 15:43:19 +0000

Great article. I find it funny how people measure themselves by credit score or even income. Both of those are great but don’t give an accurate assessment on where someone is at financially. If someone makes $300,000 per year and has a great credit history but is spending $320,000 per year, he is worse off than someone who makes $40,000 per year but spends $30,000 per year.

Personally, I wish I could have zero Credit Score because of zero Credit History. I’d prefer to pay cash for everything. But alas, that’s almost impossible these days.

@ MoneyGrubbingLawyer
I think comparing yourself to others is an issue that gets people into debt in the first place. However you can use such competition to your advantage if you look at net worth in this way:

How many years could you survive without a single source of income?

This is a tough challenge because it takes Net Worth a step further. For instance, I have a house worth somewhere between $330,000 and $350,000 in this current market. I have my mortgage paid down to about $140,000. This gives me a Net Worth of $200,000 in my house alone. However if both my wife and I lost our jobs today, we could survive maybe 1 month on our current savings.

Personally, even though I have a respectable Net Worth, I don’t consider myself in a “good” place. Now I am working on this (I actually had a decent savings until my car broke down and it cost $1200). My short term goal is to be able to survive for at least 1 year with no income. My long term goal is to survive at least 15 years with no income. Part of this strategy is to pay off debt such as my house and the like. This increases the ability to survive without income as my expenses are minimal and my savings can go a lot further.

But I believe that’s the best way to judge how you are doing financially. Credit Score, Income and even Net Worth are all great. But when the pressure is on, those things alone will not save you in a financial crisis.