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Auto insurance and the great FICO

Dear Dave: How will it affect my auto insurance if I'm debt-free and have a zero or low FICO score?

- Anonymous

Dear Anonymous,

There's good news and bad news. The bad news is that it will probably go up. The good news is that it won't go up nearly as much as the interest you'd have to pay to some bank to maintain your credit score!

My personal insurance is higher because I don't have a credit score. That's because I don't borrow money anymore, and haven't borrowed for several years. But the FICO score has way too much control over our lives these days. It's just not an accurate measure of how well you handle your money. You can easily have a really high FICO score and still be losing financially.

Think about this. If I handed you a million dollars, you're FICO score wouldn't change one point. The only thing a FICO score really does is measure your interaction with debt. That's why I call it the "I love debt score." It's really a pretty bad idea for other reasons, too. It doesn't take into account the fact that you may have been smart with your money and accumulated some wealth along the way!

- Dave

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