There are some financial advisors out there who will tell you to cut up your credit cards and pay for everything in cash.
With this approach to finances, a credit score doesn’t matter. Why? Because you will be paying for things in cash and won’t need credit of any sort.
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If that works for you and your personal situation, then great!
However, for the majority of people, having a credit card, taking out a mortgage, and managing a car payment is a normal part of life. There is nothing inherently “bad” about credit cards or loans. It all depends on your financial discipline and money management.
Having a good credit score is important because it allows you to access loans and credit on favorable terms. Your credit score can be the determining factor as to whether or not you get a loan. If you do get the loan, it will determine the interest rate that you pay.
But credit scores aren’t just for loans and lines of credit.
Landlords often use credit scores to decide who they will allow to rent their apartments. Do you want to get a new cell phone by getting a phone plan that allows you to pay the cost of the smart device over time? Then you’ll need a good credit score as well.
Whether you have a high credit score or a score that could use some improvement, I have good news for you: your credit score is not the end-all-be-all of your financial life.
Let’s take a closer look.
Why Your Credit Score is the Beginning, Not the End
Credit scores can be a touchy subject, especially if you are financially struggling.
The good news is that your credit score isn’t fixed in stone. It isn’t static.
Your credit score is always updating based on the information available to the credit bureaus. There will be mini-fluctuations here and there. Sometimes, it may even drop or spike several dramatically overnight.
All of that to say: your credit score does not permanently define you.
If you have a high credit score, then great! Use that as motivation to continue practicing and implementing healthy financial habits. Remember that there’s always room for improvement, so find ways that you can strengthen your family’s finances.
Even if you have a credit score that can use improvement, keep in mind that this is not the end of your financial journey. The work, discipline, and commitment that you begin today will yield positive results in the future.
Similar to a new diet or workout routine, the results won’t happen overnight. Just as you wouldn’t expect to lose 15 pounds in one day, don’t expect for your credit score to immediately jump up tomorrow.
It truly is a shift in mindset — a lifestyle change for your finances.
Think about it this way: when you’re on a new diet or workout routine, sometimes the scale doesn’t budge… for weeks! Why? Well, sometimes you’re adding new muscle as you are losing fat, so even though you are healthier, the scale doesn’t show it. There are other times where you might gain water weight because you’re suddenly exercising more than you used to. That sudden gain in water weight temporarily disguises the progress you’ve made. If you give up early, you’ll never see the fruits of your labor!
Similarly, improving your credit score takes time. It may feel like it’s taking forever, especially if you’re doing all the right things and sticking to a stronger financial plan.
Now, why am I even bringing this up?
Because while your credit score matters, it doesn’t define you.
If you are feeling financially behind, overwhelmed with debt, or suffocated by bills, it is easy to feel discouraged. Trust me; I’ve been there. It can feel like you’re stuck in a pit and that it is impossible to climb out.
Fortunately, a simple change in mindset can make it easier to take proactive steps that improve your financial life.
If you believe that your credit score defines who you are financially, then it’s difficult to change. Why? Because your mindset says, “This is who I am. I can’t change it.” This makes it so much harder to truly commit to a budget, saving, or planning for the future.
But if you say, “This credit score is simply a snapshot of my financial life right now, and it can change at any moment,” then that gives you the power to take control of your finances.
Here Are the Benefits of a Good FICO Credit Score
While all of the above is certainly true, I would be lying if I said that your credit score doesn’t matter.
Yes, it doesn’t define you, but there are undeniable benefits to having a good credit score.
Consider the following scenarios where it is advantageous to have a good credit score:
- Applying for mortgages and auto loans. Credit not only determines whether or not you’ll qualify for the loan, but it also determines the interest rate you’ll pay. The lower the interest rate, the less you’ll end up paying over the life of the loan. Every single percentage point counts.For example, the difference between a 3.316% APR vs. a 3.566% APR on a $200,000 mortgage would be $48 a month. At first, the difference between 3.316% and 3.566% might not sound like a lot, but that’s an extra $17,280 you’d pay over the lifetime of the loan.
- Job applications. Some employers may ask to run background screenings on new hires. If you are applying for a job that involves finances or sensitive information, it is likely that the employer will ask for a background screening that includes a credit check. You can decline, of course, but depending on the job, it may completely take you out of consideration. Jobs that may check your credit include military jobs, accountants, financial planners, prison workers, lawyers, law enforcement, border patrol, casino jobs, and government jobs.
- Turning and keeping the utilities on. It’s easy to take water and electricity for granted. However, if you move and need to get your utilities turned on, it’s not uncommon to have to pay a large deposit if you have poor credit. Given that approximately 14% of the U.S. population moves every year, this is something to keep in mind.
- Obtaining better insurance rates. If you have a car, home, or apartment, you’ll need insurance. Unfortunately, there have been multiple studies that show that people with poor credit tend to file more claims. This gives insurance companies the “excuse” to charge higher rates compared to people with better credit. Keep in mind that you can’t be turned down for insurance because of a low credit score, but a higher score will help you qualify for lower premiums.
- You’ll be able to enjoy the best perks and rewards. Have you seen those credit cards with incredible introductory offers, such as no interest for a year? Have you seen those cell phone plans that provide free access to online streaming services? Credit card companies all have their own unique rewards, but they are typically tiered. People with higher credit scores get access to the best perks and rewards, whereas people with lower scores don’t get the same benefits. Cash back, free offers, and favorable payment terms can make a huge difference if you manage those perks wisely.
The bottom line is that nearly every aspect of your financial life is impacted one way or another by your credit score.
Again, your credit score does not define who you are. It is simply a snapshot of your financial health at this point in time.
But the reality is that true financial health, and a good credit score typically go hand in hand.
How Can I Improve My Credit Score?
Just a few years ago, I was in over my head. I was suffocating under the weight of $80,000 worth of debt. Needless to say, my credit score back then isn’t what it is today.
In the course of 8 months, I was able to develop a strategy to successfully pay off all my debt and begin building a future that my family and I can be proud of!
If you are in debt and are struggling with your credit score, I want to share with you the exact steps that I took to regain control of my financial life… and my credit score!
Do you have advice on improving your credit score?
Please leave your feedback and personal experience in the comments section below! Here at TBM, we’re building a community of like-minded people who want to help better their financial lives and the lives of those around them. We’d love to see your input! sex video , sex stories
