There are tons of resources online about the credit score: ways to improve your credit score, how the credit scoring system works, and products you can buy to boost your score. But most of those resources harp on the importance of a credit score.
But why do we need a credit score? If you don't plan on borrowing money, do you actually need to worry about it?
On today's podcast lesson we are going to discuss the credit score and why I think it might be the most overrated measure in the financial world today. Do you need a credit score? Well perhaps, it mostly depends on your view of debt and whether or not you are going to be borrowing in the future.
Whether or not you need a credit score, I think it is more important to focus on what a credit score can't do with your money. It can't help us:
- Save money
- Invest money
- Pay off our debt
- Help us follow our budget
The way I look at a credit score is this-what's more important than a great score or no score, is NOT to have a bad score. Bad credit will haunt you in many ways, so if you have fallen behind or gotten dinged due to a foreclose or repossession, working on paying those old debts back is paramount to getting on solid financial ground.
If you do have a great credit score, there's nothing wrong with that, but what is it costing you? I've worked with a lot of couples who are struggling to save money but have a great credit score.
I just want to fight against the whole idea that the credit score is the be all, end all. It isn't and it isn't even close. In my opinion instead of focusing on improving your credit score first, I'd rather focus on saving, investing, paying off debt, and developing a solid budget. Doing those things first will improve your credit score, but focusing on your credit score first won't improve those other things.
As mentioned on the show, I've done a lot of other podcasts and blog posts on the topic of your credit score. You can check them out below:
- Podcast Lesson #34-Don't be fooled by the build your credit score LIE with guest Steve Stewart
- Does your credit score matter?
- Podcast Lesson #80-The FICO Score is a PRODUCT
- What your FICO Score is and isn't
- Don't be defined by your credit score
- Do you need a FICO score if you are not borrowing money?
- eCredable: The alternative to the FICO score
Today's quote of the lesson is brought to you by the JW's Financial Coaching Newsletter
“You either master money, or, on some level, money masters you!” – Tony Robbins
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