The Crazy Myths About Your Credit Score

credit score

One of the first things you are faced with when you start becoming financially independent in your life is the reality of your credit score.

First things first, what is a credit score?

Wikipedia defines a credit score as a number representing the creditworthiness of a person, the likelihood that person will pay his or her debts.  Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers. Widespread use of credit scores has made credit more widely available and cheaper for consumers.

Investopedia gives the following definition and explanation:  A statistically derived numeric expression of a person’s creditworthiness that is used by lenders to access the likelihood that a person will repay his or her debts.  A credit score is based on, among other things, a person’s past credit history. It is a number between 300 and 850 – the higher the number, the more creditworthy the person is deemed to be.  A FICO score is the most widely used credit scoring system.  FICO is an acronym for Fair Isaac Corporation, the company that provides the credit score model to financial institutions.  There are other providers of credit scoring systems as well.  Consumers can typically keep their credit scores high by maintaining a long history of always paying their bills on time and not having too much debt.  A credit score plays a large role in a lender’s decision to extend credit and under what terms.  For example, borrowers with a credit score that is under 600 will be unable to receive a prime mortgage and will typically need to go to a subprime lender for a subprime mortgage, which will typically have a higher interest rate.

That all sounds great, but what if I told you that your credit score does not make or break you financially?  There are many people who will tell you that you can’t make it in life without a good credit score.  Certainly, life might be easier with a high credit score, but you can still be OK without a high score.

Today I want to give you three myths about your credit score and tell you why these myths are not true.

Your credit score is an indication of your financial success.

This is simply not true.  Your credit score (also called your FICO score as we read above) tells you one things: how well you manage debt.  It’s all about debt.  It indicates how much debt you’ve gone into, what kind of debt you have, how consistently you’ve used and paid on debt, and those sort of things.  The best indicator of your financial success is your bank account, not your credit score.

You need a credit score to rent an apartment.

This one is not true either.  If you have your first and last month’s rent plus a security deposit, a majority of apartment complexes will work with you.  You might have to try two or three, but they are out there.

Keeping a credit score to secure low rates on car insurance is a smart move.

It is true that no credit score, or a bad credit score, can drive up rates on your car insurance.  But you will more than make up for that with all the money you will save by not paying interest to a bank in an effort to build your credit score.

The point is that the sooner you begin paying with cash, avoiding debt, and staying away from the credit score trap, the better off you will be in the long run.

About wmarsau

Most of the people who visit this blog already know me so it is kind of pointless to try to describe my life in this short little blurb. What is the purpose of this blog is the question. Over the course of this last year I have been exposed to some amazing people and have made personal development an important focus of my life. Being successful, not by the world's standards, but by God's has become my main focus. Mainly, I want to work to develop myself as a person who is kinder, reaches out to help those in need, and truly makes a difference in this world. To this end I am constantly reading and am exposed to so many differnet things along the way. These have been amazing and it is helping me grow so much. Then I started to think, "Why am I being so selfish?" You need to share with others these amazing things you are learning and being exposed to. That is where this blog comes into play. As I am reading and experiencing things that are truly amazing and life changing, I will be posting them on this blog. Obviously, I will not be able to post everything in it's entirity, but I will be summarizing them and letting you know the source of the article or book they come from so you can check them out later if you wish. I want this blog to be a place where you can go to often and be inspired and leave here with a smile on your face. I will be covering all kinds of different topics dealing with success and personal development. Topics like taking action, relationships, living to your potential, reinventing yourself, finances, leadership, presenting, goal setting, time management, etc. I will also be occasionally including topics on cooking, music, and gardening because they are special interests of mine. As a little disclaimer, I have given my life to the Lord and he is #1 in my life. I am his servant and everything I do in life is for his glory. With that being said, religion influences all areas of my life. There will be references to God in this blog because I can't seperate God from this or any other area of my life. I want you to know that if you do not believe in God, that is fine. That is your choice. This blog is open to anyone who wants to better their life. I will not be trying to influence or pressure anyone into having a relationship with the Lord from this site. Please don't feel uncomfortable. You can just read the portions of the blog that you wish to. I am inviting you to go on a journey with me. We will learn together to be the kind of people we were designed to be. Anyone can make a difference in this world, but it starts%
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