Redefining Priorities: Why Your Credit Score Isn’t Everything
For many, the shortest horror story is probably this: “low credit score” Most of us have suffered because that we have low credit scores. And it is not a thing to be ashamed of. Life happens, we can all make mistakes. While a high credit score might be useful in certain situations, a low credit score is not the end of the line. Here, we’ll talk about why it is not that important and what you can do to overcome the problems that a low credit score can cause.
What’s the Big Deal About Credit Scores Anyway?
Most people cares their credit score a lot, like, religiously. While it is an important metric for many financial institutions, and even for some employers, it is nothing more than a metric of your financial past. It is basically a number that ranges from 300 to 850 and it shows how you handle your finances. Most of the time, when you want to lend some money, buy a house, or even start working for a company, they ask about your credit score to measure your “worth.” But the major point that many people miss is it is just a piece of the puzzle. It does not show all about your finances at all.
Your Credit Won’t Care About Other Aspects of Your Financial Life
When the suits calculate your credit score, they don’t care about your employment history, education, or your potential to earn money. These might be better implications of your financial responsibility but most people only care about your credit score.
Your Savings and Income Means Nothing to Them
Credit score companies only care about your history of borrowing and repayment. They don’t care CRUCIAL things about your finances like how much you have in your savings, how much you make per year, or how much you have in your investment portfolio. I mean, you might be worth $100 million but if you make a late payment you’re done.
Even Companies Don’t Agree When Calculating Your Credit Score
There are various different companies that makes these calculations and provide other businesses this information about your financial past. But even those guys do not agree on how to calculate this credit score of yours. For example FICO and VantageScore have different understandings when it comes to credit score calculations. Plus, lenders might have completely different stuff in mind during calculations.
Would You Rather? A Debt-Free Life or a Perfect Credit Score
Most popular credit agencies uses several factors (payment history, your debt, length of credit history, new credit, etc) to determine that magic number that we call credit score. It is hard to believe but banks penalize you for becoming debt-free. If you choose to pay your debt early to become debt-free sooner, you can drop your credit score like it’s hot.
Just Stop Worrying About Your Credit Score
And I mean it… Stop worrying about those numbers and try to make the best financial decisions for yourself. Start saving, don’t invest more than you can afford to lose, create an emergency fund, and so on… These will probably better for you and your financial future in the long run. Of course, we don’t mean that you should completely disregard your credit score. That wouldn’t be wise as unfortunately, people still cares a lot about these scores.