On this episode of How To Money, Matt and Joel explain the importance of a good credit score, and why chasing that perfect 850 isn’t really worth the trouble. Matt and Joel are all about balance on this podcast, and not only in your budget, but in your life. Working more to earn more money is a great way to increase your savings and have a healthy financial life, but it’s not worth sacrificing all your relationships and hobbies. Similarly, credit scores have an important impact on your finances, but after a certain point, they don’t deserve your attention anymore. They go over what matters, what doesn’t, and some important things to keep in mind while building your score up.
Everyone knows credit scores are important overall, and Matt and Joel don’t dispute it. Good credit means you’re guaranteed the best interest rates for loans and mortgages. For example, if you’re looking to purchase a $300,000 home, a good credit score can get you an interest rate that’s half a percent lower. Doesn’t sound like much, but over the life of a 30 year mortgage, you can save $25,000 – around $90 a month! Your score can even affect your auto and home insurance rates in some states, and sometimes your job prospects: 25% of hiring managers check credit scores when looking at applicants. However, there does come a point of no return, or at least very little return, on your effort. Broadly speaking, if your credit score is 740 or above, it should be “taking up minimal space in your brain,” Matt says. Working to raise it to 850 won’t change the benefits of your score much, and might make you lose sight of your overall money goals, which are more important.
However, if your score is lower than 700, it’s worth spending some time and energy to raise that score. Matt and Joel give some tips and websites to use to check your score and figure out what’s dragging it down. Then you can focus on fixing it. But they stress the importance of patience. Credit history is history, after all: It reflects on-time payments, low usage of credit limits, and general responsibility in handling debt over time, so it takes time to build. Don’t fall prey to services that claim to lift your score for you; “It’s a long play,” Joel says, “and it’s worth taking the time to do this right.” Hear all this great information and much more on this episode of How To Money.
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