I thought my husband and I were doing pretty good financially. Sure, we had a few unexpected financial snags this year (home invasion, two car accidents, a leaky basement, etc.); but for the most part, I thought we were doing pretty well in our finances. I had a good budget plan. We were paying all our bills on time. We were slowly paying off our debt using the snowball method, and we had money in our emergency fund.
Then I started reading Dave Ramsey’s Total Money Makeover and, by the end of Chapter 1, I realized we have a ways to go. Part of being successful with your finances is having the right mindset – and changing what you’ve been programmed to believe may be the hardest part. Case in point – credit score.
Why is credit score a bad thing?
I was always taught that a high credit score was a good thing. I thought the higher your credit score, the better your finances. But think about it, what are credit scores used for? Credit scores are used to determine if you can 1) get a loan and 2) how much you can get. So really, your credit score is used to determine how much debt you’re able to get in. It has nothing to do with how much money you have saved or how much money you make. Those things aren’t even used to determine your credit score! Let me ask you this… which is more impressive – someone who is barely scraping by with a 780 credit score, or someone who has a fully funded emergency fund and pays cash for everything, but has a low – or non-existent – credit score?
What should you focus on instead?
Focus on becoming debt free. There aren’t many people who can say they are debt free, so that is something you will want to brag about. You’ll notice your credit score begin to shrink as you pay off your debt and use your credit cards less and less. But you’ll also have less and less need for them because you’ll have more money available for emergencies and other costs because you are not spending all of your cash paying off your credit bills and other loans. And if you no longer need to borrow, why will you need to get a loan anyway?
What can you do to really have something to brag about?
Check out Dave Ramsey’s Total Money Makeover. It will help change your mindset and teach you a ton about your finances. Not only that, it will also give you the steps you need to take to pay off your debts – and lower your credit score (in the best way possible).
Still not sold?
My husband isn’t either, but he’s getting there. If you are still clinging to that high score, I do have some pre-Total-Money-Makeover-influenced posts about boosting your credit score and why your credit score isn’t higher.