Things My Parents Didn’t Teach Me: The Importance of a Good Credit Score

I can’t be the only 20-something who feels like they stepped into adulthood absolutely “raw”

Meaning I couldn’t have possibly felt less equipped to handle the important things in life that would determine my future eligibility for the things we all desire like… buying a car, buying a house, and not feeling like you’re drowning in crippling financial agony.

Despite my lack of preparedness, I somehow found myself at the age of 25, having made over $1,000,000… and feeling arguably less financially literate than ever before.

For the sake of this article, I am going to save the story about my personal finance journey for another time. Today, I want to talk about one of the most frustrating topics of all; Credit.

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Growing up, our parents teach us many things: how to tie our shoes, how to read, and even how to drive.

However, if your childhood was anything like mine… it probably lacked any information or modeling of any and all key elements of personal finance and financial wellbeing.

Thus… I found myself an ‘adult’ who was quite literally the worst ever when it came to my money habits.

I would dread the day I had to check my bank account.

Paying my rent was really just a prayer to the big man upstairs… that I somehow had enough in my account.

Money went out.. just about as fast (if not faster) than it came in.

After years of trial and error. I started to make a decent amount of money through real estate investing (which I started with -$0.36 in my account — a story for another day)

I found myself all of the sudden… NOT in the red 🤔
In fact… I now had EXCESS money.

After a few weeks of irresponsibly spending too much of it, I knew I had to get some things in check, or else this was all going to be gone before I knew it.

So I dove head first into financial education.

I became obsessed with making, managing and multiplying my money.

And the one area in particular that was fascinating to me, was… credit.

Credit felt like an unfair game. In fact, it sort of felt like the school yard bully, that all of the sudden could just decide they didn’t like you, and start making your life harder and harder by the day.

See… the ‘game’ of credit in America is wild, and though it’s frustrating at times. When you learn how to work it (instead of it working you) you’ll find that you can use it to your advantage.

In fact, you can get RICH by having great credit.

I know that may sound insane, and probably triggering to some of you. I am serious.

So let’s start here with the basics…

Having a good credit score can impact everything from getting approved for a loan to renting an apartment.

Yet, many people don’t fully understand how their credit score works or how to maintain a good one.

First things first, what is a credit score?

A credit score is essentially a grade you’re given that determines your ‘creditworthiness’ aka how credible you are with money given to you.
It’s calculated based on factors such as payment history, credit utilization, length of credit history, and types of credit used.

The most common credit score model is the FICO score, which ranges from 300 to 850. The higher your score, the more likely you are to be approved for loans and credit cards with favorable terms and interest rates.

Soo… Why is a good credit score important?

Well, a good credit score is important for several reasons. It can certainly help your ability to get approved for loans, credit cards, and even renting an apartment.

Most lenders and landlord, and credit card companies will use your credit score as a way to assess how likely you are to pay back what you owe, therefore determining how much they are willing to give you!

If you have a low credit score, you may be seen as a “high-risk borrower” and may be denied credit or charged higher interest rates, both of which suck.

There is nothing like a DENIED notice.. to really crush your spirits.

Secondly, having a good credit score can save you money in the long run.

If you have a good credit score, you may be eligible for lower interest rates and better terms on loans and credit cards. This means you’ll pay less in interest and fees over time, saving you potentially thousands of dollars (and I mean THOUSANDS)

Lastly, a good credit score can impact other areas of your life, such as insurance rates and job opportunities.

Some employers and insurance companies use credit scores as a way to assess a person’s responsibility and reliability.

Before I get into the basics of how to maintain a good credit score, I also want to take a second to remind you that no matter what your score is today, you can always improve it.

There is not ONE case or scenario, that I haven’t been able to successfully help someone get back into good standing (620 or above.)

Yes, even if you have bankruptcies, collections, etc.

It’s ALL possible, and there are a massive amount of laws and regulations put in place to ensure that you have a fair shot, even if no one has taught you this stuff before.

So don’t give up, just ask and the help is available, I promise!

So let’s say that you’ve gone through the steps, you’ve done a good (or good enough) job at keeping your credit score at the 600’s or above, what are the best practices for maintaining a good credit score?

Well… I’m so glad you asked, let me tell you:

How to maintain a good credit score

Maintaining a good credit score is crucial for your financial well-being. Here are some tips to help you maintain a good credit score:

1. Pay your bills on time. Late payments can negatively impact your credit score.

2. There are 2 payment dates you need to know: Most people will make a payment on or around their ‘payment due date.’ Great!

Unfortunately, that is not the only important date to remember… your credit card will also have a ‘cycle close date’ which is the date that the latest utilization is reported to the credit bureaus.

With that in mind… Let’s say you have a credit card with a $500 limit.
You used $410 of that, but paid it off entirely before your due date on the 15th. Good job!

But now, you started using it again and your balance is back up to $300 by the time your cycle close date occurs on the 27th of the month.

Now… that card is going to report that you’re using $300 of the $500 available (60% utilization) 😩

So find out BOTH of your dates, and pay attention to each.

3. Keep your credit utilization low. Try to keep your credit card balances at or below 30% of your credit limit. I strive to keep it 10% or below, and find that my score grows more significantly when I do this.

4. Don’t apply for too much credit at once. Applying for multiple loans or credit cards at once can make you look like a high-risk borrower, and may cause your score to decrease. Be strategic when applying for new lines of credit or credit cards.

5. Check your credit report regularly. I obsess over checking my credit report! That’s like…. my version of swiping on tinder 🤣 I swear I love paying attention to it!

In all seriousness… Make sure there are no errors or fraudulent accounts on your credit report. These can and should always be removed, and it is much more common than you think!

6. Build a good credit history. This means opening credit accounts and using them responsibly over time. Good credit history also means you have time, and diversity on your report! Having more than one type of credit can be a big advantage (ex. having credit cards, home loan, and an auto loan)

Reality is… the list goes on and on as far as the credit game. It’s a constant journey, but the sooner you take it seriously, the happier you will be, trust me!

Having a good credit score is essential for your financial well-being. It can impact your ability to get approved for loans, save you money in the long run, and even impact other areas of your life.

Make sure you understand how your credit score works and take steps to maintain a good one. Your future self will thank you.