The world is a funny place because we can all only see it from our own perspective. But we often see opinions or behaviors from others that give us a glimpse into their world view. One of those behaviors that continues to perplex me is the fascination that everyone seems to have with their credit score. In the financial world, it seems to be an issue of utmost important to the non-wealthy. It’s almost the singular financial goal everyone strives for. “Gotta build credit”, “How can I improve my credit score”, “I hope this doesn’t impact my credit” are the phrases you’ll hear when almost any financial situation arises.
But why. What goes a good credit score get you? The ability to borrow money, which you have to then pay back? And when you’re done paying back, you’re back to zero. So you start the cycle anew and borrow more, work more years, and keep paying it back. It’s a cycle the banks absolutely love. You work your whole life to end up with nothing and make them rich.
How about this idea: Instead of setting a goal to borrow money your whole life to end up with zero, try actually HAVING money that grows in value. When you want to buy something, you don’t borrow for it, you just pay for it, and let the remainder of your money continue to grow. That is how the wealthy think. Spend less than you make, invest the rest. Let your wealth keep growing. Avoid debt. Fuck credit scores.
And yeah, I know. There are certain realities of living in the US where a credit score can come in marginally helpful (i.e. some auto insurance companies look at it, it might affect a mortgage rate, etc). But as you can see from this post, you don’t need to be a slave to the banks to have a good credit score. I haven’t carried debt for over 11 years and my credit score is excellent. So pay your bills on time, never close your oldest credit card without an annual fee, and you’ll be fine. Focus on building your wealth, not your credit score.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
Sometimes I discuss the various costs associated with homeownership to dispel the myth that “your primary home is the best investment you’ll ever make”. And sometimes I may not be clear enough that I’m only talking about your PRIMARY home.