America has been brainwashed to believe financial well-being is established by a high credit score. To accomplish this, Credit Card companies now give you your free credit score as part of card benefits – even going so far as to send alerts to let you know your updated credit score is available to view. There are articles put out by the financial industry, such as, “Your Credit Score is More Important than your GPA!”
With all of emphasis on the credit score, one of the most common questions we are asked by clients who are considering eliminating their credit card debt is, “What about my credit score?”
Here is what you need to know:
• Your credit score does NOT reflect financial success – it reflects that you pay your bills on time and have some credit available to you.
• Having a high credit score when you are carrying significant credit card balances – month to month, year to year – is NOT an indication of financial health.
• Placing a priority on your Credit Score over the benefit of eliminating your credit card debt is a BIG mistake.
• Credit Scores flex rapidly – while they dip when you eliminate debt, they recover quickly, and go up higher than the level they were before you eliminated your debt
• If you are about to buy a home – your credit score is relevant, and this is one time you should buy the home first before taking action to eliminate debt
If you are financially strong – which I define as: (1) zero ongoing credit card debt (so you are not wasting your money by paying interest); (2) paying your bills on time; and (3) you are saving money for your future – you will have a good credit score. So, the correct statement is that Financial Success includes a good credit score. This is the distinction the financial industry understands better than anyone but does not want you to know. If you could loan $100,000 to 10 people and they would pay you 20% interest for ever (because the individuals are in the credit card trap), you would make $200,000 per year. If you knew that a major factor that kept them paying you – rather than getting out of debt – was that they were worried about hurting their credit score, would you tell them it’s in their financial interest to stop paying you, get rid of the debt and not to worry about their credit score? Or – would you let them believe their credit score is the most important thing in the world – so long as they keep paying you $200,000 per year! Perhaps you would be honest and tell the ten people if they happen to be your friends – but if not – you would keep your mouth shut and encourage them to pay – just like the credit card companies do, day in and day out. While their commercials want you to believe they are your friends – they are not!
So, let’s clarify. If you are paying interest on significant credit card debt – you should get rid of the debt and not worry about your credit score. If you go 10 or 20 years carrying the debt – the interest you pay is the retirement fund you threw away. If you remember Blood Sweat and Tears – you don’t want my modified version on your tombstone, that says:
And when I die and when I’m dead, dead and gone,
I will have had a 700 Credit Score my entire life, But lived in poverty my last 20 years.
Save your future by eliminating needless credit card debt. That’s the best financial advice I have to offer. Call today for a free in person or virtual consultation, 248.645.1700.