Credit Scores | Why Care?

Earlier, we defined credit scores.

But why should you even care?

It’s because used properly, they save money and open doors.

Not everything is lose-lose, but when it comes to credit, if you don't have the opportunity to leverage your credit and others do, it means you’re losing out.

On the purely financial end, they allow you to get access to an array of financial products like mortgages and auto loans.

With a decent credit score, they also open up the ability to get high-end rewards credit cards, which can have very generous signup bonuses, perks, and cashback.

More importantly, across all types of loans, a great credit score provides the lowest rates, while poor credit scores get charged the most.

Let’s think about that for a second. While the logic here technically makes sense, what it means is that people struggling financially get punished even more by getting locked out of affordable rates and better financial products.

Here, as in most things, opportunities and the lack of, get concentrated towards the extremes.

Now let’s say that you have no intention of getting a car or a house anytime soon and you have no interest in opening up credit cards.

It’s still important to understand and elevate your credit score as it is used in both employment and housing.

Roughly 20% of employers check credit scores when making hiring decisions (though it’s prohibited by law in some places).

Of the multiple units I’ve rented over the last few years, I’ve gotten a credit check from the landlord every single time. Official documentation from certain government agencies actually recommends that a tenant’s credit be checked.

And to be honest, shit happens.

In the event that something catastrophic occurs from a family emergency to unforeseen medical bills, access to credit can mean the difference between sleeping soundly or wondering where the money could possibly come from.

Plans change, and even if we have no intention of buying a home or a car, one day we might. It could be that we decide to raise a family or get a car for that new job we just got.

We can’t predict the future and so the ability to access the world of credit by ensuring our credit scores are healthy helps to achieve and protect our financial independence.

This post was ported over from my Substack series