Does Your Credit Score Really Matter?

[00:00:00] Speaker A: In this episode, we ask ourselves a question that may sound odd at first hearing. [00:00:04] Speaker B: How much does your credit score really matter? [00:00:06] Speaker A: Let's get started. [00:00:08] Speaker C: Let's get some money from new money new problems. It's the new Money New Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen. Negotiating compensation, purchasing your first investment property. Helping your family with money. The highs and lows of entrepreneurship. New money brings new problems that require new solutions. Join us as we work through them together. I'm Brenton Harrison, and this is the new Money New Problems podcast. [00:00:46] Speaker A: Hello. My name is Brenton Harrison of new Money new problems, and your host for the new Money New Problems podcast. We are finishing up our series on homeownership, and we'll do more episodes on. [00:00:56] Speaker B: That in the future, of course. [00:00:57] Speaker A: But one of the things that we haven't talked about much on this podcast, which has been intentional, has been credit. [00:01:03] Speaker B: We've referenced it, but we haven't gotten too much into the details. [00:01:07] Speaker A: And that actually mirrors a lot of the conversations that we have with our. [00:01:10] Speaker B: Clients on a yearly basis. In year one, when we work with. [00:01:14] Speaker A: A lot of people, it's very rare that we dig deep into their credit scores, credit cards, and the like. We address it, but it's something that we don't spend a ton of time on. Unless they tell me that they are trying to purchase something or acquire some new form of debt, like a home or a car, they're about to go. [00:01:31] Speaker B: Back to school for a degree, so. [00:01:33] Speaker A: On and so forth. But besides those factors, we typically would cover it in more detail in years two and beyond. And that's because while credit is extremely important, in my opinion, we put too much emphasis on credit when it comes. [00:01:47] Speaker B: To building a strong financial picture. [00:01:49] Speaker A: And over the course of this episode, I'm going to try and, uh, prove. [00:01:53] Speaker B: My case a bit. [00:01:53] Speaker A: Now, to be clear, this is not about the extremes of credit. Obviously, if you have a credit score. [00:02:00] Speaker B: That is just in the seller, uh. [00:02:02] Speaker A: Then that's going to be something that. [00:02:03] Speaker B: Really inhibits you if you have a bunch of defaults and things of that. [00:02:06] Speaker A: Nature, as compared to someone who has. [00:02:08] Speaker B: A perfect credit score. [00:02:09] Speaker A: What we're really talking about in this episode is the over optimization of credit scores, meaning, how much effort should I. [00:02:16] Speaker B: Put into having, like, an 850 credit. [00:02:18] Speaker A: Score as opposed to a 725 credit score? And what does it mean for my finances? So, in the first half of this episode, I'm going to tell you some reasons why it's obvious that your credit score is important. [00:02:28] Speaker B: But in the second half, I'm going. [00:02:29] Speaker A: To give you five things to keep mind and keep in perspective so that you understand that credit scores are just. [00:02:35] Speaker B: One part, and in my opinion, not. [00:02:37] Speaker A: The biggest part of what makes a sound financial household. One reason that your credit score is. [00:02:42] Speaker B: Important is because your credit score determines the interest rates that you receive on. [00:02:47] Speaker A: Any particular type of debt. And the second half of this episode, we'll show you some examples of what that means when it comes to real numbers. But when you look at a home loan or things of that nature, the reason they ask for your credit score. [00:02:57] Speaker B: For those forms of debt, is because they want to figure out which tier you belong to. [00:03:02] Speaker A: Do you have a credit score that's below 700? Do you have a credit score that's between 701 and 725? Some lenders set the top rates, or. [00:03:10] Speaker B: The best rates, I should say, for. [00:03:12] Speaker A: People who have credit scores of 740. [00:03:14] Speaker B: Or more or 750 or more. [00:03:16] Speaker A: And based on the score that they. [00:03:18] Speaker B: Pull when they run your credit, they apply for the first part of determining how that loan will be structured. That interest rate, according to the tier. So someone who has a 750 credit. [00:03:28] Speaker A: Score for a home loan may get. [00:03:30] Speaker B: 6.5%, whereas someone who has a 625 may get an 8.5%. [00:03:36] Speaker A: Credit determines interest rates. And the next reason that credit is. [00:03:40] Speaker B: Important in terms of the importance of building and maintaining a strong score is unfortunately, based on the structure of a. [00:03:47] Speaker A: FICO credit score, which is what most. [00:03:49] Speaker B: Lenders still use to determine eligibility. [00:03:52] Speaker A: It's very hard to improve your credit. [00:03:54] Speaker B: Score quickly depending on the areas of your score that need work. [00:03:58] Speaker A: If you're following along on screen, you're. [00:03:59] Speaker B: Looking at a graph that shows the percentages of a FICO credit score. The largest percentage is 35%, which is your payment history. [00:04:07] Speaker A: Maintaining a strong payment history is the. [00:04:09] Speaker B: Easiest way to maintain your strong credit. [00:04:12] Speaker A: Because it is the largest element of your score. [00:04:14] Speaker B: But unfortunately, if you have a bad. [00:04:17] Speaker A: Payment history, it is one of the. [00:04:18] Speaker B: Hardest things to overcome. [00:04:20] Speaker A: Because not only is it the largest element of your score, but in many. [00:04:23] Speaker B: Cases, things like late payments or defaults or bankruptcies can stay on your report for up to seven years. [00:04:29] Speaker A: So if you have a bad payment. [00:04:30] Speaker B: History, it's not something that you can change overnight. [00:04:33] Speaker A: The next highest element of your score. [00:04:35] Speaker B: Is 30% of your score, and that's credit utilization. [00:04:38] Speaker A: We're not going spend a ton of time on credit utilization today, we're going. [00:04:41] Speaker B: To devote our own episode to credit utilization. [00:04:44] Speaker A: But suffice to say credit utilization is. [00:04:46] Speaker B: The only part of a FICO credit. [00:04:48] Speaker A: Score that can be improved quickly. [00:04:51] Speaker B: Many of the other elements we discuss can be destroyed quickly, but credit utilization is the only part of your score that can be improved quickly. [00:04:58] Speaker A: 15% of your score is age of. [00:05:00] Speaker B: Accounts, which is how long have I. [00:05:02] Speaker A: Had, on average, my different lines of credit? Every single time I open a line. [00:05:07] Speaker B: Of credit, it's given a birthday. The older the average age, the better. [00:05:10] Speaker A: It looks on my credit. 10% of your score is your credit mix. Meaning, what types of credit do you have? [00:05:17] Speaker B: Do you have a diverse mix, or. [00:05:18] Speaker A: Do you have all credit cards and. [00:05:20] Speaker B: No car loans, no home loans? [00:05:22] Speaker A: The more diverse your credit, the better it looks for this element of your. [00:05:25] Speaker B: Score, although it's only 10%. And then the last 10% are, uh. [00:05:29] Speaker A: Credit inquiries, meaning you don't want people checking your credit for no reason. Because credit inquiries can impact your credit. [00:05:35] Speaker B: Score for up to a year. They can stay on your credit report for up to two years. [00:05:39] Speaker A: So when you look at all these. [00:05:40] Speaker B: Elements, because, as I said, utilization, which is 30%, is the only one that can be improved quickly, that means that it takes time to build the remaining 70%. [00:05:50] Speaker A: So you don't want to just dismiss your credit score out of hand, because. [00:05:53] Speaker B: A simple blip or mistake here or there could be something that sets you back for a number of years, depending. [00:05:59] Speaker A: On how big that blip may be. Another reason it's good to maintain a strong credit score in pairing with a. [00:06:04] Speaker B: High income is because if you have both, you can reposition your current debt or make yourself eligible for advantageous debt. [00:06:12] Speaker A: Or at least as advantageous as debt can be. And one of the things, if you. [00:06:16] Speaker B: Can do it responsibly, that some people. [00:06:18] Speaker A: Will take advantage of is the ability to open things like personal loans, which they can use to pay off credit card debt in ways that will improve their credit score. There's more on that to come. Another way that they will benefit from that strong credit and high income is. [00:06:33] Speaker B: By opening balance transfer cards, which essentially. [00:06:36] Speaker A: Is a credit card that you can open. [00:06:37] Speaker B: And for a period of time, you. [00:06:39] Speaker A: Can transfer debt from other credit cards. [00:06:41] Speaker B: For which you're paying an interest fee. [00:06:43] Speaker A: And after you've paid an initial transfer. [00:06:45] Speaker B: Fee, which is typically 3%, you can keep it on that balance transfer card at 0% interest for six months, twelve months, 15 months, 18 months. [00:06:53] Speaker A: So people with high credit card balances. [00:06:55] Speaker B: Will take advantage of that balance transfer. [00:06:58] Speaker A: So that they can eventually get that. [00:06:59] Speaker B: Debt at 0% interest, pay it down, at the balance transfer card and cost themselves less over time. [00:07:05] Speaker A: The problem with that strategy, however, is. [00:07:07] Speaker B: You already kind of have to have a strong credit score to even be eligible for your typical balance transfer card. [00:07:14] Speaker A: If you're looking on screen, you're looking at blog post from Experian titled can. [00:07:17] Speaker B: I get a balance transfer card with bad credit? And it says, and I quote, it. [00:07:21] Speaker A: May not be possible to get approved. [00:07:22] Speaker B: For a balance transfer card with bad credit. Card. Issuers typically require a good or excellent. [00:07:28] Speaker A: Credit score to qualify, which is a. [00:07:29] Speaker B: FICO score of 670 or higher on an 850 point scale in quote. Now, I would say in my experience. [00:07:36] Speaker A: Which is why I said in quote, six, uh, hundred, 70 wouldn't cut it. Most people I know who are eligible. [00:07:41] Speaker B: For a number of balance transfer cards where they can apply for that card with some level of confidence that they'll be approved, they need to be in the 700s. [00:07:50] Speaker A: So this is an example of how having good credit allows you to actually. [00:07:53] Speaker B: Reposition the debts that you have in an advantageous way. [00:07:56] Speaker A: And the same will be true for things like a home equity line of credit where you do, yes, have to. [00:08:00] Speaker B: Have equity in your home, but you also have to have, in order to get the best terms, a strong credit score. [00:08:06] Speaker A: And when you're applying with another person, like a spouse or a partner, or even just a business partner, most lenders will take the lower of the two. [00:08:13] Speaker B: Applicants credit scores when it comes to determining interest rates, which is an even bigger incentive to make sure that not just your credit is strong, but also. [00:08:20] Speaker A: Whoever you may apply with for various forms of debt. Another reason that credit scores are important. [00:08:25] Speaker B: Is because there are certain insurances and. [00:08:27] Speaker A: Even jobs that make sure that you. [00:08:29] Speaker B: Have strong credit in order to get favorable rates or even to get the job in the first place. [00:08:33] Speaker A: Now, I can't say that I've ever met a person who didn't get a job because of their credit, although an. [00:08:38] Speaker B: Employer isn't required to tell you. But some employers do ask to check your credit. [00:08:42] Speaker A: You have certain cable companies or utility. [00:08:44] Speaker B: Companies who won't make you pay a. [00:08:45] Speaker A: Uh, deposit if you have strong enough credit scores. They are homeowners, insurance and car insurance. [00:08:50] Speaker B: Companies, I would say the majority of them who, if you have bad credit. [00:08:53] Speaker A: They will hike up your rates, whereas you get favorable rates if you have strong credit. And the last thing, these aren't the only things, but the last thing for. [00:09:01] Speaker B: This first half of the episode is. [00:09:03] Speaker A: The fact of the matter is, even with lenders like a bank, the better you do with your credit, the higher your income may be. [00:09:09] Speaker B: There are certain perks that you will. [00:09:10] Speaker A: Find are made eligible to you just. [00:09:13] Speaker B: By the fact that you've had other debt that you've shown them you've done a good job with in the past. [00:09:18] Speaker A: That could be something like getting access. [00:09:20] Speaker B: To a lounge or being able to upgrade hotels, getting perks at certain restaurants. Or it could be something as simple as, uh, how you reposition other debts. For example, if you're looking on screen, uh, this is an email that I. [00:09:32] Speaker A: Got from Capital one. I have a capital one credit card. [00:09:35] Speaker B: And they gave me the ability to transfer debts from other credit cards to my capital one card for nine months at 0% interest. Now, we talked about balance transfer cards. What I didn't share is that typically. [00:09:47] Speaker A: The only time that you get that. [00:09:48] Speaker B: Debt at 0% interest is when you first sign up for the card. But because of how well I've maintained my balances on this card, which I've had for years, I sometimes get offers in the ability to do balance transfers, even though it's not a new card. This is an example of a perk of having strong credit and something that you can't dismiss and you shouldn't dismiss when it comes to maintaining your score. [00:10:10] Speaker A: Now that weve told you some reasons why credit is important, after the break, well tell you why it is not as important as other elements of your finances. [00:10:19] Speaker D: This is the new Money New Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles theyve never seen. Well be right back. [00:10:38] Speaker C: Are you wondering what new money problems you might be overlooking in your financial life? If so, we've got great news. We've crafted the new money new problems gap finder to identify potential weaknesses in your finances in areas ranging from budgeting, investments, insurance, and even the threat your extended family's finances could pose to your household. Please head to now newmoneynewproblems.com gapfinder to complete it today. Again, that's newmoneynewproblems.com gapfinder. To take the assessment. [00:11:17] Speaker D: You'Re listening to the new money new problems podcast. Subscribe [email protected]. Welcome back. [00:11:27] Speaker B: M all right. Here are five reasons why your credit. [00:11:30] Speaker A: Score is important, just not as important. [00:11:33] Speaker B: As we sometimes make it out to be. [00:11:36] Speaker A: We covered that. Your credit score is what a lender uses to determine your interest rate. [00:11:39] Speaker B: And again, we're not talking about extremes here. Obviously, if you have a credit score. [00:11:44] Speaker A: That is low, low low as compared to a person who has a credit score that is perfect, and interest rates going to be a wide gap. But when it comes to that middle area where you have a strong credit score compared to someone who's just, uh. [00:11:56] Speaker B: It's okay. [00:11:57] Speaker A: I want you to keep in context. [00:11:59] Speaker B: And perspective just how big of a difference an interest rate may be. [00:12:04] Speaker A: If you're looking on screen, we have an example of a $300,000 mortgage. On the left, we have a person. [00:12:09] Speaker B: Who has a credit score that's pretty good. [00:12:12] Speaker A: Uh, but I wouldn't say strong. [00:12:13] Speaker B: It's 680 to 699. [00:12:17] Speaker A: And if they were to apply for this home loan, based on current rates. [00:12:20] Speaker B: They would have an interest rate of 7.9%. Interest. That would lead in terms of just the principal. And interest doesn't cover property taxes and. [00:12:29] Speaker A: Homeowners insurance, but a principal and interest. [00:12:31] Speaker B: Payment of $2,185 a month. [00:12:35] Speaker A: Now, let's compare that to a person. [00:12:36] Speaker B: Who has a credit score of 760 to 799. [00:12:39] Speaker A: We'll talk about this in a second. But this is above and beyond the. [00:12:43] Speaker B: Top rung of what most lenders use to calculate their credit scores and interest rates for their clients. [00:12:49] Speaker A: So this person would likely be receiving. [00:12:51] Speaker B: The best rates that this lender has to offer. [00:12:54] Speaker A: And in this example, based on current. [00:12:56] Speaker B: Rates, they would get 7.37%. [00:12:58] Speaker A: This is not just hypothetical. These are put into a mortgage calculator based on rates as of May 6, 2024. Now, 7.37%. That is a little more than half. [00:13:09] Speaker B: Of a percentage improvement. [00:13:11] Speaker A: But when you look at the payment. [00:13:12] Speaker B: It lowers it to $2,070 a month. [00:13:15] Speaker A: Which means that even though this person has excellent credit, as compared to a person who has good credit, the monthly payment difference is about dollar 115 a. [00:13:24] Speaker B: Month in this example. [00:13:25] Speaker A: Now, to be clear, dollar 115 a. [00:13:27] Speaker B: Month extra over the course of 30 years is no small matter. [00:13:31] Speaker A: But let's compare it to the other element of what leads to the structure of this loan, and that is debt to income ratio. Debt to income ratio is an expression. [00:13:39] Speaker B: Of how much of your monthly income. [00:13:41] Speaker A: Is swallowed up by your monthly debt payments. If I have a $10,000 monthly income and $5,000 in monthly debt payments, I have a debt to income ratio of 50%. Now, while your credit score determines the. [00:13:53] Speaker B: Interest rate you receive, your debt to. [00:13:55] Speaker A: Income ratio is what determines how much. [00:13:57] Speaker B: Loan you're able to get. [00:13:59] Speaker A: So, for example, you can't have a. [00:14:01] Speaker B: Loan that bumps you above your lenders debt to income requirements. So that is the difference how well you have managed your other debts when it comes to whether you can get a mortgage that's $2,100 a month or $2,700 a month. The problem, however, is that in my opinion, lenders let you get way too high in terms of your debt to income ratio and still approve you for the debt. [00:14:24] Speaker A: And I'll tell you why. [00:14:25] Speaker B: Your typical home lender won't allow you. [00:14:27] Speaker A: To exceed 43% debt to income ratio. The problem with that requirement is that. [00:14:33] Speaker B: They use that 43% based on your. [00:14:36] Speaker A: Gross income, what you make before taxes. [00:14:39] Speaker B: They don't consider what actually comes home on your paycheck every two weeks after. [00:14:44] Speaker A: You pay for taxes and employee benefits. [00:14:46] Speaker B: For example, if you're looking on screen a person who makes $150,000 or a. [00:14:50] Speaker A: Household that makes $150,000 before taxes and benefits, that's $12,500 a month. So if they were allowed to have a debt to income ratio up to. [00:15:00] Speaker B: 43% of that number, that means their total debt payments each month can be up to $5,375 a month and still fall within the requirements. [00:15:10] Speaker A: But when you factor in the fact. [00:15:11] Speaker B: That we do have to pay taxes and we do have to pay for. [00:15:13] Speaker A: Employee benefits, let's say that this person pays about 25% of their check towards. [00:15:18] Speaker B: Those two items, and that means that they actually take home $9,375 a month. Well, now, if we look at the amount that they're able to have in debt payments and compare it to the. [00:15:30] Speaker A: Net paycheck they take home, that means this lender will allow them to qualify. [00:15:34] Speaker B: For a mortgage even though that in total they're paying almost 60% of their. [00:15:39] Speaker A: Take home pay just towards debt payments, it's 57.33%. And depending on what other things you're paying for in your budget that don't qualify as debts, like daycare expenses, like. [00:15:51] Speaker B: Transportation, like food costs, you could very. [00:15:53] Speaker A: Easily put yourself in a situation where. [00:15:56] Speaker B: You total up your expenses and you are immediately house poor and living beyond your means, even though your lender approved you for the mortgage because of how they calculate DTI. [00:16:06] Speaker A: So now let's bring this home, and let's remember that when we did this calculation based on good credit and excellent credit, the person with excellent credit had. [00:16:14] Speaker B: Monthly savings of about $115 as compared to their peer. [00:16:18] Speaker A: Well, if we look at that $115 and what they actually take home, it's 1.2% of their net paycheck after taxes. [00:16:27] Speaker B: It does not really move the needle. [00:16:30] Speaker A: If you're making $9,300 a month after taxes, $115 a month is probably not the thing that makes this a good or bad decision. It's the debt to income ratio and. [00:16:39] Speaker B: The other elements of their budget that will be the thing that are the primary factors. Which brings me to number three, which. [00:16:46] Speaker A: Is the fact that when you look at debt to income ratio and look. [00:16:48] Speaker B: At credit, it is pretty clear that your savings rate and your budget for other areas of your finances are actually the most important thing when determining whether you should or should not take on another debt expense. [00:17:01] Speaker A: You cannot depend on your lender to take a look at your situation and have an understanding of all the things that make something a good idea or a bad idea. [00:17:09] Speaker B: They're not as concerned with the fact that you do spend $1,000 a month on daycare. [00:17:13] Speaker A: They're not as concerned with the fact. [00:17:15] Speaker B: That every few months you have a family member that, uh, needs money and you feel a need or an urge. [00:17:20] Speaker A: To give them that money to make sure they're supported. [00:17:22] Speaker B: It's on you to take responsibility for those items, because if you don't, your. [00:17:27] Speaker A: Lender just wants to make sure that. [00:17:28] Speaker B: You can pay them back, even if it means that you're doing so at the expense of the rest of your budget. [00:17:33] Speaker A: The next reason that your credit score is not that important, again, once you've gotten to kind of the mid range of credit, is because there's a certain. [00:17:41] Speaker B: Rung of credit scores, beyond which point lenders just don't simply improve the rates. [00:17:46] Speaker A: We talked about that for many lenders, 700, 4750 is kind of that range where they say, everybody below this falls. [00:17:53] Speaker B: Into another tier, but 740 or 750. [00:17:56] Speaker A: Above, there's no improvement. So that means that if you've been. [00:17:59] Speaker B: Working really hard on your credit score. [00:18:00] Speaker A: For years, and you have a credit score that's 751, and you're looking at somebody who has an 850 credit score. [00:18:06] Speaker B: And you say, oh, man, I can't. [00:18:07] Speaker A: Wait till I have a perfect credit score. If you look at a lender, it may not even matter. If your lender says, our top rates. [00:18:13] Speaker B: Start at 740, then there's really nothing that you should be doing in terms of how you manage your credit in. [00:18:19] Speaker A: Pursuit of that 850, because there's no monetary or tangible difference between the two scores when it comes to what you're paying. And unfortunately, there are people who already have strong credit scores who try to gamify their score to improve it more and more and more, and they've already done everything they need to do. And in reality, some of the things. [00:18:38] Speaker B: That you do to gamify a score may do more long term damage to your total finances than they would just staying put. [00:18:45] Speaker A: Going back to the FICO score, you. [00:18:47] Speaker B: Can see that there are some things that are positive financial behaviors that would actually hurt your credit score. [00:18:52] Speaker A: We talked about age of your credit. [00:18:54] Speaker B: Being 15% of your score. [00:18:56] Speaker A: Well, having a long credit history benefits 15% of your credit score, but there. [00:19:00] Speaker B: Are some things that may be the best thing for you financially. We're paying off a student loan, paying. [00:19:05] Speaker A: Off a car loan, where when you pay off those lines of credit, you actually lose that payment history and that. [00:19:11] Speaker B: Line of credit history, which actually means that your score will go down. [00:19:15] Speaker A: Now, you have to ask yourself, would. [00:19:16] Speaker B: You rather have student loans but have. [00:19:18] Speaker A: Strong credit, or would you rather pay. [00:19:19] Speaker B: Off your student loans and watch your credit score go down 20 or 25 points? I would argue that it makes more. [00:19:25] Speaker A: Sense, no matter how long you've had. [00:19:27] Speaker B: That student loan, to just pay it. [00:19:28] Speaker A: Off as compared to having a balance, having that burden on your back, but. [00:19:32] Speaker B: Being able to say, oh, at least I have a 750 credit score. [00:19:35] Speaker A: Credit mix is another example. [00:19:37] Speaker B: The more diverse your lines of credit. [00:19:39] Speaker A: The better it reflects for this element of your credit score. [00:19:42] Speaker B: But the first thing is, it's only 10% of your score. [00:19:46] Speaker A: If you have one type of debt and you feel like your credit is not diverse enough, are, uh, you really going to take on debt for the. [00:19:52] Speaker B: Sole purpose of improving 10% of your score? [00:19:54] Speaker A: Probably not, but I promise you there. [00:19:57] Speaker B: Are people out there who say, oh. [00:19:58] Speaker A: You have to get a credit card. [00:19:59] Speaker B: To build some credit. Very rarely are the cases where I've seen that to be true. [00:20:04] Speaker A: You have, uh, people who talk about. [00:20:05] Speaker B: Signing up their child for a credit. [00:20:06] Speaker A: Card before they're 18 to start building their credit. That can be positive if you are maintaining your credit positively. But if you're not doing well with your credit, putting your child's name on that credit card is not going to help them. [00:20:19] Speaker B: The things people do to gamify their score can often be solved or done better by simply getting the credit that. [00:20:26] Speaker A: You have, paying it on time, and. [00:20:28] Speaker B: Doing things that make sense for your overall finances. [00:20:31] Speaker A: Because in the short run, those things. [00:20:33] Speaker B: May sometimes hurt your score. [00:20:35] Speaker A: But in the long run, maintaining your finances well typically means that as a consequence, you will also have a strong credit score. And then lastly, and this is the most important when you're talking about whether your credit score really matters, there are obviously some things we've talked about, even. [00:20:51] Speaker B: In this episode that are impacted by having strong credit. [00:20:55] Speaker A: We talked about car insurance rates, homeowners insurance rates. But for the most part, your credit score only matters when you're trying to acquire new debt. Now, uh, there are times when that may be helpful. Maybe you need a home loan, maybe you need a car loan. But if you're just in a kind of rhythm of life and you don't. [00:21:13] Speaker B: Need a new car, and you don't need a new home, and you are not trying to go back to school. [00:21:18] Speaker A: And there's not some reason, in terms. [00:21:19] Speaker B: Of sound financial decisions, that you necessarily need more credit or a higher credit limit or a new credit card, then. [00:21:26] Speaker A: In that point in time, you don't really need your credit score. [00:21:29] Speaker B: So there's reasons that you would set up alerts for your credit to make. [00:21:32] Speaker A: Sure that nobody's trying to steal your identity or open up a line of. [00:21:35] Speaker B: Credit in your name, or, uh, that. [00:21:37] Speaker A: There'S not an inquiry on your credit. [00:21:39] Speaker B: That you did not authorize. But in terms of checking it every week or every month, it's not something that you have to do. Because unless you're trying to acquire new. [00:21:46] Speaker A: Debt, your credit score is simply not. [00:21:49] Speaker B: That relevant at this point in time. [00:21:51] Speaker A: So don't get caught up in either extreme. Your credit score is important. You cannot simply ignore it, but it is not the most important thing in your financial life. And if you get too caught up in things like your type of credit card, what type of reward points they offer, but you're not aware of things like how much you're saving on a. [00:22:07] Speaker B: Monthly basis, what you're doing to pay down the debt that you've currently accrued. Then you may be drifting a little. [00:22:12] Speaker A: Bit off center, and it's time to. [00:22:14] Speaker B: Keep the credit score in perspective. [00:22:16] Speaker A: I'll see you next week. [00:22:20] Speaker C: From new money new problems. This was the new Money New Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities, um, and obstacles they've never seen.