#028 – Why Your Credit Score is Your Financial Passport

By: Fran Walsh

Read Time: 4 Minutes

Ever glanced at your credit score and wondered, “What’s the big deal?” Unfortunately - it's a MUCH bigger deal than what most people realize early in their careers. Often times, the first time most millennials realize they have a great or poor credit score is when they're sitting down for drinks with some friends and it randomly gets brought up - causing everyone to finally look into what theirs is. 

Basically it's what tells lenders, “Hey, I’m good for it” or “Maybe check back later.” Let’s dive into why this number is your financial passport and how to make it work harder for you.

1. The ABCs of Credit Scores

Think of your credit score as your financial health’s snapshot. It’s what lenders peek at to decide if you’re the type to pay back on time or ghost them. And yes, it decides whether you get that loan with brag-worthy terms or the one that makes your wallet weep.

Everyone has that one friend who always brings up that they have a sub 3% mortgage rate because of their impeccable credit & extremely lucky timing... (Don't be this guy 😂)

Actionable Steps:

• Check Yourself: Regularly check your credit score. There are a ton of free tools and services through your credit card provider. Knowledge is power. Knowing your starting point is key to tracking progress.
• Know What Matters: Get cozy with what affects your score - payment history, how much you owe, your credit’s age, new credit, and the mix of credit you’ve got. Each of these has a different impact on your credit score, but are all important in their own way & need to be taken into consideration.

2. The Impact on Your Wallet

A stellar credit score can be a money-saving machine. Good terms on loans and credit cards? Check. Lower interest rates? Double check. It’s about making your money work smarter, not harder.

The difference between a 8% rate & a 3% rate on a $400,000 mortgage?...

$370,000 in extra interest!! Assuming all else is equal - check out the screenshot below from our workbook that every student of the Opulus Method has access to in order to figure out how much house they can afford

Actionable Steps:

• Utilize Wisely: Keep your credit use under 30% of your limit. It’s like credit score magic.
• Pay on Time: Late payments are a no-go. They can knock your score down extremely fast. This is why you always hear us harping on AUTOMATION. We are all human - we are bound to make errors from time to time. Always set your debt payments to auto-pay to ensure we are never getting dinged on our credit report.

3. Building and Bulletproofing Your Credit

Starting from scratch or patching up your credit? No worries either way. It’s about laying down a foundation that shouts reliability regardless of where you are at in your credit history.

Actionable Steps:

• Smart Starts: Consider a secured credit card or hitching a ride as an authorized user on someone else’s account.
• Pay Debt Down: Pay off what you owe and keep those old accounts open. Age is beauty when it comes to credit history.

4. Keeping a Watchful Eye

Monitoring your credit isn’t just for the paranoid. It’s for anyone who wants to catch mistakes or fraud before they turn into full-blown disasters.

Actionable Steps:

• Annual Check-up: Grab a free credit report every year from the big three bureaus at AnnualCreditReport.com.
• Alerts On: Set up credit monitoring alerts. Because it’s better to be safe than sorry.

5. Busting Myths

There’s a ton of bad info out there that can mess with your credit score confidence. Let’s clear the air.

Actionable Steps:

• Self-Checks Don’t Hurt: Peeking at your own score won’t drop it. That’s a myth.
• Closing Accounts Can Sting: Shutting down old accounts might backfire by shortening your credit history. Its better to just zero them out & let them sit as an open line that is being unused, especially if you have a major purchase upcoming

So there you have it. Your credit score is more than just a number—it’s your ticket to financial flexibility and freedom. Treat it right, and it’ll do wonders for you. Ignore it, and well, you get the picture. 

Frequently check in on your score, and make sure that there isn't anything popping up on there that looks suspicious.

Always make your payments on time, prove you are a responsible & reliable individual, and lenders will reward you with great terms on those important purchases!

Have a great week everyone! Thanks for tuning in.