I recently went through a process that required my credit score to be checked. When I received it, I had to laugh out loud.
My credit score was extremely high, but there were reasons it wasn’t “perfect.” These reasons were listed on the document, and they furthered my belief that credit scores are a pretty dumb way to measure “financial healthiness.”
Here are some of the reasons my credit score wasn’t absolutely a perfect score:
- Lack of recent installment loans (I paid my house off in January!)
- Lack of long-term credit relationships(I paid off all my non-house debt in February 2004)
- Lack of credit accounts (Duh!)
Think about this for one minute. Most insurance companies establish premium rates based in large part on credit scores. Many employers check credit scores of potential employees.
Here’s what you must know: Your Credit Score would be more aptly named if it were called a “Debt Management Score.”
Your credit score has NOTHING to do with:
- The amount of money you have in a bank account
- The amount of money you have invested – for college, retirement, or dreams
- Other assets you own
- Your overall net worth
When people modify their behavior to keep paying debt payments “just to keep their credit scores high” – THAT is financially dumb behavior.