Speaker 1: Welcome to How the Money. I'm Joel and I and Matt.
Speaker 1: Today we're asking the question do I need a perfect
Speaker 1: credit score? Joel, I wonder if our answer to that
Speaker 1: question would be any different if you or I had
Speaker 1: a perfect credit score, which we don't. Well, I don't.
Speaker 1: I don't know about you, but I do not have
Speaker 1: a perfect credit score. Now, man, I'm not even close. Alright, good,
Speaker 1: I didn't know, if I know. Previously we had been like,
Speaker 1: all right, on three, tell your credit score? Uh, and
Speaker 1: I think I think our scores were pretty close, But like,
Speaker 1: I don't even know if we're gonna do that this time,
Speaker 1: because honestly, above a certain point, having a credit score
Speaker 1: that's that's higher than that it might matter some, but
Speaker 1: maybe not to the extent that a lot of people
Speaker 1: think it would. It doesn't nearly have the impact on
Speaker 1: our finances. That's a lot of people maybe wish it
Speaker 1: did if you were in that super super upper one
Speaker 1: percent of of folks that you know that have a
Speaker 1: perfect credit score. Yeah. Yeah, So it's an important thing
Speaker 1: to to consider, like how important is my credit score?
Speaker 1: We'll talk about that something today and then how high
Speaker 1: do I need to make sure it gets in order
Speaker 1: to have all the benefits of having solid credit and
Speaker 1: doesn't need to be perfect. You know. Well, we'll answer
Speaker 1: that question as well in today's episode. But Matt, before
Speaker 1: we get there, we recently mentioned that I kind of
Speaker 1: lost our competition that we weren't actually in, the one
Speaker 1: about keeping your phone the longest the cell phone battle. Yes,
Speaker 1: so congratulations again on winning. I recently sold No need
Speaker 1: to rub it in. I'm rubbing assaulted in my own
Speaker 1: wounds right now. But of course I sold my old
Speaker 1: cell phone because I don't want that hunkle junks just
Speaker 1: sitting around cluttering up my house when I can make
Speaker 1: a little bit of money from it. I made a
Speaker 1: whole seventeen dollars, so pretty impressive. And it's from a
Speaker 1: website that we mentioned not too long ago called sell
Speaker 1: sell dot com. Well, we'll post a link to that
Speaker 1: website in the show notes. But it's one of those
Speaker 1: things where if you have an old phone lying around
Speaker 1: that you're not using anymore because you upgraded, don't forget
Speaker 1: to get rid of your old electronics and to make
Speaker 1: money from them. Uh. Cell cell was just super easy
Speaker 1: because actually send you the envelope, you do a hard
Speaker 1: factory reset on your phone. You toss that phone in
Speaker 1: the envelope, you mail it off, and then you get
Speaker 1: a check or you get a PayPal deposit. So super
Speaker 1: chill way to go about, um getting rid of something
Speaker 1: that you don't need anymore and making some money off
Speaker 1: of it. Yeah, exactly, Well, I'm glad to hear you
Speaker 1: got your money. We did the same thing with Kate's
Speaker 1: uh most recent phone that she outgrew too big for,
Speaker 1: get too big for her photos, did get too big
Speaker 1: for Okay, it was only a sixteen gig storage phone
Speaker 1: or whatever. But I feel like for me, like what's
Speaker 1: difficult when it comes to something like this is I
Speaker 1: know that I could get more money by taking a
Speaker 1: little bit more time and selling it on eBay right. Uh.
Speaker 1: And that's where cell cell dot com that they make
Speaker 1: it so easy you hop on there. They've got a
Speaker 1: bunch of different sites listed out in what they're currently paying.
Speaker 1: It's an aggregator, which is nice. It's it's not you're
Speaker 1: selling just at that site. It's like you're seeing all
Speaker 1: the sites that want to buy your cell phone, and
Speaker 1: and they all make it super easy. Like I mean, basically,
Speaker 1: as long as you meet some certain a certain number
Speaker 1: of requirements, you send it off, and as long as
Speaker 1: those things are met, you get the money. And so
Speaker 1: they make it so stink and easy. But for me,
Speaker 1: I get hung up on the fact that I know
Speaker 1: that we could have gotten more money for her phone
Speaker 1: had I sold it on eBay right But after a
Speaker 1: quick search, what I quickly learned though, is that yeah,
Speaker 1: I would make a little bit more money, but not
Speaker 1: a ton more. I think the highest phone I saw
Speaker 1: going was like around fifty bucks, and so there's a
Speaker 1: chance that we could have sold it for something near there.
Speaker 1: Most likely it would have been closer to like thirty bucks.
Speaker 1: But then on top of that, yes, I could have
Speaker 1: gotten a little bit more money, but there would have
Speaker 1: been way more time involved with getting that money. And
Speaker 1: that's an important consideration. You need to know what your
Speaker 1: time is worth, and in my mind, taking the time
Speaker 1: to you know, shine it up, like make sure it's
Speaker 1: all nice and clean, getting a few photos of it,
Speaker 1: getting that listing up, maybe even answering questions, you know,
Speaker 1: like what you post something online. And when it comes
Speaker 1: to electronics, people are like, okay, hey, what's the battery
Speaker 1: life on that? And they're kind of checking in on
Speaker 1: all different sorts of things, even writing the listing, whereas
Speaker 1: you don't have to do that with a website where
Speaker 1: you're selling it. And so you're right, there's all this
Speaker 1: extra time involvement and is something you have to consider
Speaker 1: because is it worth you know, an extra hour to
Speaker 1: list that phone to make an extra ten bucks? Yeah,
Speaker 1: and in this case, no is the answer. And I
Speaker 1: would be willing to do it for something that's a
Speaker 1: higher dollar item. Like we talked recently not too long
Speaker 1: ago about a high end kind of luxury clothing item
Speaker 1: that we that was gifted to Kate that we sold
Speaker 1: on e Bay. You made like bucks on it, totally
Speaker 1: worth it or seven something, Um, but it's your ten bucks.
Speaker 1: I've don't move the needle that much exactly. And so
Speaker 1: in that case, yeah, we weren't gonna just like send
Speaker 1: that off to a site that is just gonna pay
Speaker 1: us pennies on the dollar for what it's actually worth.
Speaker 1: And so yeah, that's definitely something to keep in mind.
Speaker 1: It's better to get some money for for something like
Speaker 1: this and kind of get it out of your house
Speaker 1: than to sit on it thinking that like, well I
Speaker 1: could get more, but what are you actually going to do?
Speaker 1: I think for a lot of people taking the lesser
Speaker 1: amount of money but actually doing the thing, that's totally
Speaker 1: the way to go. Yeah, and especially think about this
Speaker 1: too with a cell phone. Every day it sits there,
Speaker 1: it becomes less valuable, so it is more and more
Speaker 1: obsoletely exactly. So, so if you say you're going to
Speaker 1: do it and you finally get around to it three
Speaker 1: months later, it might be worth just as much on
Speaker 1: eBay now as it would have been if you'd told
Speaker 1: the easy way three months earlier. So yeah, it's one
Speaker 1: of those things where what are you actually going to do?
Speaker 1: And if you're actually going to sell it on eBay
Speaker 1: and it's worth that time to you, then do it.
Speaker 1: By all means, get the highest dollar amount you can
Speaker 1: for your item. But if you're not going to at
Speaker 1: least go the easy route and make some money for
Speaker 1: your item. Yeah, and the thing is too. Three months
Speaker 1: later you look at the prices for it and you're like,
Speaker 1: oh crap, it's worth like absolutely nothing now. And then
Speaker 1: you go to one of the you go to cell
Speaker 1: cell and they're literally paying you like three dollars. So
Speaker 1: it's just like i've've already spent way too much time
Speaker 1: on this already. Yeah, you're overthinking it kind of I
Speaker 1: did recently with my entire inflation, just spending way too
Speaker 1: much time thinking about how much money you're paying, which
Speaker 1: is almost nothing to play your tigers. You're like, oh,
Speaker 1: if I'm not running this area and I can swing
Speaker 1: by the gas station, hit it at the right time.
Speaker 1: You need to have a dollar twenty five and change
Speaker 1: on hand. Yeah, you don't need to overthink it. It's
Speaker 1: amazing though, how somebody with, you know, a frugal mindset
Speaker 1: can obsess about things that really don't matter very much.
Speaker 1: And so yeah, this is one of those things, is
Speaker 1: where you can overthink it when you don't need to. Yeah,
Speaker 1: and that's the perfect segue. It's a credit scores. I mean,
Speaker 1: you know, having the perfect credit score. Do you actually
Speaker 1: need to have a perfect credit score? Are you overthinking it?
Speaker 1: We're gonna get to that here in a little bit. Yeah,
Speaker 1: let's first mention the beer that we're having on the show.
Speaker 1: This one's called Nuclear Sea Horse and it's by Boonshine Brewing.
Speaker 1: Big thanks to listener Christopher for sending this one our way.
Speaker 1: We'll give our thoughts on it at the end of
Speaker 1: the episode. But for now, Matt, let's get to the
Speaker 1: subject at hand. Let's ask the question and then talk
Speaker 1: about it. Do I need the perfect credit score? And
Speaker 1: perfection is something that sometimes we we strive for even
Speaker 1: though we know it's not achievable. Sometimes it just random
Speaker 1: areas of our lives. But it's easy to start to
Speaker 1: think about our finances is wanting to get them in
Speaker 1: a state of perfection as well, at least for Type
Speaker 1: A personalities or indiogram ones, you know, like those are
Speaker 1: the folks that are like, I need to have the
Speaker 1: perfect score for us seven So, like, we don't really
Speaker 1: care about that stuff. I'm not totally sure what I yet. Well, well,
Speaker 1: we'll get to the bottom of that one of these days,
Speaker 1: one of these days. But but honestly, still knowing that
Speaker 1: perfection is impossible doesn't really stop us from trying in
Speaker 1: some cases. And then in the case of our credit score,
Speaker 1: it's important to note that perfection is is almost impossible,
Speaker 1: but at the same time, having a great credit score
Speaker 1: is incredibly important in the modern financial age. So how
Speaker 1: much effort should we put into boosting our credit score
Speaker 1: taking it into the realm of perfection. That's an important
Speaker 1: question for us to ask so that we don't put
Speaker 1: too much effort into something that won't offer enough of
Speaker 1: a payoff for us. Um And that's what we're going
Speaker 1: to discuss in today's episode. We don't want it to
Speaker 1: be like the cell phone, where we put way too
Speaker 1: much effort into something for minimal extra return. Yeah, not
Speaker 1: knowing how high the credit score you actually need, uh,
Speaker 1: and then how much time you should you know, be
Speaker 1: be spending on it and thinking about it working towards
Speaker 1: a healthy score. That's the thing that we're gonna you know,
Speaker 1: really hone in on today. And some of our listeners
Speaker 1: who are digging into their personal finances, you know that
Speaker 1: they could actually be attempted to focus too hard on
Speaker 1: the credit score. Uh, maybe even leading to their overall detriment,
Speaker 1: you know. And so yeah, how do you know when
Speaker 1: your credit score is good enough? Let's dig in. But yeah,
Speaker 1: us though, we've got some thoughts on why you should
Speaker 1: actually be spending less time thinking about your credit score. Yeah. Yeah,
Speaker 1: overall you should actually be spending less of your life,
Speaker 1: less of your energy thinking about your credit score. When
Speaker 1: we spend too much time on our credit score, we
Speaker 1: actually lose sight of the bigger picture right in pursuit
Speaker 1: of the perfect the unattainable or almost unattainable, which is
Speaker 1: the max credit score on the Pico scale. If it
Speaker 1: did sound effects like, that's when the uh kind of
Speaker 1: like the course of Angels would come in right exactly.
Speaker 1: What that's perfection, right, Yeah, that's nirvana. That's the halo
Speaker 1: on top of your credit score right there. But if
Speaker 1: we're seeking that eight fifty, if we're going too hard
Speaker 1: after the perfect score, it could cause us to get
Speaker 1: lax on. Actually, other more important aspects of our personal finances,
Speaker 1: like our larger money goals and ramping up our ability
Speaker 1: to earn more, cutting back on our spending, like those
Speaker 1: are the things that have the biggest impact on our
Speaker 1: personal finances. Really, when it comes down to it, what's
Speaker 1: the point of increasing your score by ten or twenty
Speaker 1: points if it's keeping you from being able to focus
Speaker 1: on excelling at work and getting that huge race, or
Speaker 1: if it's causes you to to go on spending venders
Speaker 1: is a way to treat yourself because you've put in
Speaker 1: so much effort in in this one particular area. I
Speaker 1: don't think we're necessarily defining a huge segment of our
Speaker 1: listeners amount of people who obsess about their score to
Speaker 1: this extent. But I do think it is a problem
Speaker 1: because a credit score can be so tangible and it's
Speaker 1: so easy to track. Now, some people do get a
Speaker 1: little too obsessed about it um and it can cause
Speaker 1: them to put less emphasis on the things that actually
Speaker 1: matter the most. Yeah, I mean, even aside from financial
Speaker 1: like the bigger financial goals, to just like personal life goals,
Speaker 1: you know. Like I think there could be some instances
Speaker 1: of maybe some super nerds out there who are letting,
Speaker 1: like their credit score maybe get in way of like
Speaker 1: their personal life like relationships where they're just like, oh, sorry,
Speaker 1: I need to I don't I can't go on this
Speaker 1: trip because I need to make sure I'm I've got
Speaker 1: to put that charge on this this other credit card,
Speaker 1: you know, like as far as manipulating and making sure
Speaker 1: that your ratios are all right and things like that, that,
Speaker 1: coupled with just the additional stress of having to think
Speaker 1: about it not worth it right, striving after higher scores
Speaker 1: could also just make you vulnerable to scammers. There are
Speaker 1: a lot of services out there touting their ability to
Speaker 1: immediately boost your score. Credit scores were sort of like
Speaker 1: this low hanging fruit that companies are going after to
Speaker 1: get their hands on your money. And so you know,
Speaker 1: while you are working on your score, do you do
Speaker 1: want to make sure that you avoid anyone asking you
Speaker 1: for money to help you with your score. Working to
Speaker 1: raise your credit score, it's a long road, and it's
Speaker 1: not something that you should just throw some money at
Speaker 1: force some immediate results. Yeah, it can be tempting, but
Speaker 1: at the same time, those people usually take your money
Speaker 1: and run and your score stays put um and and
Speaker 1: so to highlight the fact that it takes a while,
Speaker 1: Matt I thought it was actually important for us to
Speaker 1: talk about what's usually involved to get a credit score
Speaker 1: that's over eight hundred. And I think this will highlight
Speaker 1: for our listeners maybe the futility at least in seeking
Speaker 1: a perfect credit score. Typically you need to use less
Speaker 1: than seven percent of your available credit limit, have no
Speaker 1: late payments in the last seven years, and have a
Speaker 1: twenty five year credit history. So for our younger listeners
Speaker 1: in particular, it's really not even possible unless you know,
Speaker 1: when you were a baby, your parents may do an
Speaker 1: authorized user on a couple of credit cards and they've
Speaker 1: been handling it well. I mean, it's just like we've
Speaker 1: done recently with for our kids. We want to set
Speaker 1: them up for having good credit in the future. But
Speaker 1: that's one of those things. Yeah, that, Uh, it's almost unachievable.
Speaker 1: It's essentially impossible for a lot of people unless for
Speaker 1: a couple of decades or longer you've been handling your
Speaker 1: money really, really well and been paying special attention to
Speaker 1: that credit score. Yeah. So while striving after that perfect
Speaker 1: credit scores and something that we would recommend your your
Speaker 1: credit score, like, having a healthy credit score is still
Speaker 1: an important piece of the personal finance puzzle, you know.
Speaker 1: So even though a lot of listeners might be years
Speaker 1: away from maybe even getting into the eight hundreds, Uh,
Speaker 1: it's still really important to start working towards a healthy
Speaker 1: credit score. And so why is it actually really all
Speaker 1: that important? After the break, we will dive into it.
Speaker 1: All right, we're back from the break, and Matt, we
Speaker 1: just kind of made a point for why people should
Speaker 1: be spending less time thinking about their credit score. Now,
Speaker 1: let's quickly make the opposite point. That's what I love
Speaker 1: to do. Point counterpoint, go back and forth, Obviously, there
Speaker 1: are several reasons why you should be working to increase
Speaker 1: your credit score, even while at the same time perfection
Speaker 1: isn't something you should be striving for. First of all,
Speaker 1: a higher score really does show that you're doing a
Speaker 1: decent job managing your money. Your ability to make payments
Speaker 1: on time demonstrates that you're at least avoiding late payments,
Speaker 1: plus those awful penalty a p rs, you're not paying interest.
Speaker 1: So that credit score is essentially a snapshot picture of
Speaker 1: the kind of person you are, how reliable you are
Speaker 1: when it comes to handling your debts and handling your money. Yeah. Yeah,
Speaker 1: it's a good indicator for what you're doing with your
Speaker 1: money now, although it's not like a like a comprehensive report, right,
Speaker 1: and like it makes me think of like maybe a
Speaker 1: good metaphor is like a speed limit, and so if
Speaker 1: you follow the law, you stay within the speed limit.
Speaker 1: That doesn't necessarily mean that you are an excellent driver,
Speaker 1: but at least you're doing this one thing, right, Like,
Speaker 1: there's a good chance, like you're less likely to get
Speaker 1: an accident if you're going to speed limit versus twenty
Speaker 1: or thirty over. But having a good credit score, just
Speaker 1: like in the same way that following the speed limit
Speaker 1: doesn't make you a great driver. Having a great credit
Speaker 1: score doesn't mean that you're doing a really good job
Speaker 1: saving four retirements, that you're achieving your your financial goals.
Speaker 1: But it is kind of a like you said, like
Speaker 1: a snapshot. It's a good indicator for us to kind
Speaker 1: of measure ourselves up against here and there. It can
Speaker 1: mean that you're just not totally screwing things up. Yeah, exactly,
Speaker 1: which which honestly, like, if you're a lender, that's what
Speaker 1: you want to know. Does this person screw things up?
Speaker 1: And the credit score is a good indication of that,
Speaker 1: You're right, it's not always an indication for the positive
Speaker 1: that this person is like doing awesome with their savings investments,
Speaker 1: when it just means, man, this person is not completely
Speaker 1: ruining their life when it comes to Debton credit. Yeah, Yeah,
Speaker 1: they're good enough right now. Yeah. And obviously aside from that,
Speaker 1: you know, one of the most straightforward benefits of having
Speaker 1: a higher score means better interest rates when borrowing. Hopefully
Speaker 1: you aren't borrowing too much money, but when you do
Speaker 1: need a loan, having a top tier credit score will
Speaker 1: ensure that you get the best terms, which means that
Speaker 1: you'll pay less. And so getting a more favorable interest
Speaker 1: rate is actually a big deal here, right, And so
Speaker 1: for example, on a three thousand dollar home, having a
Speaker 1: higher credit score could easily mean scoring an interest rate
Speaker 1: that is maybe a half a percent lower, which means
Speaker 1: paying about twenty five dollars less over the life of
Speaker 1: a thirty year mortgage. Uh. This is maybe just a
Speaker 1: way for folks to see that, Like, no, your credit
Speaker 1: score impacts interest rates that you pay, and the interest
Speaker 1: rate that you have directly correlates with the amount of
Speaker 1: money that you're going to spend for something like this,
Speaker 1: And so this is real money. It has a real
Speaker 1: impact on our finances. Yeah, and when you're talking about
Speaker 1: dollars over thirty years, that's closing in on a thousand
Speaker 1: dollars a year or a hundred dollars a month. Let's
Speaker 1: say it's ninety bucks a month. I mean, who couldn't
Speaker 1: use that back in their back in their life. And
Speaker 1: so much of that comes down to your credit score.
Speaker 1: What you'll pay for insurance is also affected by your
Speaker 1: credit score, to at least in most states. Some states
Speaker 1: don't allow or at least severely limit the usage of
Speaker 1: the credit score and factoring premiums. If you live in
Speaker 1: like California, Hawaii, Maryland, Massachusetts, Michigan, Oregon, in Utah, those
Speaker 1: are the only states where your credit score won't impact
Speaker 1: what you pay for car or homeowners insurance, or is
Speaker 1: at least legally not allowed to impact it. But in
Speaker 1: in most of the other states it is a factor.
Speaker 1: And so your credit score will partially at least determine
Speaker 1: in addition with other factors like your age and driving history, right,
Speaker 1: it will determine the rates that you're paying. And again
Speaker 1: we talked about ninety bucks a month maybe for your
Speaker 1: home mortgage, This could be ninety bucks or more a
Speaker 1: year on your homeowners and car insurance. So it's one
Speaker 1: of those things that having a good credit score will
Speaker 1: save you money in that realm too, right. Yeah. In
Speaker 1: addition to that, your employment can even be subject to
Speaker 1: having a good credit score. Stats show that twenty of
Speaker 1: human resource professionals that they check your credit history when
Speaker 1: hiring for a position. Uh, they won't have access to
Speaker 1: your actual score, but your report is what they have
Speaker 1: access to, and that is what essentially informs your credit score.
Speaker 1: Right and so you're responsible handling of credit or or
Speaker 1: like thereof could have an impact on the job offers
Speaker 1: that you receive, in particular jobs that have security clearances
Speaker 1: attached to them as well. They don't want you to
Speaker 1: be blackmail herble. So all these ways, right, whether it's employments,
Speaker 1: the amount you're paying for your homeowners or car insurance,
Speaker 1: or the rate that you get if you're buying home,
Speaker 1: all these things are are impacted by your credit score
Speaker 1: by this one number. So it makes sense that this
Speaker 1: is something that, yes, we should be paying attention to,
Speaker 1: but doesn't need to be perfect. Joel, No, no, it
Speaker 1: doesn't know, it doesn't need to be perfect, But you're right,
Speaker 1: it is something that that we do need to pay
Speaker 1: attention to. And so I guess it's important now to
Speaker 1: start talking about, well what is a good score? What's
Speaker 1: good enough? If perfection isn't needed, but we do need
Speaker 1: to pay enough attention to make sure our credit score
Speaker 1: is in a good range. Well what is a good range?
Speaker 1: And first it's important to say it can be complicated.
Speaker 1: It's about a nice non answer for you, Well, it's yeah,
Speaker 1: it's not an easy answer. And part of the reason
Speaker 1: it's not an easy answer is because there are so
Speaker 1: many different credit scores out there, right, that there's not
Speaker 1: just one. FICO is the main credit score, and it's
Speaker 1: the one, Matt, you and I talked about the most
Speaker 1: because it's it's the most widely used. But the Vantage
Speaker 1: score is another really popular one put up by another
Speaker 1: credit scoring company, and and there are other well known
Speaker 1: reputable systems as well. But even Fico, Matt, when you're
Speaker 1: boiling that down, they've got different versions of the FICO score.
Speaker 1: And so you think currently we're on PICO eight nine. Yeah,
Speaker 1: it's like it's literally the eighth iteration. I think it is. Yeah,
Speaker 1: They're always launching new ones, and different lenders will use
Speaker 1: either the most recent or maybe one generation older FICO score,
Speaker 1: so we can be confusing. Yeah, I prefer the Legacy
Speaker 1: five edition. That was good. It was like Windows Man
Speaker 1: so great. Uh, but I think you know all that
Speaker 1: meaning said, It can make it kind of crazy for
Speaker 1: people to try to understand what their score is and
Speaker 1: whether it's good or not. Because there are so many scores,
Speaker 1: it's hard to know which one to follow and hard
Speaker 1: to track them accurately. Some people will maybe right in
Speaker 1: occasionally Mautin they'll be like, I've got one credit score
Speaker 1: that's thirty five points lower than the other one. What's
Speaker 1: going on? And that's part of it is that they
Speaker 1: weigh things differently. There's a different algorithms essentially that spit
Speaker 1: out a at score um and they're factoring certain things uniquely.
Speaker 1: But this also is not worth getting hung up on.
Speaker 1: It would mean expending too much energy thinking about your
Speaker 1: credit score to go too deep into all the many
Speaker 1: different credit scores that you have. And so I think
Speaker 1: we can give some good general advice without getting too
Speaker 1: specific as to what it looks like to have a
Speaker 1: good credit score. Yeah, so let's give some solid numbers now,
Speaker 1: but we're not going to give specific numbers, but we
Speaker 1: will give some ranges of credit scores, right, just are better? Yeah,
Speaker 1: So generally speaking, if you're it's kind of like horse shoes,
Speaker 1: you know, like it's close and close. Getting close matters, Yeah, exactly.
Speaker 1: Uh So, Like broadly speaking, right, if your scores below seven,
Speaker 1: that's when it's time to get more focused on getting
Speaker 1: that score higher. You don't want to be in the
Speaker 1: five to six hundred range because it will negatively impact
Speaker 1: you in a lot of different ways, like you know,
Speaker 1: like we just mentioned, however, you know, if you are
Speaker 1: in poor shape, that doesn't mean that you won't be
Speaker 1: able to do things like buy a house. Right. The
Speaker 1: average credit score of first time homebuyers last year was
Speaker 1: six eight four, Joel, I mean, I was surprised to
Speaker 1: see that number. It's actually a good bit lower than
Speaker 1: I was expecting. But know that you you know, you
Speaker 1: might qualify for say alone thirty year loan, but you'll
Speaker 1: be paying a lot more an interest. Uh. This is
Speaker 1: obviously this has to do with risk. If if a
Speaker 1: bank or a lender is gonna lend you money and
Speaker 1: your credit score is a lot lower, well they have
Speaker 1: to account for that risk, right, and like you are
Speaker 1: risk your borrower, and so because of that, they're going
Speaker 1: to charge you higher interest to make sure that it's
Speaker 1: worth their time. Yeah, now that we're getting into the
Speaker 1: ranges here, and I feel like you just gave a
Speaker 1: good line of demarcation there. Though, if your score is
Speaker 1: below seven hundred, it demands more of your time, more
Speaker 1: of your focus in order to to beef that up
Speaker 1: because of the many ways that that lower score is
Speaker 1: going to impact your life. Right, And so let's talk
Speaker 1: about another range your If your scores in the seven
Speaker 1: to eight hundred range, that puts you in pretty good shape.
Speaker 1: I'd say really good shape. Like if you're in that range,
Speaker 1: like you can just end this podcast now specifically, don't
Speaker 1: end the podcast specifically though, If you can get above
Speaker 1: seven forty, that's kind of the really important number um
Speaker 1: in so many circumstances, that's typically going to qualify you
Speaker 1: for the best rates available. That typically seven forty and
Speaker 1: above is top tier. But if you're above seven hundred,
Speaker 1: it just means you don't have to fret as much,
Speaker 1: that's for sure. This tends to be the sweet spots
Speaker 1: seven forty and above when it comes to your credit score.
Speaker 1: If you're in that range, then your credit score should
Speaker 1: be taking up minimal space in your brain. Continue obviously
Speaker 1: to make your payments on time or early, but it
Speaker 1: doesn't necessarily need to be constantly on your mind. You
Speaker 1: don't have to be thinking often about how you can
Speaker 1: improve it and get it better. You're at the point
Speaker 1: where your score is essentially in the good enough range,
Speaker 1: and expending more energy to send it higher is mostly
Speaker 1: wasted energy. And again we're giving ranges because I mean
Speaker 1: it varies from lendard to lender, right, it depends on
Speaker 1: the loan that you're applying for. Uh, it depends on
Speaker 1: how closely an HR manager is looking at your credit report,
Speaker 1: you know, like again that they don't see scores, They
Speaker 1: just see kind of generally speaking, how it is that
Speaker 1: you're handling your money. And so it's difficult to give
Speaker 1: specific numbers to say that this is the exact number
Speaker 1: you need, because really it does vary from person to
Speaker 1: person and from institution to institution. So Joel, you you
Speaker 1: took it from seven to eight hundred. So of course
Speaker 1: if you're above eight hundred, then you're you're pretty much golden, right,
Speaker 1: But remember that the you know, the benefits that you
Speaker 1: receive from being above eight hundred and getting it, say,
Speaker 1: from you know, eight hundred to eight fifty, the benefits
Speaker 1: are going to diminish greatly at this point, Like no
Speaker 1: one really cares except for you. Uh maybe in your
Speaker 1: mind you've kind of got this leader board going and
Speaker 1: you're just kind of competing against yourself, like nobody else
Speaker 1: really cares. Lenders don't care all that much. It's kind
Speaker 1: of like finishing up college and you got an A
Speaker 1: in the class, but you want to tell your future
Speaker 1: employer that you got a ninety nine on the final
Speaker 1: and they don't care. They don't care. I mean I
Speaker 1: remember interviewing four jobs like after college, and like like
Speaker 1: they don't care if you're kum lade or magna um laude,
Speaker 1: Like maybe not for the jobs you and I were
Speaker 1: applying for. At least very true. That is true, but
Speaker 1: it is one of those things where above a certain point,
Speaker 1: it's like, great, I see your g p A, I
Speaker 1: saw what you put in. I see the basics on
Speaker 1: your resume. I don't care about the specifics. And that's
Speaker 1: what That's what you're gonna into when you're between eight
Speaker 1: and eight fifty is the specifics. Nobody cares. Yeah. Yeah,
Speaker 1: there are so many other things to focus on that
Speaker 1: would have a bigger impact on your ability. Like just
Speaker 1: like when you're interviewing, there's a so many other things
Speaker 1: that you can focus on, whether it comes to like
Speaker 1: having good eye contact and making sure that you're listening
Speaker 1: to whoever is interviewing you and that you're asking good questions,
Speaker 1: Like all those things matter so much more than just like, oh,
Speaker 1: yeah I got a ninety nine on that final. Uh.
Speaker 1: There are so many other things that we talked about earlier,
Speaker 1: that when it comes to our personal finances, we need
Speaker 1: to be looking at those things rather than having the
Speaker 1: perfect credit score. But that being said, if you are
Speaker 1: above a hunter, that's great. Continue to work on maintaining
Speaker 1: that great score, but just put the idea of achieving
Speaker 1: perfection just way out of your mind. It really is
Speaker 1: a fool's Errand and so with all that mind, you
Speaker 1: need to ask yourself, like, do you even know what
Speaker 1: your credit score is? You might be listening to this
Speaker 1: conversation that Joel and I are having and you may
Speaker 1: not even know your score at all. And so that's
Speaker 1: an important first step in monitoring that score and knowing
Speaker 1: how to proceed. So we'll get to that and how
Speaker 1: to easily improve your credit score right after the break. Alright,
Speaker 1: go back from the break, and Matt, that is a
Speaker 1: big problem, by the way, if people don't know what
Speaker 1: their credit score is, true, because how do you know
Speaker 1: what ranger and how do you know whether or not
Speaker 1: you have a credit score that either needs to be
Speaker 1: improved upon or you're cool to not think about too much. Well,
Speaker 1: let's talk about where to go to get updated on
Speaker 1: that score. First, three weekly credit reports are still available
Speaker 1: on annual credit report dot Com through April one. That's
Speaker 1: only a site where you can get your credit report
Speaker 1: for free, though as authorized by federal law, those aren't
Speaker 1: gonna help you see your score, although they will give
Speaker 1: you insight into what's dragging your score down. The credit
Speaker 1: score is essentially a translation, a numerical translation of the
Speaker 1: things that are happening on your credit report behind the scenes. Yeah,
Speaker 1: maybe it's sort of like if you go to the
Speaker 1: doctor and you get a physical and they kind of
Speaker 1: like looks you over and really looks into like everything,
Speaker 1: and she's like, yeah, you're a six out of ten.
Speaker 1: You're above average, but but not doing so great, barely
Speaker 1: above average. But but the thing is, what if she
Speaker 1: doesn't give you a score, you know, like what if
Speaker 1: she's just like, hey, like you're you're you're generally speaking,
Speaker 1: you're in you're in pretty good health, but she doesn't
Speaker 1: give you your weight, or she does maybe she doesn't
Speaker 1: give your blood pressure. Like, sometimes it's helpful to have
Speaker 1: these numerical scores and touch points so that we know,
Speaker 1: you know, basically where we are and then where we
Speaker 1: need to go from there. Right, that's kind of how
Speaker 1: I see the report versus the score a little bit.
Speaker 1: The reports like the deep dive and you can see
Speaker 1: what's going on, but the score gives you yeah that
Speaker 1: perfectly easy to understand, um numerical translation. Yeah. Yeah. So
Speaker 1: that's where you can go to get those weekly free reports.
Speaker 1: But then beyond that to credit Karma and Credit score Card,
Speaker 1: which is a product or a site run by discover Card,
Speaker 1: are two of our favorite places to check your actual
Speaker 1: credit score. Most people that have a credit card will
Speaker 1: notice that they are offered a free monthly credit score
Speaker 1: there as well. If you go to your summary page
Speaker 1: oftentimes like where it'll have a link and it'll link
Speaker 1: out and you can, you know, easily see your credit score.
Speaker 1: But one of the coolest things about Credit Karma the
Speaker 1: dashboard feature, which really helps you to to see where
Speaker 1: you're falling short and where to turn your focus in
Speaker 1: order to improve right and so. And this is helpful
Speaker 1: because staying updated, uh, you know, on what your score is,
Speaker 1: maybe every month or so, will help you to stay
Speaker 1: on top of it, you know, hopefully without obsessing over it.
Speaker 1: It's something that you want to be tuned into, but
Speaker 1: you don't want it to be all consuming and so
Speaker 1: that way, if you see uh significant drop that can
Speaker 1: tip you off to something that may not be right,
Speaker 1: it's good to keep tabs on it. Yeah, So if
Speaker 1: you don't know your score, go to one of those
Speaker 1: two sites we mentioned, or check out the score provided
Speaker 1: to you buy your credit card company. That will at
Speaker 1: least help you know where you stand. And then if
Speaker 1: you have a score that's hurting, that's not looking so good,
Speaker 1: that is in that sub seven range. Um, here's what
Speaker 1: you need to do in order to see that score
Speaker 1: go up. First off, you need to be consistent, and
Speaker 1: this means making payments on time, hopefully in full, every
Speaker 1: single month. The more consistent you can be in paying
Speaker 1: your debts in a timely manner, the more your score
Speaker 1: is going to react positibly. For most people, Matt, it's
Speaker 1: late payments that are holding down their credit score. So
Speaker 1: getting on top of that and making sure you're paying
Speaker 1: on time is a huge component in working towards fixing
Speaker 1: that score. Yeah, that's right. It's important because on time
Speaker 1: payments make up of your PHICO score, So this is
Speaker 1: a big category to keep in mind. Um. And then
Speaker 1: something else, you know, if you're looking to improve your
Speaker 1: your credit score. Don't completely avoid debts. You know, sometimes
Speaker 1: the knee jerk reaction might be to to avoid debt altogether,
Speaker 1: maybe to close accounts and credit cards that you've had
Speaker 1: around for years, because uh, you know, you don't want
Speaker 1: to get into maybe some bad habits, that kind of thing.
Speaker 1: But that's actually the exact opposite of what you need
Speaker 1: to do in order to improve your score. You need
Speaker 1: to keep those accounts open, uh and active. Because old
Speaker 1: credit boost your score, it doesn't have nearly the impact
Speaker 1: that on time payments does. But yeah, you're the length
Speaker 1: of your credit history does have a pretty large effect
Speaker 1: on your credit score. But of course you do need
Speaker 1: to ensure that you are using that credit card sparingly,
Speaker 1: that you that you are you ing those accounts in
Speaker 1: a way that that you're being responsible. You know, like
Speaker 1: you don't want again, you don't want to have achieve
Speaker 1: a nice credit score while you know, at the same
Speaker 1: time you are going into debt, while you're maybe overspending.
Speaker 1: You don't want to fall into the trap of of
Speaker 1: not saving money for the sake of improving your credit score. Yeah,
Speaker 1: and I think that's one thing, Matt, that sometimes people do.
Speaker 1: They do close credit cards in order to prevent going
Speaker 1: into more debt because they know that they just can't
Speaker 1: handle credit cards. And I think that's okay, knowing full
Speaker 1: well at the same time, that's going to have a
Speaker 1: negative impact on your score, right, But that's a worthwhile
Speaker 1: trade off to prevent yourself from going into more debt
Speaker 1: to have a lower score. But what we're trying to
Speaker 1: address is people closing their credit cards thinking that it's
Speaker 1: actually gonna help their score, but it has the opposite impact.
Speaker 1: So yes, in a perfect world, keeping those credit cards
Speaker 1: active and continuing to use them in a responsible manner
Speaker 1: that's the way to go. And you also want to
Speaker 1: avoid maxing those credit cards out, even if you can
Speaker 1: pay off that full balance at the end of the month.
Speaker 1: Really you want to go not even close to maxing
Speaker 1: them out. And that's because a huge part of your
Speaker 1: credit score is also the utilization ratio, and the best
Speaker 1: credit scores are gonna mean that you're using essentially less
Speaker 1: than a third of your available credit, and using less
Speaker 1: than ten percent of your available credit is going to
Speaker 1: get you into the best score range. So, for example,
Speaker 1: let's say you have a credit card with a five
Speaker 1: thousand dollar limit. Spending up to fills a month on
Speaker 1: that credit card is that's pretty good. Yeah, that's that's
Speaker 1: in a healthy range. But spending five on that credit
Speaker 1: card every month, that's even better. And that's gonna be
Speaker 1: the best possible usage amount for you when you're looking
Speaker 1: to boost your score. Yeah, or according to Fico, like
Speaker 1: we talked about earlier in the episode, if you want
Speaker 1: to get into those rarefied eight hundred plus waters, it
Speaker 1: takes seven percent or less. You know, if you're trying
Speaker 1: to hone in on a seven percent utilization rate every month,
Speaker 1: though you're you're you're trying too hard, You're putting too
Speaker 1: much effort into It's probably true. Another consideration, too, when
Speaker 1: you're looking to boost your credit score is just to
Speaker 1: remind yourself that it takes time. You need to be patient.
Speaker 1: You know, it takes time for negative items to fall
Speaker 1: off of your credit report. It takes time him to
Speaker 1: build up a meaningful credit history of on time payments
Speaker 1: as well. Some people on the internet that you know,
Speaker 1: they pitched that they can get those items removed for
Speaker 1: you for a fee. But don't fall prey to those
Speaker 1: empty promises. Handling your debt well over time will cause
Speaker 1: that score to rise. Please remember that it takes patience
Speaker 1: because you're not going to see your credit score just
Speaker 1: jolt and jump upwards in a matter of days. You know.
Speaker 1: We had a listener question recently, Matt, where where a
Speaker 1: listener wanted to increase her credit score rapidly, and she
Speaker 1: was asking about different ways to do that. And I
Speaker 1: think it's easy to look for a quick fix when
Speaker 1: you're like, man, I'm just months away from needing a
Speaker 1: loan on a car or on a home. It's like,
Speaker 1: I got thirty days, right, that's not enough time. It's
Speaker 1: it's a it's a long play here, and it's worth
Speaker 1: it to take the time to do this right. So
Speaker 1: kind of back to the theme of the episode, Matt,
Speaker 1: and we need a perfect credit score well, and how
Speaker 1: much time overall should we give to focusing on our
Speaker 1: credit score? Overall? I think it partly depends on what
Speaker 1: shape your score is currently in. Right. If you're in
Speaker 1: a rough spot with your score, we would suggest to
Speaker 1: check out episode one of this podcast. We gave a
Speaker 1: lot of thoughts on how to rebuild your score when
Speaker 1: it's not looking so good. If you're in that position,
Speaker 1: your credit score should be a larger focus for the
Speaker 1: time being. It's similar to if you've taken years off
Speaker 1: from physical activity, it's time to ramp things back up,
Speaker 1: and so your credit score and building it up should
Speaker 1: take a little more focus. If you've taken some time
Speaker 1: off from even thinking about it and you've let it
Speaker 1: fall into a state of disrepair, it's probably not gonna
Speaker 1: feel natural for you to give it all that kind
Speaker 1: of time and energy, But it's likely going to need
Speaker 1: more time and energy then you've been giving it, right. Yeah, Yeah,
Speaker 1: it's like you need one of those thirty day workout
Speaker 1: regimens where you're working out every day for a whole month,
Speaker 1: couched a five K exactly. You've got to get started,
Speaker 1: and you need something a little more stringent to kind
Speaker 1: of get you gone. Yep. And remember too that your
Speaker 1: credit score it's only one part of having a well
Speaker 1: constructed financial life, you know, while it has an impact
Speaker 1: on so many things in our life, Obsessing over a
Speaker 1: credit score and seeking perfection is a quixotic endeavor. Which
Speaker 1: score do you want to even be perfect? You know,
Speaker 1: like we met before, there are so many different scores
Speaker 1: to consider. Uh, there's too many to keep track of.
Speaker 1: And so like we recommended tracking one or maybe two
Speaker 1: regularly via your credit card statement or via a site
Speaker 1: like credit Karma is a great step to take trying
Speaker 1: to keep your score in you know, above seven forty,
Speaker 1: that is awesome, But if you're shooting for perfection with
Speaker 1: your credit score, you'll likely spend way too much time
Speaker 1: on something that really doesn't mean all that much, that's
Speaker 1: not going to have a true impact on your finances. Yeah,
Speaker 1: I feel like we near the beginning of the episode,
Speaker 1: we said, this is how important your score is. It
Speaker 1: influences so much of your financial life. But also at
Speaker 1: the same time we're saying, don't spend too much time
Speaker 1: on it. And yes, those things are both true. That
Speaker 1: it is an important number, but it's something that you
Speaker 1: shouldn't obsess over. And I know some of our listeners
Speaker 1: who are excited about getting their personal finances together and
Speaker 1: they're excited when they hear about their credit score and
Speaker 1: it's something they can do to positively influence their financial life. Well,
Speaker 1: then they want to go all in. Um And it's
Speaker 1: great to be thinking about it, it's great to be
Speaker 1: working on it, but going all in could mean going
Speaker 1: too hard. After working towards is improving your score, and
Speaker 1: there's a limit to the return you're gonna see as
Speaker 1: you as you seek to improve it. Yeah that's right man,
Speaker 1: Well awesome. Let's let's switch it back to the beer.
Speaker 1: This episode, you and I are both enjoying a Nuclear
Speaker 1: Sea Horse, which is a New England style pale ale.
Speaker 1: This is by Boonshine Brewing Company, who is not surprisingly
Speaker 1: based in Boone, North Carolina. There you go, yeah, uh yeah.
Speaker 1: Just also, what were your thoughts on this beer, buddy?
Speaker 1: So on the label it says caution radioactive hops, and
Speaker 1: uh man, the hops were definitely alive. There was a
Speaker 1: dankness to this beer that I really enjoyed. In particular,
Speaker 1: pale ales can sometimes lack the hot presence or the
Speaker 1: hot bite that this one had. So I was impressed
Speaker 1: for a five and a half percent pale ale that
Speaker 1: this one brought so much flavor. So yeah, I thought
Speaker 1: this one was great. Yeah, man, I am a huge
Speaker 1: fan of hoppy pale ales. You know, pale ales, they're
Speaker 1: easy to drink, but they've got all that kind of
Speaker 1: dank hop flavor. But on the label here is describing,
Speaker 1: you know, how this beer is gonna taste, and it
Speaker 1: said that it's radiant bold and electric, and dude, radiant
Speaker 1: and electric are two words that I have never used
Speaker 1: to describe an I p a or or a hoppy
Speaker 1: paleo like that, but I feel like they are perfect words.
Speaker 1: You know, you're talking about how like you feel like
Speaker 1: you can taste the freshness of the hops? Uh they're
Speaker 1: almost tingly a little bit electric is a great way
Speaker 1: of of describing that as well. It makes me think
Speaker 1: back to when when I was a little kid and
Speaker 1: I would take a little nine bolt battery and stick
Speaker 1: it to my tongue. It kind of lie you can,
Speaker 1: it's a little tingly feels radiance on your tongue, it does,
Speaker 1: That's what I hear, and I feel that that this
Speaker 1: sort of what this beer does to a certain extent,
Speaker 1: I would not recommend putting uh your mouth anywhere near
Speaker 1: anything electric. Yeah, just put that disclaimer in there. But
Speaker 1: those are the kind of things that I did as
Speaker 1: a kid at least, and that should be a comfort
Speaker 1: to our listeners that you can still end up as
Speaker 1: a normal, reasonable human being even after doing crazy things
Speaker 1: like that. Maybe sometimes I'm too reasonable, so hey, that true.
Speaker 1: It just depends you know what kind of person you're
Speaker 1: trying to be when you grow up. So but yeah,
Speaker 1: I'm really glad that you and I got to enjoy
Speaker 1: this beer on the show. A big things to Christopher.
Speaker 1: He sent us two really good beers that we were
Speaker 1: able to enjoy. So Christie, ever, thank you. Yeah, no
Speaker 1: doubt this is a good one, all right, Matt. That's
Speaker 1: gonna do it for this episode. For folks who want
Speaker 1: show notes and some of the links to some of
Speaker 1: the sites that we mentioned during today's episode, you can
Speaker 1: go to our show notes and they'll be up on
Speaker 1: our website at how to money dot com. Yeah, and
Speaker 1: if you enjoy the show, if you enjoy How the Money,
Speaker 1: we would be incredibly grateful to you if you went
Speaker 1: over to Apple Podcasts and left us a solid rating
Speaker 1: and review over there. But you know what, even easier
Speaker 1: if you don't want to maybe go through the housle
Speaker 1: of doing that, make sure that you are subscribed to
Speaker 1: the show. Match that subscribe button to make sure that
Speaker 1: you don't miss any new episodes as they are released. So, Joel,
Speaker 1: that's gonna be it for this episode, Buddy. Until next time,
Speaker 1: Best Friends Out, Best Friends Out,