Credit Scores are talked about by everyone these days. Parents give credit cards to their children so they can “build their credit” and qualify for loans later in life. It seems that everyone’s financial actions are based on this 3-digit number! But does that credit score really matter?
My wife and I are striving to live a life with no debt. We go grocery shopping and pay with cash. We purchase Christmas presents and pay with cash. Furniture — Cash. High-end electronics — Cash. Vehicles — Cash. You get the picture. We just don’t use our credit cards anymore (in fact, we cut them up!).
So, by living a life without the need for credit cards, I wonder, “Why should I care about my credit score?”
I wish I could say that I don’t have to, but I can’t.
Credit scores are obviously used for obtaining a home loan. If your scores are low, you may not be able to qualify for the loan that you need. My wife and I aren’t overly concerned about this one because we plan on paying a large downpayment on our next house. Plus, we won’t be living larger than what is necessary – a quaint home will do, and therefore, we shouldn’t need that much money from the bank.
Here’s the one that scares me a little. If I ever apply for a job with another company, chances are that they will run my credit history and use it to get an idea of my moral and ethical standards. If my credit is low, this tells them that I don’t respect those that lend me money (it’s assumed that I’ve missed payments) and I’m most likely not responsible enough for the open position.
For this reason, I might consider using credit cards again, but only after we are out of debt and have gained control of our finances. I think by using Mint.com, we’ll be able to track our expenses more easily, and will be less prone to overspend. Time will only tell.
So is Your Credit Score Important?
Unfortunately, I have to say, “yes”. This does not mean that I’m going to use credit cards any time soon though. If you are digging yourself out of debt you should still cut up your credit cards. And don’t try to use the excuse that you need your cards to build your credit – by paying your debts, you are already improving your credit!
Also, if you are nervous about your credit score, take a look at an article that I recently wrote, “What Happens to Your Credit if You Cut Up Your Credit Cards?”
So, budget your expenses, cut up your cards, and pay for everything with cash. Once you are completely debt-free, then you can consider using that card again.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.