Broke Ass Financial Coaching: Credit Scores, Why Care?

While being young, broke and beautiful is all well and good, some people’s finances are more jacked than others.  That’s why we’ve invited Betsy Crouch (aka Coach $izzle) to come onboard and dole out some much needed advice.  She is a professional financial coach after all.  If you’ve got a question you’d like answered please email her at coachsizzle@brokeassstuart.com.  Maybe your question will be the next one answered.

Why should I care about my credit score?  – c.c.

Ok so what I am hearing is, “Why should I care about my credit score when it doesn’t matter because I’ll never afford to buy a house in sf/nyc?.. and I don’t need a car.”  I can understand this…

The short answer is, do you want to pay more money than other people do for the same things?  NO!  That is why you should care.

For those of you who don’t care, here is how I interpret your feelings: “I am happy to pay more for the same house/car/private student loan/other misc. loan.  I love that bank, I believe in their practices and I would rather have any extra funds I have go to them.”  Really?

Reason 1: $$$$

So according to MyFICO, a person with above average credit may pay $3343 LESS in interest on a $20,000 loan, see below:

Person 1 with above average score (720-850),

• might qualify for a rate of 7.911 percent
• $14, 219 over the course of the loan.

Person 2 with a “fair” score (640-659),

• might qualify for a rate of 9.486 percent
• $17,562 over the course of the loan.

The person with better credit in this example would pay $3,343 LESS in interest.

If you are in a dire financial situation and your credit is damaged as a result I am not criticizing you or blaming you for your situation.  What I am saying is that there are “breezy” people when it comes to credit reports and scores, at all levels of income and financial situations.  It just makes sense to protect your hard earned income by following some basic recommendations as well and as strictly as your financial situation will support.

So here are some MORE reasons why you SHOULD care about your credit report and score:

Reason #2 You want a job?

Employers will sometimes check your credit report and score during an interview process to assess your level of responsibility.  So, making late payments or defaulting on financial obligations could hinder your chances at getting hired.  As much as this may seem like a breach of privacy, right now it is legal for employers to check your credit.  For more information check out  Privacyrights.org, they have some helpful information regarding your rights regarding Background Checks and Your Credit Report.

Reason #3:  You are a student or plan to be a student in the future, and you plan on applying for private loans.

Government backed student loans do not require a review of your credit history.  However private lenders supposedly take on more risk lending you money because they won’t be bailed out by the government.  Um, ok they might be bailed out by the government but they will still need to review your credit history in order to approve you for a loan.  If you have bad credit you will likely have to pay much higher interest rates on your loans compared to someone with great credit.

Reason #4: You would like to use credit cards/qualify for a credit card.

I mentioned some of the credit score basics in my article about whether to get a new credit card or not, I am biased and I believe this is a great article to help you understand some credit basics.

Reason #5:  Last but not least, come on, you MAY move to Oregon, New Jersey, or back home to Iowa, if/when you do, you will buy a car for sure, and you may buy a house.  A good credit score versus a poor credit score could save you tens of thousands of dollars in interest on a mortgage.

Do you care now?

I heart you credit score.

How are you going to nurture and love your credit report and score?

STEP 1:  Look at your credit reports/scores fix errors:

• FREE place to start:   You can receive a free credit report and score from each of the three credit bureaus, Experian, Equifax, and Transunion, through the “official” website www.annualcreditreport.com.  Get all three reports and check for errors.  The Federal Trade Commission’s site with a lot of information on how to build better credit, fix errors on your report, and much more.

coachsizzle@brokeassstuart.com