A good credit score can ruin your financial life

Written by
Peter Dunn

When I was a kid, I would watch reruns of Lassie. I knew they were reruns because they were in black and white, and the characters said words like "golly" and "shucks'. The premise of the show was pretty simple: a kid would fall in a well, and his paramedic collie would get help. The kid's name was Timmy. He couldn't stay out of the darn well. Everyday he would eat his country breakfast, then we would go fall in a well. He, his parents, his community, and his paramedic dog were the least self-aware people on the planet. Timmy was a resilient little person. He'd fall in the well, get rescued, learn nothing from it, and then end up back in the well by 10am the next morning. In other words, Timmy was setting himself up to deal with credit card debt in the 21st century.

America is Timmy. We frequently trap ourselves in wells, get rescued, and then run back to the well. All the while, we celebrate our multiple renaissances, while learning nothing from them in the process. Your goal isn't to fix your credit so that you can now buy more stuff at lower interest rates. Although that's how marketers, including credit counseling marketers, market to us. Again, fixing your credit so that you can borrow money isn't what you are supposed to do. Here's what you are thinking right now: "Yes it is." Well, no it's not. If you climb out of the well of poor credit for the sole purpose of going back into the well, you are a dumb-dumb.

Consider the following large numbers.




These are the amounts of credit card debt that I've seen people have in the last two weeks. While you are recovering from the shock of seeing numbers that high, allow me to knock you over. In all three cases, the person had amazing credit. Good credit. Bad credit. Who cares? It's the attitude of borrowing that's the problem, not the interest rates that come and go with good or bad credit. In one instance (from the debt numbers above), the person had a 785 credit score. His GREAT credit score allowed him to constantly borrow, and put himself $85k into debt. Along with his behavior and decision-making, his credit score ruined his financial life. Credit scores ARE NOT a measure of financial health. I repeat for the 10 millionth time, your credit score, good or bad, doesn't tell your financial story. It simply tells your borrowing story.

I was at an event a few weeks back and had the chance to listen to a young man tell his debt pay down story. It was a nice story. He and his family had accumulated something like $30k in debt. He then busted his ass to pay it off. Cool. After he told his story, a member of the audience exclaimed that this was "a great American success story" and that this sort of awesome thing "could only happen in America." Eh. Maybe, but not the way he meant it. This is an American story because the American way is to spend more than you have. Our government does this and our people do this. While I certainly celebrate people that pay off significant debt, I wouldn't ever classify them as American success stories. The absurd amounts of debt is what makes people uniquely American, not the intelligence to get out of debt. And furthermore, the story would continue to be uniquely American if the young man chose to go back into debt. Thankfully, I really don't think this particular young man will go back into debt.

Does my particular viewpoint seem jaded today? It probably is. I think it's amazing when people finally decide to be responsible and make major financial changes. But all of my joy is immediately vanquished when I see ulterior motives behind the debt pay down. Yes, I realize that people generally need to borrow money to purchase a house. Yes, I realize that people like to borrow money to buy cars. This isn't to say they SHOULD borrow money for a car, but they do anyway. Simply put, I wish that borrowing wasn't the default reaction. There are several ways to fund a purchase that you can't currently afford. Borrowing is simply one of the solutions, a poor solution at that.

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