Why your credit score doesn't matter

Written by
Peter Dunn

How do you measure your health? Do you measure it solely by your weight? Metrics, such as your body weight, are an important way for us to measure something. But what are we really measuring? Measuring weight tells us that we have gained or lost weight, but it doesn't measure health. The best measures of your health are the metrics associated with proper nutrition (calories) and exercise (reps, time, or distance). How do I know this? Because about 10 years ago I lost 13 pounds on the Atkins diet. I had never been less healthy while losing weight in my life. Bacon, cheese, red meat, cheese, and more bacon were my method of losing weight. I just didn't eat carbs (per the Atkins Diet). It was quite obvious that what I was doing was unhealthy, but the metrics said otherwise.

You can achieve a wonderful credit score despite awful financial behavior. And you can also have wonderful financial habits, yet have a terrible credit score. A good credit score is an indication of nothing more than your success at borrowing and repaying money. That's not exactly something worth celebrating. According to the credit scoring system, someone that has $1 million in the bank and has never borrowed will have a lower credit score than someone $100k in credit card debt. In fact, if the debt is current and the balances aren't "too high" in comparison with available credit, then the $100k-in-debt guy may have a nearly perfect credit score.

But Pete, if I don't have a good credit score then I can't borrow money. Not true. If you have good financial habits, and you have put yourself in a position to borrow, then you will be able to borrow. People who are "repairing" credit and are scrambling to improve their credit score often ignore the fact that their habits got them in trouble. Change your habits and the score will follow. Fix the score alone, and you will find your bad habits dragging you back down.

The best measure of your credit is not your credit score. The best measure of your credit is your credit report. Huh? Your credit report is the detailed listing of your debts over your entire life. The information on this report is all you need to evaluate your credit worthiness. Your score, in my opinion, is completely irrelevant compared to the report, itself. Do you have a ton of late payments on your credit report? Then start paying your bills on time. Who cares how that affects your score? If your report shows you that you have maxed out a credit card, then pay it down. Who cares how that affects your score?

Don't be a monkey to your credit score. (Wo)man up and manage your habits. Metrics are great, but the credit score isn't a metric for you. It's a metric for the lending institutions. Your metrics are your budget and your savings/investing statements. Your metrics are your student loan balances and your credit card balances.

****The best site for checking your credit report is AnnualCreditReport.com. It's free and you can check your report every year. Do it. Oh, and you can't re-access your report once you pull it up for the first time. So make sure to print it off...at work. It's cheaper :)

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