09 Sep Are You Obsessed With Your Credit Score?
Credit scores are the driving force of consumer finance. And consumer finance is the driving force of our economy. But obsessing over your score can be time-consuming and unrewarding. Your credit score says nothing about you as a person.
I spoke with a young woman a few months ago who was upset with a credit card lender that had reported her late payment. It hurt her credit score. I asked her if she had been applying for a loan or other credit? No. Had her interest rate increased or had any other loan rates increased? No. Did she anticipate applying for any new loans or credit in the next few years? Not really. Had she actually been late with the payment? Yes, although she subsequently paid off the entire balance owed.
As a consumer lawyer, I hear from people fairly regularly who are hurt by poor credit reporting. So in this case, it took a moment to realize my potential client had not really been harmed at all. Her score had dropped a few points, that was true. However, the score was not relevant to anything she needed or wanted and no one else knew.
But in a more profound way, she was hurt. Not in a legal sense, but psychologically. She had completely absorbed the credit industry’s viewpoint that a credit score defines who you are, and how good a person you are. To her — and to millions of Americans — a credit score defines self-worth. Obsession with credit or debt can become dangerous or tragic.
Don’t be fooled. Your credit score doesn’t define who you are. It is not a value judgment. You are not a better or worse person based on your payment history with Visa! A credit score is only a crude backward-looking estimation of your credit risk probabilities, nothing more.
I had a short discussion about this with the young woman on the phone. Later I received a very sweet thank you card from her. She had begun to see that she had never really thought about what her credit score meant but had allowed monitoring it, feeding it, making it happy to become a small obsession. Getting past it was a liberating experience for her.
Don’t get me wrong, credit scores are important and influence far too many financial transactions these days. They just aren’t everything.
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