Don’t Focus Too Much On Credit Score

31 Jul Don’t Focus Too Much On Credit Score

In my bankruptcy practice, I talk to a lot of people who tell me how high their credit score is, or was. I hear a lot about that from other so-called experts–how important it is to have a good credit score. There are books, DVDs, seminars, and TV shows devoted to advising you how to build and maintain a high credit score. Maybe I have a skewed perspective, but it seems to me that the emphasis on credit score alone is misplaced. There are other aspects of your financial life that are more important, among them saving for emergencies, retirement, college, and so forth. Equally as important is your situation and time of life–whether you are just starting out, nearing retirement, are in your middle years, or living on a fixed income.

A good credit score is a wonderful thing, but it’s not the only thing. Truth is, if you have enough money saved, you don’t need credit. Most of us don’t ever save enough to buy a house or a car for cash, but we certainly should be able to save for a new set of tires, or a new TV, and we certainly need to set up a savings plan to pay for things like a new roof on the house, when that time comes. But most of us rely on credit for all those things, and more–medical bills, vacations, even groceries.

Reliance on credit for emergencies and ordinary living expenses is a downward spiral; the question is not whether you’ll hit bottom, but only when. The problem is that the more of your income you have going to debt service, the less you can afford to save, and the less you save, the more you have to use credit. So the next time you postpone talking to someone about resolving your financial condition, the next time you decide to take a cash advance on one credit card to make a payment on another, the next time you defer medical care because of the cost, or the next time you buy groceries on your credit card, think it over. What is your overall financial condition, and why are you trying to preserve your credit score. If you are looking to buy a house in the next few years, maybe it makes sense to sacrifice to preserve your score. If you are living on a fixed income, you have to carefully consider whether you need to worry about a credit score at all. Worry more about the balance in your savings account.

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Däna (pronounced "Donna") Wilkinson, has been a bankruptcy lawyer in South Carolina for 20 years. She is certified as a bankruptcy specialist by the South Carolina Supreme Court.
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