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Q: How important is my credit score?
Rachel’s Answer: Great question. You’ve probably heard that the almighty credit score is just a way of life. You can’t make it in life without a credit score.
That’s simply not true.
But why? If everyone says that your credit score is almost as vital as oxygen, then how can it be untrue?
Let’s break it down a little bit. Here are three myths about the credit score:
Your credit score is an indication of financial success. No way. Your credit score—maybe you’ve heard it called a FICO score—tells you one thing: how well you manage debt. It’s all about debt—how much and what kind of debt you have, how consistently you’ve used and paid on debt and that kind of thing. The best indicator of financial success is your bank account, not a high credit score.
You need a credit score to rent an apartment. This one’s not true either. If you have your first and last month’s rent plus a security deposit, a majority of apartment complexes will work with you. You might have to try two or three, but they are out there.
Keeping a credit score to secure low rates on car insurance is a smart move. It’s true that no credit score or a bad credit score will drive up rates on your car insurance. But you’ll more than make up for that with all the money you’ll save by not paying interest to a bank for being in debt to build your score.
The sooner you begin paying cash, avoiding debt, and staying away from the credit score trap, the better off you’ll be in the long run.