Is A Good Credit Score Really That Important?
Updated: Nov 5, 2020
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The answer is quite simple, yet complicated depending on your financial situation. Is a good credit score really that important? Well it depends on who you ask.
For those gracing the path of debt freedom, a credit score really isn’t important. Those individuals going through life without debt don’t have credit cards, don’t borrow money, and know there is another way for them. So a credit score is irrelevant; not important to them at all.
But for most people, a good credit score is important. Let’s take a look at why.
What Is A Credit Score?
Your credit score is a number that gets assigned to you based on your perceived worthiness to handle debt. If you borrow money or use a credit card, you will have a credit score. Your credit score will vary depending on how quickly you pay back debt and the debt balances you carry.
Credit scores range between 300 and 850, with 850 being perfect and extremely rare.
But, what is a good score? This is a question that gets asked a lot and the answer varies based on the credit scoring companies and the creditors. Each scoring company, FICO and VantageScore among the most well-known, develops its own ranges and scores.
Different creditors can also have widely differing views on what constitutes a “good” score with different approval thresholds and interest rates.
According to TransUnion, which uses the VantageScore, here’s some guidance on credit score ranges.
Your credit score is recorded by three credit bureaus: Equifax, Experian, and Transunion and may vary slightly from one bureau to the next.
Monitoring Your Credit
At the bare minimum you should be checking your credit report every 12 months and here’s why:
Its FREE. Don’t pass up this freebie that is directly tied to your financial health and well-being.
It’s an important part of managing your personal finances. Review your credit report just like you do your bank statement.
It’s often the first indicator you’ve been the victim of identity theft. Check your credit report for names you don’t recognize, Social Security numbers that don’t match, or accounts that aren’t yours.
Click here to take advantage of FREE Credit Monitoring with Credit Karma.
It’s how you discover inaccuracies in reporting. You may find a mistake on your credit report that directly effects your credit score. Check your report for errors and dispute an inaccuracies to get them off your report.
Where Can I Get My Credit Report
You can access your credit report in a few different places. The federal FACT Act entitles you to one FREE copy of your credit report from each of the three major credit bureaus, TransUnion, Equifax, and Experian.
Click below to access your FREE credit report from each of the major bureaus.
Transunion also offers additional free weekly credit reports if you meet any of the following criteria:
Denied credit, employment, or insurance
Victim of fraud
Unemployed
Receiving public welfare assistance
Click here to see if you qualify for the additional assistance.
How Can You Monitor Your Credit?
If you are looking to monitor your credit for free, there are companies out there like Credit Karma that will give you a free credit report and allow you to monitor your credit report.
I’ve been using Credit Karma for five years and it’s my go to source for monitoring my credit and seeing how my score is doing.
Is Credit Karma Really Free
Yes, it legitimately is. It’s a free website that provides you with your credit score and report once per week, no strings attached. There’s no need to put in a credit card number or cancel a free trial.
How Does Credit Karma Provide the Information for Free
The answer is.. ADVERTISING. Credit Karma gives you a totally free credit score because they’re using your data to send targeted financial ads your way. This is much like how Facebook uses your likes to target ads to your interests. For me the trade off is worth it because I ignore the ads; I don’t need what they are selling and I know they aren’t sharing my information with third parties.
How Does Credit Karma Protect Your Identity
In addition to the free credit reports, Credit Karma provides free credit monitoring. For me this is an invaluable service that provides me piece of mind in the digital age.
Credit Karma notifies you whenever a new hard inquiry shows up on your credit report. Personally, I was notified by Credit Karma when my personal information was involved in a breach and was able to take the steps necessary to protect myself.
Click here to take advantage of FREE Credit Monitoring with Credit Karma.
What Else Does Credit Karma Provide?
Credit Karma provides quick and easy access to your scores, but the service also provides some other great tools.
A graph showing your credit score over time
How your credit score compares to others by age, income and state
A report card that shows how certain factors—like payment history and debt utilization—impact your credit score
Tools that simulate how paying down debt or applying for new credit could change your score.
Credit Karma now offers a smarter way to save with high-yield savings accounts offering no minimum balance, zero fees, and a .40% APY.
Should I Use Credit Karma? Is it Safe?
Ultimately, yes! Credit Karma is safe and I know my information isn’t being shared with third parties. Credit Karma only performs “soft” inquiries on your credit reports, so there’s no need to worry about a credit pull lowering your score.
They really promise to go above and beyond protecting your data. Credit Karma uses bank-level 128-bit encryption in all data transmissions. They also have a dedicated security team to monitor and respond to any concerns.
Credit Karma also has a “bug bounty program” which pays people to identify vulnerabilities in their system so they can quickly fix the issues. This is a strategy shared by companies like Apple and Google.
So Why Do I Need A Credit Score?
There are plenty of scenarios where having a good credit score will make life easier. If you find yourself in a situation where you might be doing any of the following things, a good credit score should be something of importance to you.
Renting a house or an apartment
Getting a loan for a car (unless you’re paying with CASH which is highly recommended)
Buying a house
Refinancing student loans
I’m not an advocate for taking on debt and want everyone to live in financial freedom; however, I understand that there are certain situations where debt may be unavoidable.
Work to have the best score you can and monitor it often to make sure everything on your credit report is accurate. This will put you in the best place to move forward financially.