What Are You Building Your Credit Score For?
Things that you know you should do:
1. Eat more kale than Kit-Kat bars.
2. Get the oil in your car changed every 5K miles.
3. Build your credit score.
You know that you should do 1 and 2 because you want to reach your health goals and protect the investment of your car. But, do you know why you’re doing number 3, other than that it’s on that list of Things You Should Do? Let’s have a conversation about Goals with a capital G.
So, full disclosure: My credit score is… less than amazing. Not abysmal, just not where I want it. No, there are no shoe binge stories here, not even a credit card, just a two-year period sans health insurance, and a trip to the hospital that racked up more medical bills than even the most dedicated and earnest little Student Librarian could have possibly hoped to pay.
Believe it or not, that and a few other relatively minor slip-ups is all it takes when you’re only 24 and your credit history is as slim as mine. I’ve never had a credit card. That’s my other problem.
So, I read a LOT of personal finance blogs, and every week I hear CREDIT SCORE. CREDIT SCORE. FIX YOUR CREDIT SCORE. YOU’VE FIXED YOUR CREDIT SCORE, HAVEN’T YOU? I’ve had nightmares of little Experian demons dancing around and prodding me with their pitchforks. I worried, and fretted, and fussed, and… not much else.
You see, I just knew I needed a good score, because I’d been told so. But I wasn’t thinking about why. Or, more accurately, when.
My moment of clarity came just last month. I’d applied for my first big-girl credit card as a first attempt at establishing some credit history (yay!)… and got denied. (boo!) I regretted, I worried, I fussed some more… and then I had a big forehead slapping moment, and sat down at my computer. Within thirty minutes, I’d done more to tackle the problem than three years of worrying and guessing had accomplished.
I signed up for a credit reporting service through my bank for less than I spend on Kit Kat bars a month (and way more than I spend on kale. No one’s perfect.) I identified the few problem areas, (in this case, a sneaky little retail card that I’d let my mom use, and completely forgotten about,) and by that weekend, I’d closed it out, and called my bank about opening a secured card to start establishing that history that I need. See? No sweat. Because here’s what I realized–
I want a good credit score, because eventually I want to own a car and a house. Eventually. Right now, I’m living very comfortably, within my means, in an apartment outside of Philadelphia, and a commuter pass that costs less than a quarter of what a monthly car payment would cost me. According to my long term plans, I will be in this apartment, with its highly reasonable rent and godsend of a stacked washer dryer unit, for at least the next two years.
I have no plans to purchase a car until I move out of the city, which could be even more than two years down the road. Meaning–I have two years to clean this mess up. Now that I’ve plugged all the holes that were still hurting my score, I can start reversing some of that damage, with my consistent student loan payments (that I’m paying with the money I’m not using on a car,) and a secured credit card that carries no balance. See? Panic, not worth it. Planning–always worth it.
Where are you in your life? What is your credit score, and what do you need it to get to? When do you need it to get there by? These are the questions you need to be asking yourself. (Speaking of asking questions–and kale– here’s a good article to start with.) Are you ready to start wrangling your credit score, or have you been there, done that, bought the T-shirt, and are ready to start looking at some home loan terms to get a sense of where you want yours to be? NPBS has some rates available on their site to give you an idea of a starting point.
Do you need a loan to finance a new business venture? How much? Do you just want to qualify for a card for emergencies with low interest? Your credit score will determine your ability to do all of those things, in good time. And, if you don’t know what that number is, please.
Do yourself a favor, spend fifteen bucks, and go find out.