Before I dig in, I must confess something. I despise talking about credit. Not just because I believe it’s a ridiculously boring subject but because I genuinely believe the concept of “managing to improve” credit scores is stupid. On this front, I sort of agree with Dave Ramsey who often refers to credit scores as the love-debt score. His point is that the score is just a measure of how well you manage your debt and since debt is generally a bad-thing to have [too much of], a credit score is a really just a reflection of your addiction to it. If you’ve read any of our blog posts before then you know that debt is something that we generally try to eliminate at all costs but we don’t take his “just say no” approach.
In contrast, our approach is, we don’t believe in leaving money on the table, so we use the most comprehensively lucrative, no annual fee, cash back card with perks that works for us—the Amazon Chase Visa. We pay this off in-full every month so we avoid interest and fees. Done.
For credit monitoring services, we use Credit Sesame. It provides us with a free credit score and report from TransUnion, a breakdown and recommendations on how to improve our score, free identity theft protection up to $50,000 and a crap ton more. In a world of frequent hacks and identity theft, this is a layer of protection for us.
Below is a snippet of my dashboard in Credit Sesame. In short, my score is pretty high and if I wanted to improve it, I could follow the recommendations they provide. To strengthen my point about how silly scores are, the ‘C’ grade noted below is my grade for the lack of different types of credit I have. Put another way, if I had a car note, student loans and a mortgage, I might get closer to 850!
Side note: the debt listed here is largely from our rental property. If you saw our 2018 plan, then you’ll know that number will ((poof)) be gone by the end of this year.
Anyway, we do know credit is important so we begrudgingly play along and reap the perks. With that said, if you have ambitions to get out of debt and build real wealth, your relationship with credit must evolve. Otherwise, you’ll end up in a nasty breakup that almost always works in the favor of credit card companies. You on the other hand end up with a broken heart, a wallet to match and memories of a life that was never really yours. If it were played out in a stage-play, it would probably look a little something like…
Act 1- Infatuation
The early days. Is there any better feeling in the world? Early love with credit encapsulates you like the woman in your office who definitely got a new set of body sprays for Christmas. You have no idea what you’re doing or how much is too much. You just know it feels soooo good. ((spritz, spritz)) ((swipe, swipe))
What’s fun about commitment?/ When we have our life to live/ Yeah, we’re just young dumb and broke/ But we still got love to give
Act 2- Issa celebration
At this point, you’re really digging this credit card life. After making a couple of minimum payments you now believe that this isn’t a scam and you may be able to do this…forever ever?. Can’t. Nobody. Tell.You.$hit.
My credit card is a plastic bankroll/Still keep that knot ’cause I get guap from paid shows/Got a palace in the cut layin’ low/Talkin’ to that/It does whatever I say so
Act 3- Trust Issues
Further down the line, your first real lesson about how credit really works is taught. Sumthin’ about APRs, promotional rates and some other B$ about your bill being overdue and them freezing your card. If you were thinking with your head, you would know the walls are closing in but instead you’re following your heart and your heart says… Go on ‘head and keep the party going!
What kind of fuckery are we/nowadays you don’t mean dick to me/ I might let you make it up to me/Whose playing Saturday?
Act 4 – Things fall apart
If you’ve ever been there, then you know you will never forget the moment you have to open a new card to cover a transaction because you’ve reached the limits on your other other card. This is the first sign of smoke in what will soon become a four-alarm raging forest fire of debt unless you get your $hit together.
So you never know/never never know/Never know enough, ’til it’s over love/Til we lose control/SYSTEM OVERLOAD/Screaming, “No, no, no, n-nooo!”
Act 5: Broke(n):
Like love and heartbreak, there are no words that can fully describe what it feels like to be broke(n). That’s why there are songs and lyrics like…
I ran my credit card bill up/thought a new dress would make it better/I tried to work it away/that just made me even sadder
Act 6: Repair
If you’re lucky, you don’t go through a never-ending loop of stages 1-5 and can slide right into repair. If you’re unlucky, you’ve got these songs on repeat and it’s pulling you lower and lower into the abyss of broke-ness. When/if you wake up and you’re in hardcore debt payoff mode you develop a deep appreciation for nights and weekends at home and tracking all yo coins like…
Ohh don’t double charge for me for that/Don’t do it to yourself/’Cause I might just ask what the ice cube’s worth/What the ice cube’s worth/That’s the only differentiate in making this a non free perk
Act 7: Freedom
In the final act of your relationship with credit you become whole. You’re in control of your finances and you realize that credit is like the small garden outside your home. It simply needs to be tidied up, protected and sprinkled with a little love on a regular basis. Every now and then you can pull a few herb leaves and a tomato off a plant or two but you shouldn’t be relying on it to produce all of your meals.
It is here that you truly adopt a long term focus on building generational wealth.
see how the universe works/it takes my hurt/and helps me find/ more of myself/its a gift and a curse/that’s called the red queen’s race/you run this hard/just to stay in place
Credit is hella important and not paying closer attention to the role it plays in your life will cost you dearly. This is especially true if you plan on taking out a mortgage for a house, car, applying for an apartment or getting a new cell phone. I know for sure that I’ve denied some prospective tenants on the basis of not passing a credit score threshold [amongst other things]. Credit scores are also used by employers to filter through job applicants. In fact, for many people having bad credit is considered as a deal-breaker for those of you looking for love in all the wrong places.
Long story short, don’t lose sight of the importance of your credit. Here are a few tips to consider:
- Set a recurring mid-year and end-of-year thorough review of your credit report and score
- Set up alerts to ping you when charges exceed a particular amount on your card(s)
- Focus on the perks of one or two cards and funnel your expenses through there
- If you’re in debt, stick to cash back cards unless you can pay bills with the miles and points you’ve accrued
- Consider signing up for credit monitoring services like Credit Sesame
- Pay your credit card bills on time and ideally in full every month. Also, be mindful of when you pay your cell phone bills. Some cards require payment by 6/7/8 PM local time and will consider you late if you haven’t paid it by then
- Don’t hold onto your perks [points/miles]. They lose value over time