You know how important having and maintaining a great credit score is, but there are times when concentrating on something else makes more sense
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You know how important having and maintaining a great credit score is, but there are times when concentrating on something else just makes more sense. Here are eight occasions when worrying about your credit score should be the last thing on your mind.
1. It’s already awful
If your credit can’t get much worse, don’t worry about harming it further — just get back on track with your finances as a whole. Spend within your means, delete your debt, clean up old accounts and pay on time from this moment forward, and your credit report will brighten up on its own. In fact, says Bruce McClary, Seattle-based spokesman for Clearpoint Credit Counseling Solutions, fretting about “minutia while your credit is already in the basement will unnecessarily fray your nerves and may even prevent you from taking important steps necessary for healing your credit.”
You’ve done it — achieved perfect or near perfect credit! Now go have fun. Yes, keep an eye on what’s going on over at the credit bureaus to make sure there’s are no fraud and no mistakes are happening, but if your FICO score is over 750 and you’re debt-free, relax. “Just be happy with what you have and keep doing what works to maintain your healthy credit,” says McClary.
3. When it becomes an obsession
Reviewing your credit reports at least annually is wise, but overdoing it can cause unnecessary anxiety. “It’s like checking your weight on a daily basis — it can be counterproductive,” says June Walbert, a San Antonio-based financial planner who works for USAA, a financial services firm serving the military.
Fixation can also result in splurging on extraneous services. “I was once obsessed with checking my credit score,” says R.J. Weiss, a financial blogger at Gen Y Wealth from Chicago. “I was 19, I had a bill go to collections. Once I realized I couldn’t get a normal credit card, I started to monitor my credit rating heavily.” He began paying $15 a month for a monitoring service, but after about six months, he realized he was wasting his money. “The only thing I could really do at the time was to pay my bills on time,” he explains.
4. You won’t need it
“How much does your credit score matter when you are getting a mortgage, financing a car, applying for a job or opening a line of credit? It’s the main event,” says McClary. “But how much does it matter when you have a steady job, you aren’t planning on moving, you won’t be refinancing your mortgage or you don’t plan on opening any new lines of credit? It’s virtually invisible.” In short, good credit is inconsequential if you really won’t be using it in the foreseeable future.
5. You’re bankrupt
File for bankruptcy and your score will plummet from wherever it is down to the very bottom. Bite your nails about the effect? Don’t bother. You’re filing because you need to (right?), so accept the consequences. It won’t be long before you can rebuild. When you’re ready, apply for low-limit cards and charge responsibly. Though the notation will remain on the report for a total of 10 years, most people who file can increase their score dramatically in just 24 months.
6. You’ve got more pressing problems to deal with
What takes precedence over your credit reports? Your health and that of your family, putting food on the table and keeping the lights on in your home, to name a few. In times of crisis, expending the effort to drive up a score may not be the best way to use your energy, says Walbert. “It’s a hierarchy of needs. You as a person — as a parent — need to do whatever you need to do to survive, and sometimes that means making ‘bad’ financial decisions.”
7. It’s a status number
The only people your credit should matter to are you and your prospective lenders, employers and landlords. Forget trying to reach the scoring heights if it’s because you’re competing with someone else, or you think it rates you as a human being. “While a FICO score is a measure of how one has managed their debt, it should not be the equivalent of the scarlet letter or the golden ticket. Both a jerk and a saint could each do everything necessary to earn an 800 FICO,” says McClary.
8. You’re skipping the country — for good
Relocating to Tahiti? Pack your sunscreen, but leave your credit behind. “The FICO model accepted in the U.S.A. is not a factor if you’re moving to a foreign country,” says McClary. However, Walbert issues a warning to expats: There might be time when you choose to live in America again. “Maybe your kids need you or you marry a U.S. citizen who wants to move home. Preserve your score so you can pick up again.” How? Just keep charging with your U.S.-issued cards, since they’re generally widely accepted abroad.
In general, developing a great credit history and high score is advisable. With it, you have a better chance of securing premium financing, and you’ll keep employment and tenancy opportunities open, too. Equally important, though, is to know when to direct your attention to other areas of your life instead.