Does Having a Good Credit Score Really Matter?

Is it important for your credit score to be good?

Just like many other questions in the world of personal finance, the answer is simple – it depends.

Well, for starters, your credit score really matters yet this comes with a few caveats. As far as using your cash to live your dream life, your credit score only makes up one tiny piece of a bigger puzzle. Although it is important for you to know what your score is, it is also equally important that you understand how this matters as well as the things you can do about it.

Skipping these crucial steps might make you spend too much of your precious mental energy and time on something that matters but may not matter as much as how much you assume it does.

Credit Score – What is It?

A credit score is a three-digit number ranging from 300 to 900. This is being calculated by any of the major credit bureaus.

Although the exact calculations may differ depending on the specific provider, your score typically  tries to turn the following factors into one number:

• How good you are when it comes to repayment of debts
• The length of your track  record for the repayment of these debts
• The amount of available credit you are using at the  moment is typically in percentage
• How often you apply for new debt
• The number of different types of debt that you had

To What Extent Does It Matter?

If you want to make your credit score better, the first thing you should remember is that there is no such thing as a secret hack or quick trick to do just that. You will see an improvement in your score over time if you make on-time payments of your debt in the long run and lower the amount of credit that you carry every month.

But, if you don’t do these things, it might be worth it to focus more on your credit score. This can serve as a helpful guide to determine whether or not you stick to the plans that will benefit your finances such as developing the habit of making on-time payments and paying down existing debts.

Now, if you are already doing all of these, your secret weapon is none other than time. Not everyone might agree but you should really avoid focusing most of your energy on your credit score beyond the basics.

Don’t Overthink Your Credit Score Even If It Matters

It is safe to say that sooner or later, you need some kind of debt for you to be able to buy all those things you want such as a house. There will also be instances when it would be smarter to hold onto your cash through financing your car or phone instead.

Your score will matter in cases like these.

But, the best and most recommended things that you can do to benefit your credit score are those basics that you should be doing in the first place. Always pay your debts right on time, pay them off whenever you can, and establish a longer and better credit history that includes keeping open all of your oldest accounts if you are just getting started with building your credit.

After that, you can focus your energy and time on other things that matter more.