The Myth of Perfect Credit

credit score myths

When I meet for the first time with a person in financial distress, one of the things they are most likely to mention is how they “used to have such good credit!”  I find it remarkable that out of all the negative consequences living with debt can bring- family trouble, tough budget decisions, foregoing vacations and holiday celebrations, putting off retirement- the loss of credit is one of the foremost things on consumers’ minds.

Here’s the thing about credit: it has no intrinsic value.  If you have a perfect credit score, they do not send you a plaque to hang on your wall.  You do not get better parking spaces, or the choicest tables at restaurants.  Having good credit just means that businesses will be more likely to lend you more money, on better terms.

To be sure, having good credit is a positive thing; I’m certainly not suggesting that credit doesn’t matter.  It does not, however, reflect on your moral worth as a human being, and is not a precursor to happiness.  If I were offered five thousand bucks for fifty points off my credit score, I would take the deal.  The importance of your credit depends entirely on what you need it for.

Let me say that again, because it is important: the importance of your credit depends entirely on what you need it for.

If you plan to finance a vehicle in the near future, having a good credit score can save you a few hundred, or even a few thousand, dollars.  While the math is tricky, it can be calculated- your credit has monetary worth in this situation.  If you are financially independent, your ability to borrow may be irrelevant- if so, your good credit score is worthless, or your bad credit does not matter.

Many folks I meet have added “having good credit” to their definition of the American Dream.  I think this importance is largely misplaced.  Approach your finances holistically, and figure out what the economic value of credit it based on your particular situation, not some perceived value based on nothing more than social norms.  This will help you make good decisions about your finances in general, about your debt in particular, and may also help you avoid some of the stress that comes with economic hardship.

One final note: while I believe that the credit score is overblown, credit fraud is a different thing entirely, and should be taken seriously.  If you believe you are the victim of credit fraud, contact these three credit bureaus, and report the suspicious activity immediately.



Opening Remarks

Yesterday afternoon, I was meeting with a client and caught myself in a re-run.  Of course, for the client, the information was new and shiny, but it occurred to me (after the fact) that I had given this same explanation, in basically the same words, about three dozen times.  No case is ever the same as another, but they frequently rhyme.

So, as a frequent “explainer of legal things” and occasional blogger, it occurred to me that maybe I should blog about the law.  Specifically, about consumer debt law, my area of focus.  If you read my other blogs, you will correctly predict that I will stray off-topic from time to time when the mood strikes me, but I plan to stick with this focus because of how important it is that people get actual information about debt, the law, and how one can affect the other.

My particular pet peeve in legal information sites is when they are basically sales pitches attached to small nuggets of truthiness (hat tip, Stephen Colbert): this will not be that.  If you want to hire me, go to my firm’s web site.  While I might link to it and other sources from time to time, my purpose in blogging is not to drum up business, it is to share information and ideas.

Finally, please be aware that this information is just that: general information.  Don’t mistake it for legal advice.  Yes, I’m an attorney, but without actually knowing you and asking you six thousand questions, I can’t tell you what to do.  If you need legal help, talk to an attorney one-on-one.  You should never rely on legal information without double-checking with a local attorney, and since the law changes and varies from time to time and place to place, this blog is no exception.

So, I hope you find this information useful, and I look forward to your questions and comments.