Credit Report: How Your Credit Score Influences Your Success & Potential

Do you fully understand the importance and impact of your credit report? Do you realize that a three digit number, called a FICO score, largely determines and influences your financial and personal potential and success in life? Would it surprise you if I told you that a person’s credit report, history, and score often reflect their inner character – making evident whether or not they are ethical, responsible, trustworthy, dependable, hard working, and honest?

From a strictly financial perspective, having a high credit score is absolutely essential. In fact, your credit score is far more important than your GPA, education obtained, jobs and titles held, bank account balances, standardized test scores, and successes displayed on a resume. It is this three digit number that significantly determines whether or not you obtain a certain job, qualify for loans and money being lent to you, the interest rates you pay, the house and car you’re able to buy, the insurance premium rates, the ability to start a business, to small things like buying a new phone and obtaining a credit card.

And yet, what people fail to recognize when talking about this all-important three digit number is how it actually reflects not only their character, but how the attributes and actions that determined their credit score will literally dictate every other area and pursuit in life. Thus, paying bills on time is not so much about maintaining a high credit score as it is about maintaining integrity and dependability – not only with our creditors, but with everyone and everything we encounter in life. The same honesty, integrity, dependability, and hard work that correlate with a high credit score will most certainly carry over into every other aspect of our lives – and it is these attributes that are at the foundation for not only happiness, but any success in life.

Thus, this simple three digit number actually communicates to the potential employer, lender, or landlord whether or not you are a person of their word and have a character of such quality to do business with them. If not, you will either be denied, or you will literally ‘pay for it.’ Understanding this, do you now realize more fully how absolutely important this credit report and score are not only to your financial success, but to your personal character – which determines every other success in life?

Therefore what? Knowing and understanding this principle is important, but like anything in life – thoughts, dreams, ideas, and even knowledge are useless until we put forth action! Below, I have listed 6 tips to help anyone improve, build, and protect their credit. However, as you read and implement these essential tips, understand that the goal should not only be to improve your credit score, but to also improve your character:

1) Identity Theft Protection: Perhaps the most important advice I can give is to insure yourself with identity theft protection. I take no reservation in saying that identity theft protection, in my opinion, is more important than life insurance. It is an investment that is essential to you and your family’s protection, financial security, and eventual financial independence.

2) Credit Cards Are A Necessary Evil: Eliminate from your minds that credit cards are bad. The problem is not with the plastic, the problem is a lack of self-discipline from the owner of the plastic! In order to build credit, one must not only have credit cards (yes – more than one), but also use them properly. Using them properly essentially boils down to two things: 1) Use your credit cards for purchases, but never buy anything unless you have actually have cash to buy it. 2) Ensure that you pay the balance in full at the end of the month, and never pay a dime in interest.

3) Understand The Elements That Effect Your Score: Your credit score is determined by 5 categories: 35% paying bills on time; 30% total balance on credit cards and loans compared to total credit limit; 15% length of credit history; 10% new account or credit inquiries or applications for credit; 10% mix of and types of cards and loans (lines and loans). To put this in much simpler terms – make sure you always pay every bill and payment on time; never use more than about 25% of your available credit; keep credit accounts open; limit new inquiries; and ensure you have various types of cards, loans, and lines.

4) Increase Your Available Credit Limits Often: Every six months you should be calling your creditors and increasing your available credit limits. Yes, you read that right. You do not do this to increase your spending limits, you do this to increase your credit availability which lowers your debt-to-credit ratio (which improves your score).

5) Protect Your Identity: Guard and protect your social security number, and your personal and financial information always. Make it a habit to check your credit score and report often to ensure that there are no mistakes, improper inquiries or loans, and to know what/how to improve your score. Remember that if you have children, protecting their credit and getting identity theft protection for them is just as vital to ensure their future financial success is not hindered.

6) Understand Good vs. Bad Debt: There is actually a thing as good debt; however, I can think of only three things that fall under the umbrella of ‘good debt.’ They are: education, purchasing a house, and a business or investment that makes you money. Everything outside of this criteria is bad debt, or usually referred to as consumer debt. When you purchase something, always ask yourself these two questions to determine not only if you should buy it, but if it is good debt or not: 1) Do I have cash to pay for this? If so, buy it on the credit card and pay the balance in full at the end of the month. If not, don’t buy it. 2) When purchasing something knowing that you’ll have to go into debt to buy it, ask: ‘will this item make me money?’ If not, don’t buy it!