5 Reasons Not to Obsess Over Your Credit Score

It's reasonable to try to boost your credit score, but you shouldn't work too hard at it. Here's why.

Jan 10, 2014 at 6:15PM

It's human nature to be competitive. Give us a measure of success in life -- from the age our kids learn to walk, to grade point average, or cholesterol level -- and we want a better score than our friends and relatives have.

The latest measure of success may be the credit score. Great. Let the competitions begin.

A good credit score is important. You need it to get a mortgage, get into an apartment, and sometimes even to get a job. However, zeroing in on your credit score too much is not a good idea.

Before you get carried away obsessing over your credit score, consider these points:

1. Comparing your score with other people's scores is futile.
There are many different scoring models. Even Fair Isaac's (NYSE:FICO) FICO has more than one score. They're calculated differently, and their high and low ranges are not identical. Before you get excited because your score is 20 points higher or lower than your co-worker's, make sure you're even comparing scores from the same scoring model.

Another reason you shouldn't compare your score with someone else's is that it's such a narrow view of your financial success. Credit scores don't report how much you make, what kind of car you drive, or how much you have in your investment brokerage.

You may even have a higher or lower score than your spouse -- with all the same accounts and no obvious differences. That's the way it goes.

2. Checking your credit score constantly is discouraging.
Your score may go up and down by a few points every time you check. You'll drive yourself crazy trying to figure it out. It's like jumping on the scale four times a day, and getting discouraged when you've just had a glass of water. The small fluctuations don't matter.

3. Some things are out of your control, or don't make any difference in the long term.
You don't know when your creditors report to the credit bureaus. They could report right before you pay your monthly bill, causing you to show a higher balance one month. Thanks to the debt utilization ratio, which shows the percentage of your available credit you are using, your credit score may go down by a few points. Next month, it may report to the bureaus right after you pay and the balance is zero. Your score goes up. Nothing material has changed.

4. Past a certain point, your score can't help you.
You should certainly strive for an excellent credit score, especially if you may be applying for a home mortgage or other loan in the near future. Most lenders give their best rates to applicants with a 740 to 760 credit score or higher.

After that, a higher score may give you bragging rights at parties, but that's about it. It's not the kind of thing you can put in your holiday card (I hope).

To score a loan, you need more than a credit score. A score of 812 won't get you into a new home if you can't prove you have enough income to make the payments.

5. You can lose sight of the big picture.
Don't make decisions based primarily on how they affect your credit score. For example, buying a car on an installment plan may help your score. Buying a car you don't need, or a more expensive car than you need, and paying lots of interest is a bad financial move. It will hurt your total financial picture far more than it helps your credit score.

You are far better off spending your energy on your overall finances than trying to fine-tune your credit score every moment. Take care of your total financial picture, be fanatical about paying bills on time, and for the most part your credit score will care of itself.

And one thing you didn't know about credit cards...
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Fool contributor Sally Herigstad has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers