You know what’s one of the scariest things in the world to me?
No, it’s not the rising trend of the male romper.
And it’s not even the fact that people take awful financial advice about avocado toast seriously.
“[The] study found that as many as 34 percent of Americans have never even checked their credit reports. Princeton Survey Research Associates conducted the research in April, polling 1,000 adults.”
What. The. HELL?!
That means that nearly 110 MILLION Americans have never checked their credit score despite the fact that it’s essential for responsible financial planning — not to mention it’s an incredibly easy way to get started on earning a Big Win (i.e. IMPROVING your credit score).
It’s especially ridiculous when you consider the fact that improving your credit score is potentially worth nearly $100,000.
Consider two people:
- Abby, who has great credit (760)
- Derek, who has poor credit (620)
In their 30s, they decide to buy houses of similar prices. How much do you think they each pay?
Spoiler alert: Not the same amount.
Check out the graph below:
Source: MyFico.com. Data calculated in June 2017.
Because Derek has poor credit, he’ll end up paying nearly $68,000 more in interest than Abby — whose credit is awesome.
And yet, nearly 100 million Americans are willing to forgo checking their credit score because…why? Why won’t people take that simple step and get on their way to living a Rich Life? From my experience, it boils down to two reasons:
- People don’t know HOW to check their credit score
- People feel guilty about their credit situation
Today, I’m going to show you the exact steps you can take to address these two issues — and how you can even get started IMPROVING your credit score.
How to check your credit score
Before we get started on how exactly you check your credit score, there’s an important piece of information you need to know: Your credit score is NOT the same thing as your credit report.
Many people conflate the two or seem to think that their credit report will provide their credit score information — when this couldn’t be further from the truth.
Here’s a detailed description of both as well as how exactly you can access your credit score:
What is a credit report?
This is an all-inclusive report detailing your credit history. It’ll include information such as your:
- Loan history
- Accounts opened and closed
- Payment history
- Credit balance
You’re entitled to a free credit report each year, per the Fair Credit Reporting Act. Generally, though, you’d want to request one of these if you think you’ve been unjustly denied anything due to your credit.
To get a free credit report, there are three major companies that will provide them for you:
It doesn’t matter which one you use, they’ll all be able to provide you the same information. The report is the data used to calculate your credit score.
What is a credit score?
Your credit score is an actual number — the same number that renters and lenders will utilize in order to assess how safe it is to have you as a customer.
And while your credit score and credit report are two entirely different things, your score comes from the information in your report. The actual number is determined by the following information and their associated weight in relation to your score (credit score formula courtesy of Wells Fargo):
- Payment history: 35%
- Amounts owed: 30%
- Length of credit history: 15%
- How many types of credit in use: 10%
- Account inquiries: 10%
Checking your credit score is incredibly simple. There are a seemingly endless amount of sites and services out there that’ll provide you your credit score, but here are a few notable ones that will provide you your score for free:
“My credit score is XXX. Do I have good credit?”
Your credit score will be within a range of 300 and 850. The range determines whether or not your score is solid — but a good rule of thumb is the higher your credit score, the better you’re off.
Below are a few ranges from Experian and what it may mean for you.
- 850 – 800: This is a fantastic spot to be with your credit score. Rest assured, if you’re here, you’ll have no problem securing a loan or a good down payment percentage on your home.
- 799 – 740: Though not the top spot, this is still a very good area to be. You’ll be offered great rates here.
- 739 – 670: This is an okay credit score range — though not great. With a few small changes, you could easily bring the score up. Focus on closing unused accounts and consolidating loans first.
- 669 – 580: This is when you should start worrying. If your credit score is here, you’re considered a subprime borrower and won’t get very good rates at all. Reduce your debt load and work on your payment history in this band.
- 579 – 300: Here you’re likely not to be considered for a loan at all and will run into numerous issues with things like getting approved for apartments. You should find a non-profit credit counselor and ask for help.
If your credit score falls below 580, you’re going to want to do all you can to improve it ASAP. Below are my absolute best resources on getting out of debt and improving your credit score:
- How to improve your credit score
- How to get out of debt fast
- How to use credit cards to rebuild credit
Stop feeling guilty about your credit score
One of the most common reasons people don’t look into their financial situation — whether it be through their credit scores, bank statements, or credit card bill — is simply because they feel guilty about it.
It’s called the paradox of guilt and many people don’t even realize it’s happening to them before it’s too late.
After all, how often have you talked to a friend about working out, saving money, or studying for school and heard them say something like, “Yeah, I know I really should be doing that but…” followed by some lame-brained excuse as to why they’re procrastinating on something important?
“I know I really should be doing that” is just code for “I’m not going to do that at all.”
It’s the same with people in credit card debt — many don’t even know how much debt they have! They’d rather avoid their statements and bury their head in the sand than face the reality of how much they owe.
Which is why if you truly want to stop feeling guilty about your credit score, the first step is being honest with yourself and facing the truth: Your credit score sucks.
BUT there’s another bigger truth you need to understand:
You can ALWAYS make your credit score better.
It’s true. It doesn’t matter how bad your credit score is or how much debt you’re in. If you’re willing to follow a few straight-forward systems and apply some patience, you’ll be able to turn that credit score around. I promise you that.
I want to show you an exclusive video from my premium course, Success Triggers. It’s about defeating guilt and enjoying the things that make YOU happy.
After all, we’re constantly told what we should do. It’s important to reward ourselves when we work hard and earn something.