I’m NOT a fan of debt. In fact, I frequently remind my fellow nurse practitioners not to start a business on the wrong foot by taking out debt. After all, how can you truly be making any real profit when you owe it all to the bank?
The same is true in your personal financial life. If you buy a house for $400,000 but only have $100,000 in your retirement savings, then you’ve actually got a negative net worth.
However, here’s the thing about credit – IT’S A GAME THAT’S UNAVOIDABLE. This thing called a FICO Score has somehow become so ENGRAINED in the financial brain of society that it’s like a tumor that can’t be removed. The only course of action is to live with it the best we can.
If you don’t think so, take a minute to consider how many of the things we take for granted in our daily lives are affected by our credit scores:
- Auto insurance
- Cell phone contracts
- Utility service at your home
- Opening a bank account
The stakes even get higher when it comes to mortgages…
The best and cheapest mortgage rates are reserved for those people with the best FICO Scores. Interest amplified over 30 years can be SIGNIFICANT. To put this in perspective, Forbes Advisor found that someone with “Good” credit (FICO 670-739) will pay over $20,000 more in total interest than someone with a higher score for the same $244,000 loan. That is a lot of money…
In other words, it doesn’t matter whether you plan to borrow any money or use the credit you have. The entire world is effectively judging you based on your FICO Score, and so it’s in your best interest to make sure yours is AS HIGH AS IT CAN BE, especially if you plan on getting into rental and investment real estate.
Fortunately, getting your score higher can be done with very little debt or effort:
- Put all of your bills on autopilot so that they always get paid on time and in full.
- Keep each card to less than 20 percent. Your FICO Score suffers if you go above 30 percent.
- … but at the same time, don’t refuse to use your credit cards. Having a zero balance does not help build your credit.
- Essentially, pay for EVERYTHING with a credit card, and pay off that credit card every week. Do not use a debit card… Plus you are getting all those sweet award points using credit cards.
- Keep old cards open. This does two things: Increases how much credit you have available and the age of your credit. These are two factors that can positively influence your score.
- Don’t apply for new loans or credit ever unless you have to. When someone pulls your credit report, even if it’s for a legit reason, it can negatively affect your score.
I can’t encourage you enough to build your niche practice with as little debt as possible and to become debt-free in your personal life. But at the same time recognize that you will be judged by your credit score, and it is a necessary evil. Therefore, OUTSMART THE GAME and get yours as high as it can be and maintain it there. It is great being able to get a mortgage on a piece of rental real estate whenever I want, and the reason why is because my score is high. Outside of that, it shouldn’t matter much because hopefully you are living below your means and avoiding a bunch of consumer garbage debt.