Being a personal finance nerd, credit score is something that has always fascinated me. All of how we behave financially is boiled down to a single number for the sole purpose of determining the risk when lending us money. Trying to maximize this number is kind of fun. Like trying to achieve a high score in a video game. But other than that, I feel that we, as a society, put too much focus on a credit score. After all, in my entire life, having a high credit score has really only been important once. And more recently, my view and approach to my credit score has turned from something worth preserving to something not worth even worrying about.
When we bought our home, ECA and I had a good enough credit to get a rate of 3.375% on a 15 year mortgage. And although the loan cost us basically nothing (considering the growth we’ve seen in the stock markets these past few years), we began to pay down the mortgage as quickly as possible since we absolutely abhor being in debt. This may not have been the best use of our money, but it felt pretty good to get the mortgage down from about $230K to about $20K in around 3 years.
Since then, my credit score has continued to improve. I’ve even started to churn credit cards, opening 5 in the past year, and not seen any impact to the score. Unfortunately, I wasn’t checking my score very often before, so the data isn’t great, but since Chase has started what they call their “Credit Journey” where you can get your TransUnion credit score for free with weekly updates I’ve been following a bit more closely. I started this back in February, where my score was 808. After opening a couple of cards somewhat rapidly, my score did actually dip down to 800 at one point, but it very quickly raised back up.
This service gives a few other interesting data points such as your current outstanding credit balances, your credit utilization (although mine says 0% so, that’s not quite right), your available credit, how many accounts you’ve opened in the past year (7 for me), how many inquiries in the past year (5), and the depth of your credit (only 7 years, well, I am only 30 after all).
There’s also a score simulator where you can simulate what different things might do to your score. Which there’s basically nothing I can do to really raise my credit score. Paying off all the cards would increase it by 3 points apparently! Although I already pay them all off every month anyway…
Due to the value we gain from churning and the fact that we have no intentions to get a big loan anytime soon, thinking about my credit score basically has no effect on my behavior. I used to want to get it higher, but I would gladly trade points on my score for real money, something much more tangible. The only reason why my score is so high is because I’m a safe bet to give loans. Save a catastrophic event, if a bank gives me money, they’ll get it back. Of course, the only reason is because it’s worth it to pay it back since it costs me less. It would do me no good to default, or to not pay off my credit cards each month. I guess it’s just a mutually beneficial situation: banks win and I win, high score achieved.