167 – Expert Disagrees With My Opinion on Credit Scores

How important is your credit score?  In my book, Straight Talk on Your Money, on page 48 I discuss the "Credit Score Scam", and on page 52 I say that you should not focus on your credit score.  (Apparently I'm not a fan of credit scores).  It was those passages from the book that prompted Ross Taylor, a mortgage broker, to email me and say:

I noticed when reading your book we do not completely agree on the importance of one's personal credit history.

I emailed Ross back and said "great, come on the podcast and let's discuss it!", and that's exactly what we do on today's show.

My view is that credit scores are for the benefit of the bank, not you.  I explained this in a past post Why our credit reporting system is broken. Credit scores are a tool to help a lender decide how much money to lend you.  A person who has never borrowed money but has $1 million in the bank may not even have a credit score.  A person who has five credit cards and owes money on each of them may have a high credit score, because they are servicing their debt.  So to get a high credit score, you need to borrow money.  In many cases that's a bad idea, and that's why I don't believe in making a high credit score your top financial priority.

While Ross Taylor doesn't necessarily disagree with any of those comments, as a mortgage broker he also knows that to get the best rate on a mortgage, you need a clean credit report, and a high credit score.  That's why he believes you should pay attention to your credit history, and take steps to improve your credit score. In his words you need to look at:

Your score, your history, the content and what comprises it.re

Which approach is correct?  Are we both right?  You be the judge.