If you seem to lose sleep or are stressed out over your credit score, you can congratulate yourself that you have joined the herd mentality over this one. You are not alone, as more and more people seem to be obsessed with their credit score. The question to be asked is if that is a sane and solution-oriented approach toward your past unresolved debts and the future desire to borrow money.
Your credit score is simply a tool for you to understand how you have managed debt in the past but it is not an indication of how you will handle debt in the future. Only you can decide what your future handling of debt will be. Past performance is no guarantee of future performance.
The same is actually true of a credit score. It does not matter what you score is a today, it could be below 500 or over 700, it is still an indication to lenders what your past habits in repaying debt were.
It can never be a guarantee to lenders of how you will pay your debts in the future.
Life happens, and anyone can raise their score or lower their score based on circumstances that come into their lives.
In spite of this, lenders always look at your credit score to determine if you are a reasonable risk in the future for repaying your debt. At the end of the day, it is their best guess on getting their money back.
The problem with the credit score is that people start to define themselves or define others by their credit score.
This is simply insanity!
Think about something, the purpose of having a credit score is so you can borrow money. The more money you borrow the higher the risk of lowering your credit score, which will limit your ability to borrow more money. The cycle continues in your life, thinking that somehow borrowing money is the key to wealth creation.
It is not, unless you are borrowing money as a leverage tool for a business or real estate, but not for personal residence or consumption. So instead of being obsessed with your credit score, why not be obsessed with wealth creation?
Simply do what the rich people do, they will focus on making money and creating wealth, and simply manage their debts. If you focus on your debt, you simply get more of it. Be obsessed with your ability to make money, lots of it, manage your debts and credit score will take care of itself.
You might consider the following approach if your score is below 650. Simply get your most current credit reports, and list out all your debts. Prioritize them from the least amount of the larger amount. Create a repayment plan that covers each debt on the minimum monthly payment.
As soon as you pay one debt off, take that payment and add it to the next one.
This means that your monthly debt repayment amount will stay the same until all debts are paid except for your house.
Once you have set this in place, do not go and borrow any more money, and simply focus on creating more income and more money with your current career and maybe a side business. Be obsessed with making money, manage your debts and your credit score will take care of itself.