3 Myths About Credit Scores

By Rachel Cruze

3 Minute Read

Ever heard this one? “You can’t make it in life without a credit score!”

You might have heard it from your parents, an old college professor or the local finance expert. But I’m here to tell you that it’s simply not true.

So before you pass along this myth to your kids—or let someone else convince them how important it is—let’s talk about three of the most common myths surrounding the credit score.


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1. Your credit score is an indication of financial success.

No way. Your credit score—maybe you’ve heard it called a FICO score—tells you one thing: how well you manage debt. Don’t think of it as a FICO score. Think of it as an “I Love Debt” score.

It’s all about debt—how much and what kind of debt you have, how consistently you’ve used and paid on debt and that kind of thing. Think about it this way: If you inherited $200,000 tomorrow, or if you received a raise at your job, your credit score wouldn’t reflect that at all. If your income isn’t a factor, then how can a credit score actually measure your success with money?

In reality, the best indicator of financial success is your bank account, not a high credit score.

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2. You need a credit score to rent an apartment.

This one’s not true either. If you have your first and last month’s rent plus a security deposit, a majority of apartment complexes will work with you. You might have to try two or three, but they are out there.

Just ask around. Be honest. Tell them you don’t use debt but you have good financial standing. Prove it with your bank account. And if you have kids who are just entering the real world and looking to rent, this is extremely valuable information.

3. Keeping a credit score to secure low rates on car insurance is a smart move.

It’s true that no credit score or a bad credit score will drive up rates on your car insurance. But compare those monthly savings to the usually insane amounts of interest you’ll pay on a credit card over the course of a year. Don’t pay interest to a bank just so you can be in debt to build up your credit score. Pay that interest to yourself in the form of saving and investing. After that, a small discount on car insurance isn’t going to matter.

Stay away from the “I Love Debt” score at all costs. The sooner you begin paying cash, avoiding debt, and running from FICO, the better off you’ll be in the long run.

Rachel Cruze is a seasoned communicator and presenter, helping Americans learn the proper ways to handle money and stay out of debt. Her new book Smart Money Smart Kids, co-authored by her dad Dave Ramsey, released April 2014 and debuted at #1 on the New York Times best-sellers list. You can follow Rachel on Twitter at @RachelCruze, online at rachelcruze.com, or at facebook.com/rachelramseycruze.

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