What is a Good Score?

What is a good credit score video transcript:

0:01 What's going on everyone? Phil with Foundation Wealth Planning. I appreciate your stopping by. Today we're going to talk about the ole credit score, which it seems like it's talked about a lot, but a lot of people don't even really know what is in the credit score or what

0:14 It really is. So we're going to talk a little bit about that today. And if you find value in this video, please, you know, like it, share it, follow the channel, all that good stuff.

0:26 I would love to get the word out more. I like to do these short little videos. Last time I said four to seven minute videos, and then I immediately posted an eight minute video.

0:34 So five to ten minutes of some educational content and hope you find value in it. So this is just simply

0:41 from the Experian website, you know, that's one of the main credit reporting agencies, which would either be Experian or Equifax or TransUnion.

0:51 So that's usually those are the major credit reporting agencies. So. The question on here is what is a good credit score?

0:57 Which again, is kind of funny because Is a credit score even good? Do we even need it? We'll talk about that.

1:04 But anyway, if you look at this little chart here They look at your financial history and they come up with these scores and basically if you are over 800 you're exceptional If you're you know over 740 you're at least very good and 670 or higher is is good.

1:28 That's kind of like the average You know, so if you're in that range You would be able to get a loan, typically without much problem, you know. The lower you are on this little scale the harder it could be to get a loan as well as you can get higher interest terms. Because, you know, What this is supposed 

1:44 to be telling you is how likely are you to pay back your debt. And that is ultimately what the credit score is an indication of. So if you've never looked at the breakdown of what it entails.

2:00 It's actually nothing to do with your wealth or if you are in a good financial position. It doesn't take into account income or your assets.

2:12 I mean here it is everyone. Look at this. It takes into account your payment history, your credit usage, your length of credit history, types of accounts, and recent activities.

2:27 And here it is. Your payment history is the biggest piece and the amount owed. So between how much you take out in debt, right?

2:38 So you know, credit usage and amount owed and all that. It's like how many accounts have balances. How much do you owe?

2:46 What are the credit limits that you have all come into play? So when you see that number, 65% is just simply how much do you have in debt and how well are you paying it back?

3:00 That has nothing to do with your income, your assets. Are you budgeting? Are you saving for the future? Are you investing?

3:09 Are you, you know, a good person? Are you gonna, you know, I guess the one thing is it would say is that you would theoretically be a good person because you pay back your debts.

3:19 That's really the only thing that it measures. You know the amount, you know, how long you had credit, you know, so again that's establishing that you've been able to pay it back for a long period of time, right?

3:29 You don't want just someone that says, hey, I paid it back, but it's only been one year. You want someone that's got that.

3:35 long track record of paying it back and that's how you get a better score. So the question is, is this even a thing that we should be worried about?

3:48 In this current environment of, you know, a debt-fueled economy, a consumer-based economy we're told that we are, but you know, you can get, there are some companies out there.

4:01 That if you didn't have a credit score at all, you could still get a mortgage because they would look at your income.

4:08 So, you know, although that's probably the most common thing people use the credit score for is buying a house. You wouldn't necessarily have to have that.

4:17 There are ways to do it without it. The other way that people needed is to buy a car. And I've done a previous article on, you know.

4:28 If you could buy a car or whatever. Car payments are just obscene. You know, the average payment these days is over 700 a month.

4:36 So I don't think you really need to finance a car. I think you should buy a car that's within your means and make sure you're not you can pay cash for.

4:44 So I don't think you really need a credit score for that. A credit score to be able to get another credit card.

4:51 That would be another reason that seems silly or a higher debt limit? No, I don't think so either. The, one thing you may get some pushback on is if you are a business owner, you're trying to get some business financing to expand your business.

5:07 Now that one might have. Some validity to it. You know, business financing is a whole different deal. But you know, you could, you could make the argument is, do you really need to finance anything with your business?

5:19 Could you build it with cash? But, ou know that, that is, that's a, that's a fair argument. You know, do we need a credit history to be able to get a business loan?

5:29 Maybe. Do you need a commercial loan to buy some commercial real estate? Maybe. So, you know, we're not gonna get.

5:35 The nuances of that, but I'll grant that that might be potentially. But again, you're setting yourself up for a lot of risk.

5:42 You're gonna take out a bunch of debt, pay it back. So then you can prove that you can pay it back so you can get more debt and then pay it back.

5:52 It's quite a cycle. And.Its kind of the system that we are in. And so I think the moral of the story is that you really may not need a credit score. And just ultimately knowing that that's not the end all be all. Your credit score doesn't really mean

6:08 much at all. right? how much are you making? Can you go out can you make more money? Can you go out and save that extra money that you're making? Can you pay off these debts and can you invest for the future? And do that all within the confines of your goals.

6:28 Make sure that you're aligning your money with what God wants. Those are really much more important than your FICO score.

6:36 Right. So I hope that's helpful. I hope you found value in that. This is a quick overview on your credit scores and everything, and I'm coming up on my seven minutes.

6:51 So trying to stay within a reasonable time for the video. But thanks for stopping by. Again, if you found value in this, please like follow the channel, all that good stuff, and I'll catch you in the next one.

7:02 God bless.

Phil Francois, CFP®
Foundation Wealth Planning
phil@foundationwealthplanning.com
https://www.foundationwealthplanning.com/