How to Money – "The High Cost of Crappy Credit (Bestie Ep)" (#1083)
Release Date: January 2, 2026
Hosts: Joel and Matt
Episode Overview
In this episode, Joel and Matt dive into the real and often underestimated expenses associated with having a poor credit score ("crappy credit"). Using their trademark friendly banter and real-life examples, they dissect how bad credit goes far beyond inconvenience, impacting everything from mortgage rates to ability to rent a home, car loans, insurance, and even job prospects. They stress how improving your credit doesn't require perfection—and that striving for an 850 score isn't necessary—but that being proactive is key to building financial health and freedom.
Key Discussion Points & Insights
Setting the Stage: Why Care About Credit?
- Bad Credit Is Costly:
Using a power outage analogy, the hosts illustrate how bad credit is not a minor glitch—it’s an extended blackout affecting every corner of your financial life (07:41, 09:08). - The Mortgage Example:
Joel shares how a 2.5% interest rate difference on a $300k mortgage (due to a lower score), can cost $171k more over 30 years—plus a near-million-dollar opportunity cost if those extra payments had been invested instead (09:53).
"That really drives home, I think at least partially, how expensive a bad credit score can be." – Joel (11:32)
- Generational Credit Score Gaps:
Gen Z and Millennials average lower scores (679 for Gen Z) than Boomers, signaling why this topic matters for many listeners (11:56).
What Counts as "Bad" Credit?
- Score Ranges Demystified:
740+ is considered "very good"; 680–739 is just "good;" below 680, "you need to really make some strides because it's going to cost you a lot more." (12:47–13:10) - Chasing Perfection is Pointless:
Only 1.2% have an elusive 850 score. Anything above 740 is "solid," and the hosts themselves aren't obsessed with perfection (13:13–13:52).
"We just don’t care about having a perfect credit score. It’s a worthless pursuit." – Joel (14:59)
Credit: Necessary Evil?
- You Can’t Opt Out:
The hosts critique the system’s opacity and inaccuracies but emphasize that pretending credit scores don't matter will harm your finances (15:00–16:17). - Debt Debates:
While borrowing isn’t ideal, most people need a credit score to buy a home or sometimes go to school. Focus on moderation and the big financial picture—not absolutist principles (16:17–17:44).
"We all need a credit score, we all need a healthy credit score." – Joel (17:44)
How Bad Credit Hurts in the Real World
1. Higher Interest Rates—On Everything
- Mortgages and car loans with bad credit result in much higher rates and massive additional costs (21:20, 27:21).
- Even modest jumps in interest (e.g., mortgage 4.5% vs 7%) compound to six-figure differences.
2. Renting and Deposits
- Landlords often check credit and may deny renters or require larger deposits for those with poor scores. Not just homebuyers are affected (28:27–29:26).
"Renters aren’t able to just skate by sporting a crappy score without any consequences." – Matt (29:09)
3. Credit Card APR and Rewards
- Low credit scores mean higher interest on balances and ineligibility for premium rewards cards or 0% offers (29:26–32:24).
"We hardly ever talk about [credit card APR] because in our minds, that's just a nonnegotiable—you just don't do that. But that's not what most folks do." – Matt (30:15)
4. Insurance Rates
- Insurers in most states use credit scores; bad credit can mean 75–110% higher auto premiums and a 63% uptick for homeowners insurance (32:24–33:29).
5. Job Prospects
- Bad credit can derail certain job opportunities (especially in states where employers can pull credit). Low scores can prompt questions or outright denials (33:53–35:00).
6. Delayed Retirement
- The opportunity cost of money lost to higher rates, fees, and deposits drains investing capacity, meaning working longer before reaching financial independence (35:00–36:41).
Understanding & Monitoring Your Score
How to Check and Track Your Credit
- Free Tools:
Credit Karma and most credit cards let you see your score at no charge (23:32–25:01). - AnnualCreditReport.com:
Access free weekly credit reports for now (policy began with the pandemic, could revert soon) (26:19–27:06).
Mitigating and Fixing Bad Credit
The Basics: How to Build and Maintain Good Credit
- Three Ground Rules: (40:53–41:32)
- Have at least one credit card.
- Use it regularly but keep credit utilization low (ideally under 30%).
- Always pay your bill in full and on time.
- Avoid Credit Repair Scams:
Don't pay upfront fees for companies promising big instant results. You can dispute errors on your own for free. Debt collectors must respond to you directly by law, making your efforts more effective (42:36–44:09).
"You have more power in your own hands than these credit repair firms have or can wield on your behalf." – Joel (44:09)
Tangible Steps to Improve Your Score
- Shop Around:
Especially when borrowing, compare offers from credit unions, banks, and lenders. It’s a myth that shopping (within a short window) will kill your score (45:09–46:32). - Bigger Down Payments and Shorter Loans:
Offset a low score by putting more cash down, choosing shorter terms, or, best of all, paying cash where possible (47:35–48:49). - Increase Positive Trade Lines:
Add new accounts only as needed—responsible use of multiple types of credit looks good (48:49–50:39). - For Very Low Scores:
- Self(ink) (formerly Self Lender):
Build positive history by “loaning yourself” money—helps people boost scores by an average of 32 points (50:39–53:18). - Secured Credit Cards:
Start with a deposit-backed card—after on-time payments, often upgrades to unsecured with a higher limit. - Pedal Card:
Offers credit access without relying on your score (53:18).
- Self(ink) (formerly Self Lender):
"The goal is to never have to use these companies [like Self or secured cards] to begin with. The goal...is to handle credit in a responsible way and to slowly increase the credit that's available to you." – Matt (53:18)
Don’t Overcomplicate: Focus on the Basics
Most listeners won’t need drastic options; consistent, low utilization and on-time payments go a long way. Focus on real-world financial health, not obsessing over credit minutiae (53:18–54:15).
Notable Quotes & Memorable Moments
- Joel on opportunity costs:
"Almost a million dollars less in your net worth because ... you had a bad credit score." (10:57) - Matt on the system’s frustration:
"I wish that the whole system was upended in some way, form or fashion. But at the same time, pretending that credit scores don’t exist is going to… harm our finances." (15:00–15:59) - Joel summarizes why it matters:
"Bad credit will make life a whole lot harder. … Tend to it like you would a garden." (54:18–55:28)
Fun & Personal Touches
- Travel Tales:
The hosts share stories of summer adventures and justify last-minute hiking shoe buys as “pulling consumption forward from the future.” (03:24–06:13) - Beer Break:
Joel and Matt sample a Grapefruit Radler from local brewery Halfway Crooks, praising its real citrus flavor and discussing Radlers' German cycling origins (07:19, 55:28–57:42).
Timestamps for Key Segments
| Segment | Timestamp | |--------------------------------------------------|---------------| | Credit Score Analogy & Introduction | 07:41 | | Mortgage Example/Opportunity Cost | 09:53 | | What is a “Good” Credit Score? | 12:30 | | Why Perfection Isn’t Needed | 13:13–13:52 | | Critique of Credit Scoring & System Flaws | 15:00–15:59 | | Real-World Costs of Bad Credit | 21:20–37:17 | | Free Ways to Check Your Score | 23:32, 26:19 | | Avoiding Credit Repair Scams | 42:36–44:09 | | How to Build Credit from Scratch or Rebound | 50:39–53:18 | | Beer Review & Wrap-up | 55:28–57:42 |
Closing Takeaways
- Don’t Obsess, But Don’t Ignore:
Aim for "good enough" (>740), then focus on bigger-picture financial goals. - Credit is a Tool, Not a Trophy:
Use it purposefully to save money and expand your options, not to rack up debt or chase perfection. - When Rebuilding, Avoid Scams:
You can self-repair your credit—skip overpriced or shady services. - Questions?
Listeners are encouraged to write in for future “Ask How to Money” episodes.
Resources Mentioned
- AnnualCreditReport.com – Check your full reports free
- Credit Karma – Free monitoring
- Secured Credit Cards (via credit unions or Self.ink)
- How To Money Credit Card Guide (as referenced by the hosts)
- Halfway Crooks Brewery – Featured beer maker
For full show notes and links, visit HowToMoney.com.
Until next time—best friends out!