The High Cost of Crappy Credit (Bestie Ep) #1083

Summary

How to Money – "The High Cost of Crappy Credit (Bestie Ep)" (#1083)

Release Date: January 2, 2026
Hosts: Joel and Matt

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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.

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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)

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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).

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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).

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Mitigating and Fixing Bad Credit

The Basics: How to Build and Maintain Good Credit

• Three Ground Rules: (40:53–41:32)
  1. Have at least one credit card.
  2. Use it regularly but keep credit utilization low (ideally under 30%).
  3. 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).

"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).

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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)

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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).

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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 |

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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.

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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

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For full show notes and links, visit HowToMoney.com.

Until next time—best friends out!

Transcript

[Matt]

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[Joel]

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[Chelsea Handler]

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[Joel]

I'm Joel.

[Matt]

And I am Matt, and today we're.

[Joel]

Discussing the high cost of crappy.

[Matt]

That's right, buddy. We are going to talk about all of the different ways that crappy credit is going to cost you if you've got that crappy credit. But obviously we're gonna get to that. But more important than ever is the fact that we're back, baby. It's back to regularly scheduled programming here. You're back from Florida. You are. To the chagrin of everyone out there, you are. You're not a Florida man any longer.

[Joel]

I Came close, though. I almost morphed into one. Did you? I was down there for like three weeks of the summer. My family's down for five.

[Matt]

I was kind of back and forth crazy.

[Joel]

I will tell you this. Florida has some cool stuff, but it is ragingly hot.

[Matt]

And you're like, no wonder Florida, man, is a thing that it's a meme that it exists because you kind of lose your mind while you're down there.

[Joel]

It messes with your brain.

[Matt]

Does it really?

[Joel]

Yes.

[Matt]

You feel like it kind of addled your brain a little bit.

[Joel]

I'm trying to get adjusted back to normal life. Like they call Atlanta Hotlanta. But no, no, Florida is a different kind of heat. And yeah, it's that wet heat. Glad to be back.

[Matt]

Well, okay, so while you were down in Florida. So one of the. Kate and I, we used some of our time off to go up to Ashevill, right?

[Joel]

We dropped cooler spot.

[Matt]

Oh, my gosh. And honestly, even still, it was pretty. It's just been so freaking hot lately. No matter where it is that you live. But enough about the weather. We're going to go up there. We had some nice dinners planned, of course, we're going to hit up some breweries, but we were also planning to do some hiking. And oh, by the way, we scored a last minute Airbnb because, like, it didn't matter for us to go up there. We're just thinking, oh, it'd be nice if we do. This wasn't like a do or die situation. And we were able to. We got a screaming deal on an Airbnb. We hadn't done something like that.

[Joel]

Absolute last minute.

[Matt]

Yes. It's like either one a book really far in advance or like the absolute last minute. We jumped on the very last minute thing, got an awesome deal. We're right there in the middle of downtown, which we've never done, but back to ash, like, so we're planning to go hiking. And we woke up and getting our stuff ready to go and I realized I didn't bring my stinking hiking shoes, my trail runners. I was like, dang it, I can't believe I forgot to pack those things. And so hopped in the. In the van and we went to an rei because I felt compelled. I was like, I gotta get another. I gotta get a pair of shoes in order to do some of this intense hiking that we're planning to do. So I bought another pair of hiking shoes. They're like a pair of running like trail runners, basically. So I want to ask you, what would Joel. Have done in that situation, because on one hand I thought, of course I need to do this. But on the other hand, I was like, who am I? This. I don't just, like, go into a store without doing any research and just buy something.

[Joel]

Well, you know, I bet you I'm Gary guaranteed that you bought the same shoes you have, just different color or something like that. Right.

[Matt]

So I actually got a different, kind of a different pair. Like, Hoka. You seen the Hoka. Whatever. I don't know how you even say them. Like, got the big old.

[Joel]

Because you're into the Altrias or whatever.

[Matt]

Altras. Yeah, I've owned multiple pairs of those, but I decided to kind of go a different direction. But I think I hear what you're getting at, which is the fact that.

[Joel]

If you knew you like them and you're gonna. Yes, yeah, they're expensive shoes. But. And I will say this, I wasn't.

[Matt]

Being held hostage, like, at the trailhead where they're like, here's 500. Don't have any shoes. Here's. You got to buy this pair for 250 bucks.

[Joel]

Man, it just stinks to drive all that way and then to not get to hike or whatever. But did you have another pair of shoes you could have hiked in? Well, I had.

[Matt]

I had my vape. My. My white Vans. So you could have used those. I could have, but they're white and they're not made. I mean, they're like street shoes. They're made like. They're my nicer. Kind of like, I wore them the night before when Kate and I went out to, like, a nice dinner. And so I thought, okay, if I just buy another pair of trail runners, I know at some point I'm going to, like, after a couple hundred more miles of my old trail runners, like, I'm going to need to buy another pair. So the way I thought about it and justified it is I'm just pulling consumption from, like, forward and, you know, into the present, from the future and.

[Joel]

Like, expanding your shoe wardrobe.

[Matt]

You're just.

[Joel]

Yeah. Buying them early.

[Matt]

If you think about it linearly, I will get to these shoes at some point. I would have gotten to this. This pair, and I was able.

[Joel]

Did you like them?

[Matt]

Yeah, they're actually. I mean, so I got the. They're like, those soles are huge on the shoes.

[Joel]

They're huge.

[Matt]

And I was like, I'm gonna. I see people wearing these. They're real popular. I want to try them out. And I actually. I really dug them. Dude, it took a second to get used to all the kush. But I like the kush. I'm all about it.

[Joel]

See, I've got a friend who I was just talking to the other day and he's into the Zero Kush. Like they literally have sandals called zero sandals. And he likes to trail running those.

[Matt]

So that's a young man's game right there.

[Joel]

Everybody's got their thing. So.

[Matt]

Yeah, I mean, I was able to get them on sale too. That's the other thing. But I'm more willing to spend money on like the proper gear. Cause like younger Matt would have said, I'm just gonna, I'm gonna stick it out. I'm gonna wear the shoes that I've got and I'll clean them afterwards. But I thought, you know what, let me just go ahead and get these things. I'll wear them to. I'll wear, literally wear them into the ground like at some point. But I was curious if you would have done the same thing or not or what path you would have taken.

[Joel]

No, I might have done the same thing. Yeah. Yeah. I mean, especially if it's. If it's something like you're there, it's a free activity to go hiking. Yeah. That's the best thing to do in Asheville. One of the best things besides drink good beer and so you don't want.

[Matt]

To miss the trail time.

[Joel]

Yeah. But I'm glad we're back together. Glad we're recording today.

[Matt]

I know.

[Joel]

And glad we get to talk about.

[Matt]

Credit a regular Wednesday episode here.

[Joel]

Yeah. So let's mention the beer we're having on this episode though. It's called Rattler. It's by halfway crooks. It's a grapefruit rattler in particular, one of our favorite beer styles, especially during these hot summer days. This is like the perfect thirst quenching beer. And it really does because it's half grapefruit juice. It really does have thirst quenching qualities. We'll talk about this one at the end of the episode.

[Matt]

Is it, is it 50? 50? Who knows when? We will explain, share our thoughts at.

[Joel]

The end of the episode. But first let's talk about the high cost of crappy credit. And that made me think about like when electricity goes out at your house. It sucks, right? All of us, we've become so accustomed to just being able to flip a switch, but how quickly we become annoyed when that modern convenience that we're all accustomed to goes away. And so it's true that it can be kind of frustrating if Your electricity goes out, let's say it's out for 20 or 30 minutes. So it's like no harm, no foul. It's kind of fun even for a second because get to get out your battery powered flashlights or your candles or something like that.

[Matt]

Make it romantic.

[Joel]

Exactly. Yeah. You can kind of make it fun. But an extended outage would be different. Right. It would quickly turn from something like a minor inconvenience to something more major. Let's say your fridge or your freezer now doesn't have electricity for an extended period of time. Your food could spoil. Let's say you've got one of your fancy briskets in the freezer. That could be.

[Matt]

I don't want that to happen.

[Joel]

I know. You don't want that to spoil. That's an expensive piece of meat. And so, yeah, if treacherous weather conditions led to this outage, like people lose their ability to heat and cool their homes. Yeah. Which can have massive consequences too. Right. And for the home itself and to the safety of individuals and families. So I think bad credit can be similar. Right. It might seem like this, this minor blip, it might seem like a, oh man, it'll be back on in 20 or 30 minutes sort of electricity funk. But bad credit is not a small chink in your personal finance armor. It's. It's much worse than that. It's akin to your electricity being out for like an entire weekend or something like that.

[Matt]

Sure, yeah. Yeah. And it's not just that. Bad credit means that you've got a score that's not quite as high as that, you know, like that you wish it would be. It's not the score per se, like the number itself that you should be preoccupied with. It's the fact that that simple score has an impact on virtually every aspect of your personal finances. Right. Like, just like with the power outage, it's not the quick inconvenience of not being able to flip on a lamp. It's the wide ranging downstream effect of that power outage that is going to have the most significant impact. And so a bad credit score, it doesn't just result in minor consequences as some out there might lead you to believe. It's not causing a few bucks to leak out here and there. Bad credit is very expensive in a bunch of different ways that we're going to highlight today.

[Joel]

Yeah, Tons, tons of ways that bad credit messes with you. And so we've got a bunch of different things that we've got to cover and specifically, really hopefully to drive home Just how impactful in a negative way that crappy credit can become. Let's give a quick example here, Matt. From the outset, friend of the show, Andrew Giancola. He highlighted recently how, how bad credit can influence how much you lose when it comes to buying a home. This example came with kind of some older statistics. So we know these interest rates don't necessarily apply right now to everyone. And so like, but let's say you took out a 30 year mortgage of 300 grand and you had a credit score of 760 or higher. Maybe you got qualified for a rate of four and a half percent, but a credit score of 620, let's say might get you a rate of 7%. So there's a big, a big gap there, two and a half percent gap. And over the 30 year period, having that higher interest loan would cost you around $171,000 more than what you would have gotten had you had the 4.5% loan. Right. And so that's a big chunk of change. Right. But it's more than that. It's more than that. The monthly payments are going to be higher. $475 to be exact, when you compare those two loans. But even above and beyond that, Matt, it's the opportunity cost that those extra dollars could have done for you, the legwork they could have done all because you had a bad credit score. So let's say $475 a month, which is the gap in payment with a return of 10% over the course of 30 years, that would net you $979,000. So almost a million dollars less in your net worth because we, when you bought a home, you had a bad credit score. That, that really drives home, I think at least partially how expensive a bad credit score can be.

[Matt]

Yeah, that's the difference between a credit score of 760 or higher. Basically if you have excellent credit versus not so great credit of 620 or below. But so another reason that we're talking about this today is because this is even more of a problem for the younger generations out there. This probably shouldn't come as a shock, but Gen X, Millennials and Gen Z all have significantly lower credit scores than boomers and anyone older than boomers.

[Joel]

Okay, Boomer.

[Matt]

Yeah, like literally. According to data from FICO, the average credit score for Gen Z is 679. It's, it was, that's what it was, I think in 2021. That's what it was in 2022. It's kind of Flatlined. And while this is higher than the 620 example that you just gave, I still wouldn't want to be towards the bottom end of what's just considered good enough. And so this raises the question, what is a bad credit score? Well, this obviously goes on a scale, so, you know, you could be in the dumps where your score is. What's it called?

[Joel]

5.

[Matt]

Like deep prime or deep subprime, I think is the term. Or it could just be mildly bad. Credit score scales also vary between the different bureaus. But a quote unquote, very good FICO score is between 740 and 799.

[Joel]

Yeah. And so it is important to note that basically that 740 for us is the line of demarcation somewhere in that 740, maybe some lenders might say 760 is kind of considered. You're in top tier range, but if you're above 740, you're doing great, you're in good shape. If you're below that, we want to see improvement. If you're below 680, you're in that range where you need to really make some strides because it's going to cost you a lot more.

[Matt]

You literally are paying more for everything because of that credit score.

[Joel]

Exactly. It is important to mention here too, Matt, that we're not looking for perfection. Right. There's on a lot. Most credit score models, they go up to 850. And so you might be like. And I know some how to money listeners who are just really into their finances, they want to get to that apex, that top of Mount Everest. The 850 credit score, it is possible, but it's also not really worth pursuing. It's kind of a waste of your time.

[Matt]

Is it a reasonable goal?

[Joel]

No.

[Matt]

This really should not be something that you're focused on.

[Joel]

Exactly. Yeah. So Experian, they found that 1.2% of all credit holders have this elusive 850 credit score.

[Matt]

Like literally the 1%, the rare, rarefied air Right.

[Joel]

Of credit scores. And. But you and I, we're nowhere near that. We're still way above 740, which is great, but man, I haven't cracked 800 in a long time. I'm like vacillating in between that, like 780 to 800 range, basically.

[Matt]

Okay, so of course we had both. You know, I'm sure you looked up your credit score.

[Joel]

I did you? Yeah, I did.

[Matt]

I was shocked. I was actually so literally not to brag my scores. 812.

[Joel]

Oh, look at You.

[Matt]

I know. And I was actually kind of disappointed because I truly wanted it to be kind of like in that 790 range, which I feel like that's typically where I am, the way I use my credit, the way I utilize my credit for the things that actually do matter. And I almost thought about not sharing it because I wanted to be able to identify more with the common working man and woman out there, because I don't want anyone to think that this is something that I'm, like, really working on. It truly does not matter. I would be perfectly happy. Like you said, anything above 760 is great territory.

[Joel]

We're going to give tips later on about exactly how to get into the solid range that we want you to be in and kind of how you can go up about that. But you're. Yeah, you're sitting pretty over there.

[Matt]

8:12 more pretty than I need to be.

[Joel]

Yeah, exactly.

[Matt]

Like, what am I doing? Like, spending all my extra time, like, polishing that thing.

[Joel]

Right.

[Matt]

That's what it seems like.

[Joel]

The way lenders see you and I would be the exact same, Even though you're 20, 25 points higher than I am. Right. And so, yeah, basically it's important to mention that we just don't care about having a perfect credit score. It's a worthless pursuit. But we're also going to speak out of both sides of our mouths here to emphasize that working to boost a bad credit score is a worthwhile goal. Right. We don't love the fact that so much of our personal finances revolve around this singular number. And I guess what I think the FICO score was instituted back in 1989. So it's still a relatively modern phenomenon, the credit score, but over those decades, it's taken on an increasingly important role in our financial lives. And so I wish that weren't the case, but it is. And it's important to point out that the credit bureau, sometimes they have the wrong information. Some people would say a quarter of the information on credit reports is wrong, which is pathetic and messed up and it harms a lot of us. And yeah, sometimes they do a crappy job of keeping our personal information secure. So I kind of 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 end up harming our finances as individuals. Right. And so you can disparage the credit score score. You can call it an I love debt score, like some people do, but it's also, while it's frustrating. It's still an unfortunate necessity that we need to take care of.

[Matt]

That's right. And actually while you mentioned, so you mentioned I love debt score, which makes me think of somebody else. Because while we're clarifying some of these money principles and what it is that we believe in, we're also not absolutists when it comes to borrowing money and taking out loans. Because on one hand, yes, from a principal standpoint, anytime you are increasing your debt load, anytime you take out a loan, you are paying interest. But an important question to ask is what are the alternatives? So take mortgages for instance, right. Like rates, they're comparable, honestly to where they were in the early 2000s. And relatively speaking, they are much lower the further back you look. So if you look back to the, you know, the 90s, the 80s rates, mortgage rates were much, much higher. And so instead of paying off a 15 or a 30 year mortgage as fast as humanly possible, we think that investing that money into the market that's historically returned over 7% with inflation, mind that this is the best path forward. The vast majority of homeowners have low mortgage rates. Nearly, I saw that nearly 92% of folks have a rate that's locked in under 6% and 62% of homeowners are below 4%. So do we love the fundamental principle of paying any interest to a lender, to a bank? No. But the reality is that we don't live in a bubble, right? Like everything needs to be considered. You can't make decisions based on principles alone. You got to face the actual reality.

[Joel]

And the reality is in the modern age, we all need a credit score, we all need a healthy credit score. But we also all need debt at some times or one time or another, right? Typically that is to finance the purchase of a home or is to pursue higher education, get a degree or something like that. And that's not necessarily a bad thing, but it's also something that needs to be done in moderation.

[Matt]

Yeah, we have to take just a whole. You got to look at the entire picture.

[Joel]

Basically.

[Matt]

You need to fully understand how it is that the decisions you make with your money, how that's going to impact your overall financial picture. But you also need to fully understand the high cost of bad credit. You need to know and understand the different ways that it's going to impact you. And we're going to get into some of those different ways right after the break.

[Joel]

Life is fragile and finite, but that also makes the time that we have together that much more precious. Our family has certainly experienced that dichotomy this year, and from a practical perspective, policygenius can help you ease the gravity of protecting what matters most. So after a lovely holiday season with the people you love the most, start the new year with clarity and security. Lock in your life insurance today.

[Matt]

That's right, yeah. PolicyGenius is an online insurance marketplace that allows you to compare quotes from some of America's top insurers side by side for free. They help you to find your most affordable policy that's going to meet your needs. They answer the questions, they handle the paperwork, and they advocate for you throughout the entire process.

[Joel]

With Policygenius, real users have gotten 20 year $2 million policies for just $53 a month ease the weight of protecting a wonderful Life. Head to policygenius.com to compare life insurance quotes from top companies and see how much you could save. That's policygenius.com if you've ever hired for your small business, you know how important it is to find the right person. And get this employees hired through LinkedIn are 30% more likely to stick around for at least a year compared to those hired through the leading competitor. When you make the wrong hire, it's costing you time and money. And LinkedIn jobs. AI assistant is stepping things up by filtering through applicants based on criteria you've set for your role.

[Matt]

That's right, hire right the first time. Post your job for [e-mail] howtomoney Then promote it to use LinkedInJobs new AI assistant, making it easier and faster to find top candidates. That's LinkedIn.com howtomoney to post your job for free. Terms and conditions apply.

[Commercial Announcer]

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[Joel]

All right, Matt, we mentioned one big example before the break. We talked about how much just 2.5% increase in interest rate on a mortgage could cost you. And the truth is it can be really expensive, especially when you factor in that opportunity cost. We're going to get to actually a bunch of different ways. Some that most people might not be aware of at all, might not even Be on their radar. Like, hey, yeah, I know my bad credit scores cost me maybe over here, maybe a little bit over here. But you might not realize the full extent. Especially let's say you're saying, well, I don't plan on owning a home. So haha jokes on you. I don't care. Well, there's still a lot even for.

[Matt]

Renters out there, pay attention as well.

[Joel]

Yeah, A lot of ways it impacts them.

[Matt]

Okay, so before we go, I just thought of another example. We kind of, you mentioned the electricity example, how that can impact lots of different things. Like, we try to avoid like, health examples because oftentimes they're overdone. But I can't get past. I was thinking about how your credit, like credit score, like a crappy credit score is like having too much stress in your life. Because just this one thing, too much stress, it can impact how much you're able to sleep, which is going to impact your physical health, which is then going to impact your relationships. How it is that you treat other people because you've got so much going on, it can have an impact maybe on like the quality of work that you're doing. So again, think about your credit score in this one small thing that's going to affect just countless things that you probably had no idea that there are again, all of these sort of downstream effects that we do need to pay attention to.

[Joel]

I'm sure some of our listeners know that how much anxiety can affect even their physical health. We know this in our family from personal experience and just how it seemed like there were a lot of physical issues going on with Emily back in the day. And then, well, it turns out anxiety was at the root of it. But it's hard to know that in the moment. Right?

[Matt]

Yeah.

[Joel]

And you just, you think it must be all these other things, but no, it's actually anxiety run amok.

[Matt]

Yeah, I like how you said that. Because it's not that stress or anxiety. I think small amounts of that causes you to do things. Right. Like it's what gets you up out of bed. But when it's unhealthy.

[Joel]

Right.

[Matt]

Just like with your credit score, when it's in an unhealthy place and things turn sour, like that's when it kind of has those negative downstream effects. Because it's not necessarily that we're trying to eliminate all stress from life.

[Joel]

Sure.

[Matt]

It's just that having.

[Joel]

You don't want to be like Peter in office space, like you've got zero worries. Right. Well, it makes me think, I think we did an episode back in the day about using financial stress to your advantage. How. Yeah, there is a way of.

[Matt]

It rings a bell.

[Joel]

Yeah. Where like little bits here and there, it can actually be the pressure point that gets us to do the thing that needs to be done. And if we're feeling zero stress about it, then we're likely to leave it undone. And so I think it is important to feel some of that, but go overboard with it and man, it can completely upset the apple cart.

[Matt]

Absolutely. Well, yeah, we'll look that one up, link to that one in the show notes. Because it's not that stress in and of itself is the bad thing that you're trying to eliminate. It's the other things. It's the negative consequences that are occurring because of that overload.

[Joel]

Yeah, exactly. Alright, so let's keep talking about credit scores, Matt. And the first thing is people got to know where they stand. Because if you don't know where you stand, you don't really know how you stack up and what needs improvement. And so that means the first step is to look up your credit score. And there are fortunately now free ways to do that. That did not used to be the case. I still remember when Washington Mutual existed. That was my bank of choice for a while. They had the best interest rates. But not only do they have the best interest rates, they were the only bank that I knew of that allowed you to peek at your credit score every single month for free. And so me being the, the curious money nerd that I was in my early 20s, I was stoked to have this bank letting me see my credit score every month. But now everybody does that like it's, it's pretty much ubiquitous. Right. You can go whatever credit card you have, they, they probably offer you access to your credit score for free. If not, if you're with one of the random issuers that doesn't do this, it doesn't have like a backend in their system that allows you to kind of take a peek at your score. Well, Credit Karma is a great site that offers a lot of information, a lot of insight about your credit score and your credit standing. We would say sign up for an account there so you can not only see what your, your score is currently, but also so you can see what you can do to improve. I love incred Credit Karma mat in the back end. The score detail section is enlightening and it kind of gives you a window into what's hurting you and what you can improve, which is just really important. If we're talking about like ditching that crappy credit score and building it up so that we can get better terms and not get screwed over by the system.

[Matt]

Totally.

[Joel]

Yeah.

[Matt]

And honestly, like, there are more credit scores out there, like actual systems and models than you might think. So first off, there are the three major credit bureaus who keep a file on you, but Fico and Vantage 3.0, they are the most popular to credit score numbers that you'll actually see floating out there. But those bureaus, they might actually have dozens of different scores that they use for different reasons. And we just want to mention that so that you know that that exists. You don't necessarily need to know all the details or even how the sausage is made, but the scores that you get from credit karma or from your credit card company, they're going to shed enough light on the situation. You know, you might not have access to the same exact score that lenders do, but we do think that the free scores, you know, good enough. I do wish that the credit scored models were a little less muddled, that they were a little less confusing. But this is an instance where having all the details and knowing exactly what it is that you should be going after, it's not necessarily going to further you along towards the goal of financial freedom. Right. Like it could get you closer to having the perfect credit score. But again, that should not be the goal. It's the way, just like with the stress or the electricity, it's not that, well, yeah, we should have electricity. Well, no, it's about what the electricity can do for you. It's about what, having less stress in your life, the downstream impacts of that.

[Joel]

Yeah, I think you could obsess about this way too much. And again, it's one of these opaque systems and I wish there was more insight and I wish there was like even federal law probably that required the credit bureaus to share more information about how they compile our scores and what our scores are for free. We have federal required access to our credit reports every single year. And in fact, they're available every single week for free right [e-mail] if you want to get your credit report, that is the best place to go to check up and see kind of like, well, what is dinging me on my credit? You're going to want to go there. That's annualcreditreport.com so we'll link to that in the show Notes.

[Matt]

It's been a minute since we've mentioned that, but that was something that they switched to doing free weekly. During the pandemic. During the pandemic. And we're way past that. So I'm actually, I wouldn't be surprised.

[Joel]

If that goes away. Yeah.

[Matt]

Sometime this year.

[Joel]

Take advantage of it now so you can kind of get the behind the scenes look at what's happening on your credit report. What's on there directly impacts your credit score. Right. But okay, where is it going to cost you? We said the crappy credit is going to cost you.

[Matt]

The high cost of crappy credit.

[Joel]

That's right.

[Matt]

That's what we're talking about.

[Joel]

Let's outline the specific ways in which it's going to do that. And the first is higher interest rates on basically everything. And you might say, no, duh, I get it. And this is, I would say, common knowledge. But just how much it can cost you isn't terribly well understood. And it's not just the home loan where you might add a few points of interest costing you tens of thousands of dollars or more like we discussed earlier over the life of your loan. Even I think I said that was a 300,000 dol. Thousand dollar loan, which really a lot of people taking out much higher loans than that. This could be catastrophic if you, for over the course of 10, 15, 20, 30 years, if you have a higher interest rate on that mortgage. But in addition to that. Right. If you don't pay cash for a car and you get financing for that, the rate on that loan is going to be sky high. If your score sucks as well, we're talking credit card rates, credit card level rates on a car loan, you're going to get financing in the, the low to mid 20s, potentially if you have got a bad credit score and that is going to impact not only your payment, but the overall amount that you pay for that car. Thousands and thousands and thousands of dollars more you're going to pay for that vehicle than if you'd had a good credit score to begin with.

[Matt]

That's right. And so you kind of hinted at this at the beginning, but the one example we gave before the break had to do with the amount of money that you're paying in interest on a mortgage. But if you are a renter, this is going to really impact you as well because you could potentially not get the home or the apartment that you're trying to rent because your credit score is instrumental in a landlord's decision to rent a place to you or not. You're essentially in competition with other potential renters. And your credit score is one of the major deciding Factors you might even find that you're able to rent this place with a bad credit score, but only if you put down a larger security deposit. That's something I've done personally with, with, with tenants before.

[Joel]

That's the only way the landlord can kind of.

[Matt]

It's how you, it's how you cover their butt.

[Joel]

Yeah.

[Matt]

You are able to hedge some of that risk by doing that. But this means more of your money is tied up just because that three digit number is not up to snuff. So it's important to mention that renters aren't able to just skate by sporting a crappy score without any consequences. You are impacted as well. It's not just those out there shopping for mortgages.

[Joel]

Right. You might, you might not get the apartment at all. You might be forced to come up with a much bigger, you know, security deposit and you might not have that money on hand. There's a lot of downsides for renters when it comes to low credit scores as well. So I'm glad you mentioned that Matt. That's really important. But let's talk about credit card apr. That's something else that's going to happen. The interest you're going to pay on credit car if you have poor credit like we hardly ever talk about this actually because our approach to using credit cards is we want people to pay off the balance on time and in full every single month. That is how you and I use and handle credit cards. That's how we advise how to money listeners. It's like credit cards are not the devil. They're a tool that you can use. And guess what? If you pay them off on time and in full every month, it doesn't even matter what the credit card APR is in the terms and conditions that you signed. It's irrelevant, right? Basically, yeah, because it doesn't matter.

[Matt]

We hardly ever talk about that or think about that because like at our minds, well that's just a non negotiable like you just don't do that. But that's not right. That's not what most folks do.

[Joel]

Unfortunately when you look at the Numbers it's something like 50, close to 50% or maybe a little more than 50% of people don't pay off their balance on time and in full every single month. And so when they carry 52% of.

[Matt]

Like slightly the majority makes me shudder.

[Joel]

To think that there's that many people who, who don't pay off that balance on time and full because of how damaging that can be to their finances. And and there's a reason that the banks continue to offer points and cash back and all the other perks that you and I that we like to take advantage of and that a lot of how to money listeners like to take advantage of. And that's because the banks are still making money, and they're making money specifically on the backs of the people charging them exorbitant interest rates. And that's happening when they don't pay their balance off on time and in full. And so if you're applying for a credit card, you might be denied completely, or they just might say, hey, listen, your rate's going to be a little bit higher because you're a bigger risk to us. Again, if you're handling credit cards the way Matt and I talk about, not that big of a deal, but if you're not and you're forced to put money and put money on and charge up those credit cards, it is a big deal. Yeah, it is a big deal for you.

[Matt]

Yeah. I mean, the difference between someone who's got crappy credit, like, it's somewhere between like 8 to 10% difference between somebody who is carrying a balance that has poor credit versus somebody who is. That has an excellent credit score.

[Joel]

And you might not be eligible for some of those balance transfer opportunities, which will help you pay off that credit card debt more quickly and pay less in interest as well. So it's important when we're talking about the credit card side of things.

[Matt]

Yeah. Well, and not only like the transfer cards, but just some of the cards that offer the best benefits, because you may not have access to those either. You won't even be able to get the best credit card offers out there because your score is in the dumps. To get the cards that come with the best rewards, you're gonna need a solid or even just a very good, excellent credit score. You're gonna be stuck with far less rewarding pieces of plastic. If your score is pathetic or honestly, you might even be turned down for, for credit altogether, you won't have access to that card. But if you're looking to up your credit card game and some of the different rewards and benefits that you're able to score from, you know, these credit cards and what it is that they're offering, you got to turn that credit score around.

[Joel]

Yeah. Matt, when we talk about some of our favorite credit cards on the show, and we've got, you know, an article about it on the website or whatever, but like, when we mentioned some of those, many of those, most of the great Ones are only available to people with great credit scores. Okay. How else is that crappy credit score going to cost you? Well, it's going to lead to higher insurance rates. This is one more place you're going to feel the negative effects of a rough credit score. And there are, yes, a handful of states, a very, very small amount of states that don't let insurance companies factor in your credit score to determine rates. California is the biggest state. I believe Massachusetts is another one. There might be one more. But I think there's only three states that really take that approach. But in most states, in all the others, your credit score is going to have a direct impact on what you're being charged and the quotes that you receive when you're shopping around. So depending on which stats you trust, bad credit could cost you between 75 and 110% more. On the insurance front, that's a lot more. Yikes.

[Matt]

Yes.

[Joel]

So instead of, like, you know, a thousand bucks a year to insure that car, you're forking over $2,000 a year, and which is a significant jump. That's so much more money. In Bankrate found that homeowners insurance will cost, on average, 63% more. For folks with bad credit as well, that's another big jump. So we're talking about, let's say you own a home and a car and your credit goes from 670 to 760. You're going to be saving, in all likelihood, a few thousand dollars every single year. Just because you tweaked your credit score, you bumped it up, and that jump is going to lead to significant savings.

[Matt]

That's right, yeah. Just on homeowners and auto insurance. But you also might be denied a job. Most folks, they've got no idea that an employer can pull your credit and opt to not hire you. In most states, if you have bad credit. Honestly, many employers won't do this. Like, they don't actually care. And many won't even pull credit scores at all. But some of them do, especially for more senior positions. So, you know, will you be denied, you know, a job because Your score is 680? Well, probably not. But if you are closer to, like, 500, well, that might raise some flags.

[Joel]

They might be like, wow, this person, they can't.

[Matt]

What's going on? I feel like a separate conversation is gonna be warranted because they're like, you seem great in all areas of your life. Why is it that your credit seems so terrible?

[Joel]

Because that means that you probably didn't follow through on some really Important things when it came to payments and stuff like that. And you might be able to explain it away and still get the job. But you're right, Matt, it's probably gonna raise some big red flags and cause a conversation, if not just an outright denial of getting that opportunity.

[Matt]

Yeah, it would suck to just do so well on all the other fronts. You interview well, you've got a great resume, you got great references, but in the end you're like, oh, I didn't get that job because my credit score.

[Joel]

And again, that's like a state by state thing. I think there's 10 or 11 states that don't allow for potential employers to pull a credit score. But in a bunch of other states this is fair game. And so yeah. How widely is it used? How pervasive is it? Well, I mean, that depends on the specific company typically. But it's worth noting that your credit score could impact your career and something else, Matt, like that the high cost of crappy credit. Well, well in all likelihood for a whole lot of people will lead to a delayed retirement. And people might say, well, how in the world is that? Like, how am I not going to get to retire as early because my credit sucks? Well, again, going back to kind of the numbers and the opportunity cost and how much extra you're going to be paying for higher interest rates and stuff like that, if all that extra money is going to higher interest rates, bigger insurance premiums, larger security deposits, all that kind of stuff, you've got less money to throw into those tax advantaged retirement accounts. And this will in all likelihood delay your ability to quit working. Or like we talked about earlier this month, you're going to move along that financial independence spectrum more slowly. And I don't know about you, I just kind of hate being inefficient. I hate fees, I hate more money leaking out of my account than needs to be going out of my account. And this is one of those things where bad credit, you're just going to, at every turn, everything is going to cost you more than it would for somebody who has a better credit score. And so it's, it's a little demoralizing, but it's also a little self defeating at the same time. And so I think a lot of people are going to find, oh wait, oh man, I'm paying extra for this and extra for that and more for this. And because of that across the board.

[Matt]

It'S costing you more money.

[Joel]

You got less money to invest, less money to sock away in the, in the IRA and the 401k. And yeah, that's going to have an impact on your ability to retire.

[Matt]

Totally. Yeah. We are all about you having options. It's not that we want you to have that perfect credit score. It's that we want you to have options and we want you to have the ability to live life on your own terms, to make the decisions that you want to in life because those are things that you desire. Not because you have to. Not because you've subjected yourself to additional payments and you haven't eliminated the balance and you're making interest payments. And in order to pursue the things that you want to pursue, you need to have a degree of freedom, financial freedom. And you're only going to be able to do that if you take those extra dollars and instead of giving them to the bank in the form of interest, you're able to take that money. Money and invest it for future you.

[Joel]

Future.

[Matt]

You will definitely appreciate that.

[Joel]

Yeah, yeah. I mean, rather have that money going to you than to the banks, lending institutions. And again, just because, like we said, the credit scoring model, not our favorite. We don't love that it exists in the form and fashion that it does. We don't love how opaque that it is and how difficult it is to ascertain even what your credit score is or how many credit scores you have behind the scenes on you. But still, it's the game it's important to play if you want to be as efficient, as optimized with your finances as possible. And you don't want to delay big milestones along the way along your financial independence path that you're trotting. But Matt, we've got more to get to. Let's talk about in a second, mitigating the downsides of a bad credit score and then how you can actually improve your score meaningfully. There's a lot of potential pitfalls that people need to avoid when they're doing that. We'll discuss, we'll get into that right after this. If you've ever hired for your small business, you know how important it is to find the right person. And get this employees hired through LinkedIn are 30% more likely to stick around for at least a year compared to those hired through the leading competitor. When you make the wrong hire, it's costing you time and money. And LinkedIn jobs. AI assistant is stepping things up by filtering through applicants based on criteria you've set for your role.

[Matt]

That's right, hire right the first time. Post your job for [e-mail] howtomoney then promote it to use LinkedIn jobs new AI assistant, making it easier and faster to find top candidates. That's LinkedIn.com howtomoney to post your job for free. Terms and conditions apply.

[Commercial Announcer]

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[Matt]

All right, we are back and we're talking about the high cost of having crappy credit. And you know what we're not going to do here is now talk through what makes up your FICO score. Like basically I think a lot of folks have seen the pie chart, you know, like you can google it what compose or like what makes up a great credit score and you can see the different percentages right? Like on time payments, making sure you don't utilize all of the credit that's available to you. I think that's like 60, 65% of.

[Joel]

What consists those two factors combined. Yeah, yeah.

[Matt]

What consists of a good credit score. But bottom line, I feel like feel like the basics of having healthy credit can and using a credit card, well can be summed up in make sure you got a credit card right. So most folks out there already have one but if you don't get one because that's going to ensure a longer length of credit history, it'll make sure that you get this ball rolling. Use it a little bit, don't overuse it.

[Joel]

Right.

[Matt]

So you want to keep that utilization rate low, but then make sure you pay that stupid bill on time and in full every single month. Like, if you just do those, like, follow those simple steps like, that will ensure that you are again, getting the vast majority of the way there without overcomplicating things.

[Joel]

Yes. Yeah. And if you are one of those people out there listening and you're like, but my credit stinks, and you just said, I probably can't get some of those credit cards that you say are great. Well, we'll actually, in just a few minutes give our thoughts on, like, where you should turn in order to get a decent credit card or, you know, just basically tools that will help you build your credit apart from having to get a credit card. We'll. We'll kind of talk about both. But first, let's talk about mitigating the downsides because, you know, repairing your credit score, getting it up to snuff. It's actually easier than a lot of people think just because the system is shrouded in mystery. And it's hard to know there's so many numbers swirling around out there when it comes to your credit score. Well, it's easy to think that it must take some professional to help you get your credit score back in shape if you're in the five or six hundreds. Well, no, not necessarily. Just like, it took a while, though, to get your credit into disrepair. It's going to take a little while to clean up. There is no easy button, although a lot of people will actually try to make it sound like there is specifically people who work for different credit repair companies. That is an industry which has attracted billions of dollars from Americans every year that they spend on credit repair.

[Matt]

Crazy.

[Joel]

It's crazy and it's sad because a lot of that money is poorly spent and a lot of those credit repair firms are preying on people who have bad credit.

[Matt]

Yeah. The folks who are in the most vulnerable position. I think I saw the estimates that that industry raked in something like. Like over $4 billion.

[Joel]

Yeah.

[Matt]

Which is crazy. Like, just think if all of that money and not let. Let's just say that that's an. An estimate that's off by 2 billion. Imagine $2 billion, which is still a ton of money that was instead going to actual balances rather than quick fixes, which is essentially what folks are after.

[Joel]

Yeah. And. Well, and a lot of those credit repair firms. This should be A blinking red light. They'll ask for payment up front. They'll say, listen, yeah, for $400 or $900, we, we can start to work on fixing your credit score. And they'll often claim that they can get negative stuff removed from your credit file, which is not true. And, you know, if there is inaccurate information on your credit report, by the way, which we said you can [e-mail] for free, you can dispute those items yourself for free. You do not need to pay anyone to do this on your behalf. And so it's also important to mention, Matt, you actually have more power because debt collectors can ignore letters from companies, but they can't ignore a letter written by you according to federal law. And so this is another thing where, like, you have more power in your own hands than these credit repair firms have or can wield on your behalf. But let's kind of discuss some of those next steps to mitigate the downsides of a wrecked score and to improve your score without getting scammed by one of these companies. That sucks. A big one.

[Matt]

Yeah, yeah. Basically, you've got to see you're in the position where you have a bad credit score, but you're trying to. To still figure out, like, what is it that you can do in order to pay the least amount of money. Well, when you are looking for a loan, shopping around really matters. It's not just your credit score that determines the different loan terms out there. Where it is you borrow from is going to have a huge impact. Credit unions are the best place to go for borrowing most of the time. And that's especially true if your credit score isn't great. I know there are some folks might write and be like, oh, no, actually I was able to get a better rate from a bank or actually right from straight from the dealership. Then there might be some cases of that. But credit unions, because of the way that they're set up, they are often the best place for borrowers to churn. But on top of including credit unions in your search, just make sure that you get multiple quotes. Don't just get a quote and be like, all right, did my homework. Now time to sign on the dotted line. Because that's what I'm excited about. I'm excited about that new ride, or I'm excited about getting this house. Get multiple quotes. Stats show that specifically on home loans, individuals who get at least 3 quotes Save thousands of dollars more than the folks who just go directly to a single lender. I think this is one of the instances where the means to an end, in this case the credit score is the means, the end is life, the things that you are able to do in life actually supplants the true end and becomes this false end in and of itself. Right. And folks are just so preoccupied. Like they've been on this path of rehabilitating their score and it's the precious. And like they're, that was a terrible Gollum voice. But they're afraid to actually put it to use and they're, they're afraid to get multiple quotes because they're like, oh, I don't want to. Every time I get a quote it's going to ding my score, my precious score. Well, first of all, that's not true.

[Joel]

Because usually there's a two week window.

[Matt]

Yeah, yeah. And if you do it within a short period of time, it doesn't count as multiple inquiries. But secondly, even if you wait, there's some stats out there too that say as long as you do it within a 30 day window, let's say you wait 60 days before you get another quote. First of all, that's a long time that you're shopping. You can probably tighten that, tighten that up a little bit. But even if you are waiting a really long time and it does ding your score, the whole point of getting your credit score to where it was was in order to pay less money. And so make sure that you are not skipping this really important step that is going to actually allow you to pay less money. Even if it doesn't, does ding your score just a little bit for a short duration.

[Joel]

Yeah. So even if your score is not where you want it to be, not where it ideally should be, it doesn't mean that you just have to take it on the chin always and forever. You can shop around and get better terms even if your credit score isn't above that 740 level where, where we'd like to see it. Same thing goes with, we talked about higher insurance rates, Matt. You should shop with multiple different insurance companies no matter what your credit score is. And even though on average you're going to pay more, you might find that some insurance companies are more lenient. Don't care, don't factor that credit score into their models nearly as much as some of the other ones. So it's important to shop around on all levels if your credit score is in the dumps. But let's talk about something else, Matt, that people can do with bad credit scores. They can save more cash for any purchase that they're planning to make. Right. Being able to put down a bigger down payment on a home, that's going to lead to better terms and often a better interest rate as well. Like your credit score matters, but it's not the only thing that matters. Do you have have. It matters even less if you're buying a car and you choose to buy a cheaper car because you got the cash to cover that payment, whereas you'd have to finance the newer one that costs more money.

[Matt]

Or even better, you just have enough cash to actually buy the newer one. Yeah, yeah. Without having to finance it at all.

[Joel]

Right, exactly. That is like more cash means that your credit score matters less. It's just true. And so if you have the combo of bad credit and no cash, that becomes an even more, more precarious situation to be in. And something else I think that matters as well is, is looking towards to get shorter term loans because lenders are going to assume that you're less likely to default when you're looking at a 48 month loan versus one that you plan to pay off over like 96 months. Right. So having more money to put down but also choosing a shorter timeline. Yeah, it's going to make your payments higher, but it'll get you that lower rate, allowing you to pay less in interest over the life of the loan and it's going to ensure that you're out of debt more quickly, don't bite off more than you can chew, and borrowing less in general, paying cash for a car, like we just said, for instance, is the best way to go in order to avoid financing altogether. But if you do have to finance things, shorter term loans are going to offer you better interest rates. Even if your credit score is, you know, let's say 680, 690, 700, it's not where you want it to be, but the longer loan you choose, the more you're going to pay in interest overall and the higher that interest rate is going to be. Totally. Yeah.

[Matt]

This is one of those instances, like everyone has heard the term, like cash is king. And that's totally true when it comes to getting a deal, because nothing beats the actual cash, whether it's somebody who's looking to sell and they have the slam dunk decision of knowing that finance is going to come through because, oh, there it is, there's the actual cash or whether it's your ability to pay you as a consumer to pay less in interest. But again, you don't take this to the far extreme and think, okay, well why don't I just pay cash for my house. Again, look, look at the whole picture and what are some of the alternatives? What else can you do with that money instead of saving it up for, I don't know, 20 years or however long it would take you to pay cash for an actual home. But basically, at the end of the day, we just want you to have a healthy credit score. We want you to be doing the right things. We want you to take a healthy approach to just generally boosting your credit score. We don't want you to have to rely on some of these different strategies constantly. Like yes, they are important to implement, but ultimately just have a good healthy credit score. We kind of touched on this a second ago when we're kind of talking about some of the basics of what go into making up a credit score. But by increasing the amount of credit that you have available to you and not utilizing it, of course that's going to drastically increase your credit score. Basically you want to increase the number of positive trade lines. That's what the different bureaus call it. They want you to have access to, to a bunch of these different lines of credit while using them in basically minimally. And it reflects well on your score to have a few different credit cards, right? To have a loan or two and to make sure that you're paying everything on time and in full. But specifically on those revolving lines of credit, we want you to use those sparingly. So for instance, if you've got a card that's got a limit of $20,000, only spending up to something like $2,000, that is a great approach where you're not not basically over leveraged, where you don't have too much outstanding debt or.

[Joel]

I think typically if you're using less than 30% of your available credit, that's the thing you want to shoot for. But even less can help even better, even more. And you want to pay specific attention to your utilization rate, the number of lines of credit that you have. Especially if your credit score is not doing so hot. Well, you might need to over time. And we'll talk about this how, how do you increase the number and the variety of debt that you have in order to improve your credit score without taking on more debt than you need to? That can be a difficult proposition. And so one way to do that is through a company called self.ink, it used to be called Self Lender. And they've got this really, really cool sort of business model where you're actually making a loan to yourself, but you're Doing it through Self, which is just, it's hard to, I don't know with their name being that it's.

[Matt]

To even talk about it without sound like an idiot.

[Joel]

Yes. Yeah. That's why the name Self lender, like it made it easier.

[Matt]

It seemed like it made more sense.

[Joel]

It made it easier to talk about it. I agree. But so yeah, basically you're giving Self cash and then what happens is you're making payments towards this debt that you've taken on, making payments to Self right on your behalf. And so it's a bit confusing. But here's the thing. Most people who go through self.inc and make themselves alone in this way and, and then Self reports to the credit bureaus on your behalf, they see a credit score bump of something like 32 points, which is meaningful. If you're at 690 and you just went up to 722, that's a big old bump. And so that is one important thing to try. Secure credit cards can be a massive help too. And you can typically get them via your credit union. You can get them other places too. Those are basically another type of installment loan where a secure card is where you say, listen, give me a credit card with an $800 limit, I'll give you the bank or the credit union 800 bucks. And then after seven or eight months of on time payments, you, you get a full, you get upgraded to a full fledged credit card. And so you know, after, after using that credit card responsibly now you've improved your credit score too. There's. There's also something called the pedal card which we'll link to in the show notes that can be helpful for people with bad credit to boost their credit score. That doesn't. They don't rely on your credit score in order to give you a line of credit. But the rise in secured credit cards and the use of companies like Self doing this, self generated lending essentially are all in response to the problem of credit repair services that we talked about earlier. Just people trying to scam you out of money in order to improve your credit score. Usually they run away with the cash without doing much or anything to help you improve your score. These are legitimate, inexpensive ways for you to increase your credit score through tried and true methods.

[Matt]

Yeah, they are legit. Like they will actually increase your credit score. But the, the goal is to never have to use these companies to begin with. The goal, like the response like the reason these secured cards exist is because you have someone out there has made poor decisions when it comes to how it is that they handle credit, but especially if you are listening and maybe you don't even have a credit card and it's just sitting there, it's pristine, it's like freshly fallen snow and no one has walked out there. And it's perfect. Not perfect from you've got a perfect score standpoint, but perfect in that it's just blank, untrammeled. You have the ability to, from day one right now, to handling credit in a responsible way and to slowly increase the credit that's available to you and to boost that score because it's going to have these long lasting impacts.

[Joel]

And let's be honest, you mentioned the average credit score for Gen z millennials is 679. Those people in all likelihood, if you're right at that point, you're not going to need to turn to a secured credit card. You just need to start doing those basics better, right?

[Matt]

It's very unsexy for most people what it is that they need to do.

[Joel]

These services are really for people who are down in the dumps with credit and they need, need a big leg up and they need more drastic measures. And so these, this is one way to do that, right, is to turn to somebody like self or to turn to a secure credit card. But for most people out there, it's just doing those basic things of never not paying anything on time and to reduce your utilization and to make sure that you're tending to your credit score and you're watching it go up month after month over time. Not seeking perfection, of course, like we said and basically like your credit credit, as we've discussed on this episode, is going to impact you in a bunch of ways. Good credit is going to give you a leg up in the personal finance world. Bad credit will make life a whole lot harder. And we know it's a little bit confusing, but your credit score matters in a lot of ways in the real world. So tend to it, tend to it like you would like a garden. You got to pull the weeds and all that kind of stuff, right? Ensure that your credit score is not hampering your ability to make the financial progress you want to make. And by the way, if you have questions about credit scores, feel free to holler at us. We can take your questions on an upcoming Ask how the Money episode. We know there's a lot of confusion, a lot of specific questions that people are probably going to have in light of this episode. So reach out to us, send us your voice memo and hopefully we can Take it on the show soon.

[Matt]

That's right, man. All right, let's get to the beer quickly here that you and I enjoyed today, the refreshing beer that we both enjoyed, which was a Grapefruit rattler by Halfway Crooks beer. And by the way, I want to mention real quick, we've said this before on the show, but Halfway Crooked Crooks, they have the absolute best merch. And while I was up in North Carolina at a different brewery, there was a guy there and he had a Halfway Crooks shirt on. And I was like, oh. Which is our. I mean, we moved, but that was our local neighborhood brewery.

[Joel]

Yeah.

[Matt]

And I don't know, they're.

[Joel]

They're the best.

[Matt]

Their marketing team or. I don't know. I think it's just a couple guys. But they do such an awesome job. And I'm glad, though, that you and I got to enjoy this actual beer. What were your thoughts on it?

[Joel]

It. So it was delicious and I love me a good rattler. Grapefruit rattler in particular. And this one is because it's a craft instead of like a mass produced one. It had. It just tasted more like grapefruit, man.

[Matt]

More real.

[Joel]

Yeah.

[Matt]

As much as we love it, it tastes more real than Steagall.

[Joel]

I do, I do. Like, I love Steagall.

[Matt]

It's sweet, but it's.

[Joel]

Dude, like, could you, like, I want way less sweet. More grapefruit tasting.

[Matt]

Yes.

[Joel]

Those bitter notes.

[Matt]

Yes, exactly. That's what it's got going on with it. Whereas the Steagall is. It's just. It literally, it's like a minute made. It's almost as if you get that beer in a carton, in the quart carton where you unscrew the little screw and pour the beer. Like, that's how sweet it reminds me. Like, I don't. I don't. By the way, I know if I can enjoy that beer because it's so sweet, I would love to compare it side by side with Halfway Crooks. That'd be fun.

[Joel]

And we talked about in the past, but not on this episode, how rattlers are essentially half juice and half.

[Matt]

Oh, that's right.

[Joel]

Pilsner, typically. Right. Or. Or is half beer. And so, yeah, this. I think they were originally created for cyclists in Germany to stop get something like thirst quenching. But also, you know, you don't want.

[Matt]

To drink too much, though. Like, if it was full beer, it's like, well, how is that going to cause me to be a better bicyclist?

[Joel]

Right. So these are typically somewhere between 2 and 4% in ABV, which is cool and they're just delightful.

[Matt]

We're going to get some of these before we go to the beach, that's for sure. But this is absolutely the kind of beer that you enjoy on the beach. If you've never tried a rattler before and you like something that's juicy, but also you're a big fan of beer, make sure to check out a rattler for sure.

[Joel]

All right, Matt, that's going to do it for this episode. Folks can find show notes, links to some of the stuff we mentioned up on the [e-mail] that's right.

[Matt]

That's gonna be it for this one, buddy. Until next time, best friends out Best.

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[Matt]

This is Julian Edelman from Dudes on Dudes with Gronk and Jewels. Sunday mornings I've got my game day.

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[Matt]

Bright Eye Berries got a feisty receiver.

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[Matt]

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[Joel]

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