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NerdWallet's Smart Money Podcast
Financial Resilience in a Shaky Economy and What a Perfect Credit Score Gets You
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- [00:01]
Sean Pyles
The following is a paid sponsorship, not an endorsement by NerdWallet's editorial team. Today's episode is sponsored by Bilt.
- [00:07]
Elizabeth Ayola
You've heard me talk about Bilt as the loyalty program that lets you earn points on rent wherever you live, and they just leveled up even more. As of 2026, renters and homeowners can also earn up to 1.25x points on their housing payments.
- [00:23]
Sean Pyles
This is thanks to Bilt's three new credit cards, the Palladium Card, Obsidian Card and Blue Card. All three can turn your housing payments, rent or mortgage into flexible rewards so you can choose the card that fits your lifestyle without missing out on points and exclusive benefits.
- [00:38]
Elizabeth Ayola
Built Points can be redeemed at top airlines and hotels, Amazon.com purchases, future rent payments, and so much more. Built Points have also been ranked by top publications as the industry's most valuable point currency.
- [00:52]
Sean Pyles
Your housing payment is most likely your biggest expense. Make it your most rewarding. Find the card that fits your lifestyle and Apply today at joinbilt.com smartmoney that's J-O-I N B I L T.com smartmoney make sure to use our URL so they know we sent you. Terms and limitations apply subject to approval and eligibility.
- [01:14]
Elizabeth Ayola
BILT cards are issued by column NA member FDIC pursuant to license for MasterCard International Incorporated. Today's episode is sponsored by Spectrum Business.
- [01:26]
Sean Pyles
Picture this. You're running a business and the Internet drops during business hours. Your to do list instantly becomes 1 panic, 2 stare at the router like you're negotiating with it and three start offering customers a brief moment of mindfulness while the checkout screen loads. For business owners, being connected isn't a perk, it's how you take payments, talk to clients and keep things moving. Spectrum Business keeps businesses connected seamlessly with fast, reliable Internet and advanced wi fi plus phone, TV and mobile services if you need them.
- [01:57]
Elizabeth Ayola
And Spectrum Business offers 100% US based customer support 24. 7 to help you stay up and running. And that means that you get actual help, not submit a ticket and hope for the best.
- [02:10]
Sean Pyles
Our colleague Kerri is a Spectrum customer shout out to our social media team and she told us she chose Spectrum because people online kept recommending it as a reliable and affordable option for Internet and phone service. She told us that she was actually a little hesitant to switch at first because she'd been using a different service for a while, but after a year with Spectrum she's had a really good experience. Her phone gets strong, reliable service and it automatically connects to Spectrum WI FI everywhere.
- [02:33]
Elizabeth Ayola
Join the millions who rely on Spectrum Business. Visit spectrum.combusiness to learn more one more time that spectrum.com business restrictions apply.
- [02:44]
Sean Pyles
Services not available in all areas. Fractured, unstable, volatile. Those are a few words to describe our wonky economy right now. But how are you doing financially? Today we've got new insights into the state of Americans finances. Welcome to NerdWallet's Smart Money podcast where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Pyles.
- [03:08]
Elizabeth Ayola
And I'm Elizabeth Ayola. Later this episode, we'll be chatting about what to do once you have the the perfect credit score. But first, our weekly money news roundup. We're going to break down the latest in the world of finances to help you be smarter with your money. Our news colleague Ana Helhoski is back again to dig into some new Federal Reserve data that paints a mixed picture of Americans financial well being. Hello. Hello, Ana.
- [03:33]
Ana Helhoski
Hey, Sean. Elizabeth.
- [03:34]
Amanda Barroso
Yeah.
- [03:35]
Ana Helhoski
When it comes to how well Americans are handling these turbulent economic times that we find ourselves in the the picture's a little bit confusing. A new Federal Reserve analysis shows that households financial well being remains below pre pandemic levels and Americans continue to cite rising prices as their biggest financial concern. Now since last year's report, people are more concerned about finding or keeping a job as well. But despite those anxieties, some things haven't changed. Americans emergency savings, retirement confidence and credit card habits largely held steady from the previous year. Now here to talk about these findings as well as a new analysis of Americans financial resilience is our colleague, economist Elizabeth Renter. Elizabeth, welcome back to Smart Money.
- [04:16]
Elizabeth Renter
Hey everybody, always a pleasure. Thanks for having me.
- [04:19]
Ana Helhoski
Looking at the Fed data, it shows a complicated picture that we've been seeing for a while where the economy looks fairly stable but public sentiment still feels deeply pessimistic. Why is there still such a disconnect between macroeconomic data and how people actually feel?
- [04:34]
Elizabeth Renter
Well, that disconnect is often present, but it's been particularly pronounced in the wake of the pandemic. And really there are many factors at play. Part of it is that we've lived and are still living in some pretty potentially volatile times. So the pandemic, a surge of inflation, global trade policy and tariffs, and now war and more inflation, all of these things do have economic risks and can really impact how we feel about the economy around us. So. So the data indicates that the economy has weathered all of this pretty well. But that doesn't mean we're not all feeling a bit like we're going through the wringer because those risks are present and therefore the potential for volatility is present. Things like inflation and particularly the price growth we're seeing now, like gas prices, these have real tangible effects on household finances and they do a lot to color what we think about the economy. That's regardless of what measures like GDP tell us.
- [05:26]
Elizabeth Ayola
Right.
- [05:26]
Ana Helhoski
It feels very different at the personal level. Now, despite the report's picture of a stable financial situation for adults as a whole, financial well being declined year over year for young adults, low income families and black adults. Can you speak to the unique challenges that these groups face in this economic climate?
- [05:42]
Elizabeth Renter
Yeah, absolutely. So certain demographics in our economy tend to feel the pain first when things are less than ideal. For example, when prices rise quickly, it's people who don't have a lot of room in their budget that are going to feel the pain the quickest and the most dramatically. And this is people with lower incomes or even younger people that are less established in their careers. So financial well being for these groups is a more precarious concept. They tend to have less discretionary income, less or even zero emergency savings, and less access to credit should they need to borrow money.
- [06:13]
Ana Helhoski
The gap in financial well being between college graduates and Americans without a high school diploma has widened over the past decade, according to the report. At the same time, there's been growing backlash against college over concerns about costs and outcomes. Is education increasingly shaping long term economic stability or is the relationship a little bit more complex than that?
- [06:33]
Elizabeth Renter
It's definitely complicated and especially now in the age of AI. So recently we found 69% of Americans believe going to college isn't as important as it used to be to earn a good living. That was in a recent Nerd Wallet survey. But as you said, college educated people report higher financial well being. So I think some of the sentiment about the value of a degree is changing and largely driven by where people think AI is taking us. The problem is we, we really don't know where it's taking us. We don't know the end point. And we do know that college graduates out earn those without a college degree and certainly those without a high school diploma. So generally speaking, at a household level, higher education aids in economic stability. To the extent that AI fully displaces jobs requiring a college education, that could change. But I don't foresee that being the case on a large scale, that full displacement anytime soon.
- [07:26]
Ana Helhoski
Yeah, there's a lot of white collar panic happening right now that isn't necessarily manifesting. Now, the report suggests the labor market is still technically stable, but workers are feeling less confident. Fewer people are voluntarily leaving their jobs and concern about finding or keeping work is rising. Are workers becoming more fearful even in a relatively strong labor market?
- [07:46]
Elizabeth Renter
Well, you're right that the labor market is stable, but from a workers perspective, it's far from the strong market we had just a few years ago. Yes, you guys remember the great reshuffling, right? From about mid 20 to 2023, workers could easily upgrade their jobs. They were getting decent raises at their current places of employment and could find a higher paying job that maybe fit their lifestyle better because employers were working to fill a lot of roles. It was a very dynamic labor market and very friendly to workers. With that fresh in our minds because it's fairly recent history, today's labor market seems really dull. Employers aren't really hiring and it's tough for workers to negotiate higher wages. So yes, people are less confident right now about the labor market. Even though we haven't seen layoff spike in the federal data, I do think there's a fear that companies that are currently reluctant to hire could pretty easily become companies that need to downsize if the economy takes a turn.
- [08:41]
Ana Helhoski
Now let's get back to, I guess, the overall sentiment. The report finds that 73% of Americans say they're doing okay financially, but only 63% say that they could cover a $400 emergency expense with cash. What does that gap reveal about how fragile financial stability really is in the modern economy?
- [08:59]
Elizabeth Renter
Well, you raised a really interesting point, and it might have been unknowingly so. This survey from the Fed asks whether folks would cover a $400 emergency expense with cash, not whether they could. And that tiny difference, it's one letter, could really change how people respond and how they interpret the question. I still think the question has value, but many people may opt to save their cash for other expenses. So even if they could cover it with cash, they wouldn't. And it makes that number slightly less valuable in measuring true financial capac. That said, having the cash available to cover emergency expenses is really a lifeline. When you have an emergency fund, even if it's this small one, it can really insulate your household from financial disaster. Interestingly, we asked a similar question in a recent survey here at NerdWallet with a slightly different wording, and found that 63% of Americans have enough cash on hand to cover an unexpected $1,000 expense should one arise this month. This was fielded in May. So, of course, the response to this question varies greatly by income. But if you can cover an emergency exp without taking on debt, you're positioned to weather some financial turbulence.
- [10:07]
Elizabeth Ayola
Got it.
- [10:08]
Ana Helhoski
Well, speaking of financial stability, you and your team have put together a new index to measure financial resilience. Can you talk a little bit more about the index itself and what it's capturing about the American consumer right now?
- [10:19]
Elizabeth Renter
Yeah, I'm super happy to. It's actually part of the survey that I just mentioned. We're launching a monthly index that measures consumer financial resilience across three topics. Those are financial security, financial strength, and economic outlook. So the index is a composite score made up of data from five questions across these topics in a nationally representative survey conducted every month by the Harris Poll.
- [10:41]
Ana Helhoski
I was looking at this month's report, and it says that the resilience score is 60.4 out of 100. What does it actually tell us about the financial health of Americans?
- [10:49]
Elizabeth Renter
Well, the overall index score suggests that consumers have a lot of growth potential when it comes to household financial resilience. You know, many report being in control of their finances and feeling confident in their ability to pay all their bills this month, but some are going to have to rely on credit to manage some of their expenses, perhaps. Obviously, higher income Americans report greater financial resilience, but I think the real value in a measure like this is what we begin to see when we've gathered three or six or 12 months of it, and we're going to be able to see how these measures change from month to month.
- [11:20]
Ana Helhoski
I was wondering why so many Americans report feeling in control financially while simultaneously relying on credit just to get through the month.
- [11:28]
Elizabeth Renter
Well, control is really a matter of how you feel. Right. It's an aspect of financial security, and it's open to interpretation. Whereas asking people if they have to rely on credit is a pretty black and white answer of financial strength or position. So 74% of Americans feel in control of their finances. Who knows why this could vary from person to person? It could be because they know where their money is going, they follow a strict budget, or they feel insulated from a surprise expense. It's also true that 37% of Americans say they'll have to rely on credit to manage at least some of their expenses this month. So this question speaks more to the actual books of the household's finances, and both of these things could be true. Right. Just because you need to rely on credit doesn't necessarily mean you don't feel in control. Using credit to get by could be one way you control your finances. Whether or not that's healthy is probably another question entirely.
- [12:18]
Ana Helhoski
Right. But it is strategic. Now, when it comes to financial security, how much of this resilience gap is about income versus age and accumulated wealth?
- [12:27]
Elizabeth Renter
Right. Well, that's a great question. So most of the differences we're seeing across demographics are quite obvious. When it comes to income and age, higher income people and older people are more likely to be financially resilient. This is what I refer to as a no duh aspect of the data. The more money you make and the longer you've been able to accumulate wealth, the better insulated your household is from financial turbulence and the better you're probably going to feel about things too naturally.
- [12:52]
Ana Helhoski
So why are recession expectations so high right now, especially among middle income earners?
- [12:58]
Elizabeth Renter
Well, we found 2/3 or 66% of Americans believe the U.S. will enter a recession in the next 12 months. And this is one measure that we've actually been tracking for a while, since August of last year when it was 61%. I think the reason for higher expectations now are pretty obvious. We're involved in a war and there's currently a lot of fallout from that, including rising inflation. You pointed to an interesting nugget of the data there, that a group of middle income Americans who are most likely to say they expect a recession in the next year. So 3/4 or 75% of those with household incomes from 50,000 to just under 75,000 believe that. And this income group is just below the median household income across the nation. So we would typically refer to them as a lower middle income group. Now why is this group more likely to expect a recession? I'm honestly not sure. Could be that generally they're more on more precarious financial footing. At that income level, things are going to be tight, especially if you have multiple people in your household, but you generally earn too much to qualify for public assistance. So I imagine there's this additional level of fear among some of those households. But honestly, that's a best guess.
- [14:04]
Ana Helhoski
Now, what indicators would tell you that consumer resilience is genuinely improving versus people are simply getting used to economic instability? For example, are Americans psychologically adapting to higher prices even if their finances are remaining strained?
- [14:19]
Elizabeth Renter
That's exactly why we included the two questions on financial strength. So that's the question about whether you'll have to rely on debt this month and whether you have enough cash on hand to cover an unexpected thousand dollars expense. These aren't really open to much interpretation. They're not about the respondents feelings. And so we'll be able to track these measures over time and see if actual resilience via financial strength is improving. I do think the financial security questions that measure more about how people feel about their finances are very important as well. But you're right that a lot can impact how we feel from month to month. And you know, getting comfortable with economic, economic turbulence or high inflation could certainly impact these questions that are of pure sentiment.
- [14:59]
Ana Helhoski
All right, Elizabeth, if you combine the findings of the new financial Resilience index from Nerd Wallet with the Federal Reserve data, are there any key overlapping takeaways?
- [15:09]
Elizabeth Renter
Well, a big part of the work I do here at NerdWallet is in consumer sentiment data. And so I really nerd out, like really nerd out about surveys like this one from the Federal Reserve. And one thing that stood out to me and comes through pretty clearly in the Fed report is that many questions in these sentiment surveys are measured measuring our perspectives rather than reality. So for instance, the share of people saying their financial situation is worse in the current year than the year prior has been pretty stable for the past four years and higher than those who say it's better in the current year. So if it's worse this year when you ask me, and it was worse last year when you asked me and so on back four years, it could imply things are gradually just getting worse and worse for me. But the share of people in that same survey that say they're doing okay or living comfortably has hardly budged in the past four years. So to me this really underscores that human memory is fickle and both backwards and forward looking questions have some room for error or bias. And you know, that's one reason that I'm really personally excited about this monthly index that we're launching because it'll give us more real time information this month. Right. Every month as both moods and actual financial conditions change.
- [16:22]
Ana Helhoski
It seems like your attitudes and how you feel personally is very relative, even from year to year. But the figures will tell a little bit more of a clearer picture of how you're actually doing.
- [16:32]
Elizabeth Renter
Yeah, most definitely.
- [16:33]
Ana Helhoski
Thanks Elizabeth. Appreciate it.
- [16:35]
Elizabeth Ayola
And thank you, Ana. I think what I appreciate most about these datas and surveys is that they help me feel seen because like a lot of the data that you guys shared, I am feeling very conservative with my spending. I'm feeling uncertain about the economy, but I'm also feeling somewhat optimistic about my personal finances. How have you been feeling, Sean?
- [16:54]
Sean Pyles
I've been feeling pretty okay. This conversation makes me think about the phrase people throw around in somewhat dismissive ways, that feelings aren't facts. And in this case we're actually seeing that feelings are facts, even if there is a separation between how people are actually doing. On my side, I just try to focus on the number in my savings account and in my retirement account and not get too hung up on how I'm feeling from day to day because there are so many other factors that influence that, from the price of gas to whether it's sunny or not outside. So I just try to focus on the long term and do what I can to build my resilience.
- [17:26]
Elizabeth Ayola
I agree, but I always feel a lot of empathy for people, as Liz mentioned, you know, maybe who are lower earning, who, you know, a gas price hike can really throw off their whole budget for the week, right? And maybe they can't afford to fill up their tank and they're feeling the pinch the most. So it is really difficult to be hearing that, hey, the economy is stable when you can't afford gas, right?
- [17:46]
Sean Pyles
It still feels pretty rotten when you're like, hey, I'm having a really hard time here while everyone else is out buying avocado toast. Something we always return to for some reason.
- [17:55]
Elizabeth Ayola
Good tie in, Sean, but yes. All right, up next, we answer listeners question about what happens when you achieve a perfect 850 credit score and also what doesn't happen. Spoiler, you are not getting a toaster. And if you want to get that inside joke, you got to tune into the episode. All right, but before we get into that, a reminder to send us your money questions and maybe you are trying to figure out how to afford avocado toast. I'm going to stop talking about avocado toast. Or maybe you're trying to think about how to budget through this current economy. Whatever your money question is, please send it to us on the nerd hotline, which Sean is going to tell you what it is.
- [18:31]
Sean Pyles
You can leave us a voicemail or Text us at 901-730-6373. That's 901-730-Nerd. You can also email us your question@podcastnerdwallet.com or if you're on Spotify or YouTube right now, you can drop us a comment and be sure to follow us wherever you're getting this podcast in a moment.
- [18:48]
Elizabeth Ayola
This episode's money question stay with us.
- [18:55]
Sean Pyles
Today's episode is sponsored by Quince. Lately I've been more intentional about what I wear day to day, leaning into pieces that feel effortless comfortable and still put together. It makes getting dressed simpler. Quince has been my go to the fabrics feel elevated, the fits are flattering and everything just works without overthinking it.
- [19:13]
Elizabeth Ayola
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- [19:26]
Sean Pyles
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Elizabeth Ayola
Everything at Quint's is priced 50 to 80% less than similar brands. They work directly with ethical factories and they cut out the middlemen. So you're paying for quality and craftmansh, not brand markup.
- [19:45]
Sean Pyles
Let me tell you Elizabeth, I've been really loving my European linen sheets that I got recently. I feel like they get softer with each wash and I'm sleeping so well at night.
- [19:54]
Elizabeth Ayola
I appreciate a good pair of sheets I tried on my bathing suits that I got from Quints. I got the same one in two different colors and they feel so soft. The fabric feels high quality and I'm excited to wear them as soon as the pool opens up.
- [20:07]
Sean Pyles
Yeah, I mean, summer's right around the corner, right?
- [20:09]
Elizabeth Ayola
It is.
- [20:10]
Sean Pyles
Well, if you want to refresh your wardrobe with everyday luxury that you'll actually use, head to quint.com smartmoney for free shipping on your order and 365 day returns.
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Elizabeth Ayola
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- [20:30]
Sean Pyles
Quint.com smartmoney the following is a paid sponsorship, not an endorsement by NerdWallet's editorial team. Today's episode is sponsored by Bilt.
- [20:39]
Elizabeth Ayola
You've heard me talk about Bilt as the loyalty program that lets you earn points on rent wherever you live. And they just leveled up even more. As of 2026, renters and homeowners can also earn up to 1.25x points on their housing payments.
- [20:56]
Sean Pyles
This is thanks to Bilt's three new credit cards, the Palladium Card, Obsidian card and Blue Card. All three can turn your housing payments, rent or mortgage into flexible rewards, so you can choose the card that fits your lifestyle without missing out on points and exclusive benefits.
- [21:11]
Elizabeth Ayola
Built points can be redeemed at top airlines and hotels, Amazon.com purchases, future rent payments, and so much more. Built points have also been ranked by top publications as the industry's most valuable point currency.
- [21:25]
Sean Pyles
Your housing payment is most likely your biggest expense. Make it your most rewarding. Find the card that fits your lifestyle and apply today at joinbuilt.com smartmoney that's J-O-I-N-B-I-L-T.com smartmoney make sure to use our URL so they know we sent you. Terms and limitations apply, subject to approval and eligibility.
- [21:47]
Elizabeth Ayola
BILT cards are issued by Column NA, Member FDIC, pursuant to license for MasterCard International, Inc.
- [21:56]
Sean Pyles
Having a good credit score can make your financial life a heck of a lot easier and less expensive. But what about having a perfect credit score? What does that get you? This episode we're taking on a listener's question about whether reaching an 850 credit score is really what it's cracked up to be. So here's the question, which comes from Leslie, who sent us an email. I achieved a perfect credit score and nobody sent me a toaster or anything. What am I supposed to do with this? It's very anticlimactic.
- [22:21]
Elizabeth Ayola
Well, I didn't get a toaster either. But to help us answer Leslie's question on this episode of the podcast, we are joined by friend of the pod NerdWallet, personal finance writer Amanda Barroso. Welcome back to Smart Money, Amanda.
- [22:34]
Amanda Barroso
Thanks for having me. YouTube. It's always fun to join you and chat about these things.
- [22:40]
Sean Pyles
So yeah, I want to dig into this because Leslie has the sort of enviable problem of being let down by achieving a perfect credit score. So let's start by defining what a perfect credit score really is. Amanda, can you lay that out for us? And how a perfect credit score kind of fits into the broader landscape of credit scores.
- [22:58]
Amanda Barroso
So credit scores fall on the spectrum from 300 to 850, which makes an 850 credit score the perfect score. Leslie has reached mountaintop, right? FICO and vantagecore are the two major credit scoring companies in the US and they both use this scale, but they kind of chop it up differently. For example, FICO has five credit score ranges going from very poor to exceptional, while VantageScore has only four ranges. And the names are not very intuitive. For example, they call scores that fall between 661 to 780 prime. So sometimes it's hard to know, is prime a good thing, a bad thing? Just know that they label those ranges differently.
- [23:35]
Sean Pyles
Yeah, there's a lot of jargon in the credit score space. It can make it confusing and hard to know whether you're actually in a good place or in a dangerous place. And what that all gets you.
- [23:45]
Elizabeth Ayola
Well, beyond bragging rights Because I guess it sounds cool to be like, I have an 850 credit score. And also disappointment when you don't get a toaster. What does a perfect credit score get you? As Leslie said, what are they supposed to do with it?
- [23:58]
Amanda Barroso
It's funny because I've gotten a perfect score a few times before. Two times. And I felt Leslie's disappointment a bit too, truthfully. I basically, like, squealed. You know, I was like, oh, my gosh. And then I took a screenshot immediately because I feel like it was gonna change at any minute. And then I, like, my husband works from home, too. I, like, we work next to each other. I was like, oh, my God, look at this. And then I kind of just like, moved on with my day. I don't know. Yeah, it feels really anticlimactic. After putting in months, even years of, like, this consistent work to get there, I reached out to FICO to kind of see if I could get Leslie a little more detailed help here. And a spokesperson there said, look, once you're good enough to access top tier lending, reaching a perfect score adds very little in criminal value. And again, that is a bummer. Leslie, I hate to be a downer, but I think your perfect score is more of a symbolic win because you've already been in the range where you can unlock all the best financial opportunities, and that's really a good thing. You should celebrate that. I think the good news is that if you're in the market, you can leverage your excellent score to get better borrowing terms, maybe get lower interest rates, apply for credit cards with the best perks and rewards. So that's a way that you can really make that 850 score work for you.
- [25:12]
Sean Pyles
Yeah. And to be clear, beyond a credit score of around 740 to 760, you're going to be getting the best rates when you're at that range and above. So 850 isn't going to give you a better rate necessarily, although it can give you some cushion. Our credit scores fluctuate a lot based on things like how much credit we're using or hopefully we don't have a missed payment, but that can really knock down your score, too. But if you do have an extra buffer of being all the way at 850, that makes any other fluctuations a little bit easier to weather.
- [25:41]
Amanda Barroso
That range that you just mentioned, Sean, that 760 is a really good baseline score to shoot from. I reached out to John Alzheimer, and he's a credit expert. He's worked in the field for a long time. He said folks should strive for 760 as a baseline score. So he calls this the safe zone of credit because it's well above good scores on both those FICO and Vayner score ranges, which means that you're likely to get great interest rates on a car loan, qualify for the best credit cards. And 760. Right. There's still 90 points between that perfect 850. But John says, hey, like, relax, you don't need a perfect score or anything close to perfect to get the best deals. So I would recommend shooting for around 760 as a target.
- [26:24]
Sean Pyles
Yeah, well, I think what we're getting to as well is that people can get really hung up on their credit score and they view it as sort of a reflection of their personal value and their success or failures as an adult in the world. And I find that kind of frustrating because, yes, these numbers do have a big impact on our financial lives and they can influence how much access we have to credit and how much we're paying for it. But your credit score is not who you are. How can people have a healthier relationship to their credit scores?
- [26:53]
Amanda Barroso
I get it. Credit scores can feel really high stakes and weigh heavily on your mind. But remember that credit scores are just a tool and not a measure of your intelligence, your worth, your character. A credit score is literally just a snapshot of how you've interacted with a very specific system. Right. And I should mention, not everyone has equal access to this system. We certainly don't get educated about credit scores in public schools. At least I didn't in my public school.
- [27:20]
Elizabeth Ayola
Right.
- [27:21]
Amanda Barroso
So I think remembering that is key. Not let it sort of seep into how you think about yourself or, or change your self worth.
- [27:32]
Elizabeth Ayola
As you guys are talking, I'm remembering, you know, my journey to increasing my credit score and trying to get the perfect quote, unquote credit score. And I studied the social sciences. So I remember graduating and thinking all these economies, you know, western economies want us to do is get into debt and borrow more and more and more money. And I was like, what's a cred credit score for anyway? To be able to borrow more money and I don't want to live in debt and blah, blah, blah. So anyway, all that to say, I think after a while I stopped trying to achieve the perfect credit score. And like you said, as long as my credit score was good enough to get the great credit cards with the points you guys, though I have quite a few travel credit cards, it was good enough as long as it's good Enough for me to get good rates when I borrow. I think the journey to the perfect score ended for me.
- [28:13]
Sean Pyles
Yeah. It's also helpful to remember that originally we were never intended to see our own credit scores. They're sort of a business to business tool so that lenders can see what kind of behaviors we're doing. Although I'm glad that we can see our credit scores, I think we should have access to all this information. Our credit scores do have a little bit too much power and influence over our lives in some ways. But again, as long as you're doing the right things to get your credit score in a good place, I'd say don't sweat it too much.
- [28:41]
Elizabeth Ayola
Well, Amanda, what might be a better way to think about our credit scores then?
- [28:45]
Amanda Barroso
I would think of it this way. A credit score is a signal to lenders, like, you know, the bat signal or whatever, but you know, it's not permanent. So it's something that you can influence and shape. There is potentially an empowering angle to this. Right. Your score will probably be different next month as new data is reported to the credit bureau. So like, expect fluctuations and just know that that's just part of it. It might not feel like it, but your credit score is like, like a relatively small part of your financial life. It doesn't consider your savings, it doesn't consider your income, it doesn't consider your retirement contributions, your giving habits, all of these other pieces of your financial picture. It is important because it is a tool that provides access, right, to credit, to loans, to things that frankly a lot of us need to live. Renting an apartment, buying a home. It is important. I don't want to downplay that, but it's just part of the picture. And a part of the picture that you can influence potentially a little bit easier than you can your income or some of these other factors that feel really hard to change right now. Right.
- [29:48]
Sean Pyles
Well, for those who don't have a perfect credit score, like Leslie, but want to strive to get maybe in that range of 760 and above, what are some quick tips they can implement today?
- [29:58]
Amanda Barroso
Two of the biggest places to start, Pay your bills on time every month and keep your credit utilization under 30%. Those are the two most important credit scoring factors that both FICO and Vantage score use when calculating your score. So to get back to this last part, credit utilization. That is really just a fancy way of saying how much of your available credit you're using at a given time. Here's an example. If you have a credit limit of $1,000 on a credit card and you've spent $500, you're above that 30% threshold, you're at 50%. So it would be smart to get that balance to $300 or less. And your score will probably thank you. My source at FICO also said that consumers with the highest FICO scores consistently demonstrate strong long term credit behavior. So credit is a long game. It takes patience and consistency. So what that really means is a longer credit history. Some of this just comes with age, right? The older that we get, the more time that we've had to get it on a loan, to get a credit card, to maybe buy a house. Some of these things that show up on our credit reports. The spokesperson at FICO also said that the highest scores also have a really healthy credit mix. So this is really showing lenders that you can responsibly manage different kinds of credit. So credit cards versus auto loans, right? And revolving versus installment credit, right? Having a good balance of that there is a difference there that they want to see.
- [31:26]
Sean Pyles
What you just outlined also to me really underscores how it is a bit of a game and you need to know the rules. You mentioned the term credit behaviors, which is such a. Like how people who are in this space kind of think about it where you have to do the right things, you have to keep your utilization low, you have to have a right mix of credit and a history of credit. And these are things that I think everyday people aren't really too concerned about. But then they see their credit score and they think, oh, this really isn't where I wanted to be and I want to get a better rate on my auto loan, but I just can't because I am not playing the game properly. I think for a lot of people it's helpful to know some of the general elements of this game that they've been thrust into against their will. But maybe not sweat about gaming the system too much. As long as you're just making your payments on time and not racking up too much on your credit card.
- [32:16]
Amanda Barroso
I think that that's so true. And I think the two most important credit scoring factors are also the easiest to automate. I can automatically pay that balance off every month, or I could automatically set it to pay the minimum payment that I can go in and manually add what I want. On top of that, I can make smaller payments on my credit card throughout the month as opposed to one big payment toward the end to help keep that utilization low. If I feel like my spending's a little High. Okay, I'm going to go throw 250 bucks on my credit card and just keep it a little bit lower. There are these strategies that you can do for the two most important factors that I think are actually, like, super achievable for most people. You probably know, okay, I missed a payment. You might not think that it could have such a huge impact on your score. Meanwhile, it's the most important factor. Once people learn what these scoring companies like FICO and Vantagecore are looking for, the credit behaviors, really, it's just good financial habits. Right? Paying your bills on time and keeping your debt low, those are just good habits to have. And once you can build a system for that, automate what you can to kind of relieve some of that mental space, then you might find it's actually a little bit easier to maintain a strong score.
- [33:22]
Elizabeth Ayola
People on my timeline are often offering a service to fix people's credit for them. And hey, not here to tell anyone you know, what to do with their money, what to spend it on. But it really is something you can do yourself. Know, it doesn't have to be so complicated. Like Sean and Amanda have said, just understand the basics of what your credit score is composed of, and then it's the consistent financial habits that will improve your credit score over time.
- [33:46]
Sean Pyles
Yeah, I tend to believe that credit repair companies are scammers, and any individual saying they're going to help you is just trying to get some money from you. So please don't put your money there, people.
- [33:56]
Amanda Barroso
Yes. And at Nerdwell, we do not recommend you use those credit repair companies. Again, you can do all of this yourself for free. And here's the thing that I just need folks to hear with credit, unless there's an error on your credit report or something like that could be fixed quickly, I need you to readjust your expectations for how long something takes to build. Like, you're looking at six months to a year of consistent behaviors. This part of our timeline that we're all living in. Right. Is all about, like, getting things quickly, instant gratification. Unfortunately, the credit space has not caught up to that.
- [34:32]
Elizabeth Ayola
Right.
- [34:32]
Amanda Barroso
We are not door dashing a better credit score. It takes. Takes consistency, patience, and you will get there. But adjusting expectations is key here.
- [34:42]
Sean Pyles
Yes. Although I will say that paying off your credit card on a weekly basis is one of the best ways to keep your credit score higher. And if it does get dinged a little because your utilization has run up, if you just pay off your balance, you'll see that reflected in a week or two, most likely.
- [34:56]
Amanda Barroso
Hey, that's about as instant as it's going to get with the credit, right?
- [35:00]
Sean Pyles
Pretty much. Now this come to the time of the show where I want each of us to get a little vulnerable, and I'd like us to share what our credit scores are and how we feel about them. So, Amanda, as our guest here, you're up.
- [35:14]
Amanda Barroso
Okay, so I checked. This was about a week ago. My FICO score was at 807 and my vantage score was at 786. And I'm a little bummed because my FICO score dropped about 30 points. Remember, mine was perfect not too long ago. I have the screenshot on my phone. I was actually going back and trying to find that, but my husband and I had to replace two H VAC units in our house and we had to get like this home project line of credit to make the repair. And it was $17,000.
- [35:40]
Sean Pyles
So sorry, that's a lot of money.
- [35:43]
Amanda Barroso
It's a lot of money. So it affected my score. But here's the thing. It was a home repair that had to be done. Did it hurt my score? Yes. But my excellent credit got us approved within less than an hour for a line of credit with 0% interest for five years. And so that will be paid off. So I know my credit will rebound with time because I'm keeping those key habits consistent. So that's the thing about it, right? Like we might take hits sometimes for necessary things, but we know that again, if we just keep our habits stable and keep paying that off. My excellent credit was a great benefit because it got us great terms, right? So kind of a bummer, but a necessary evil, I guess.
- [36:23]
Sean Pyles
Two interesting things from that. One, what you're saying reminds me that our credit scores are really just best tools to be deployed when we need them to most of the year. And for big chunks of our lives, we might go weeks or months without even really considering when we need to use it. If we're not applying for a line of credit or a credit card or whatever it may be, but when you do want to use it, you're going to be happy that it's in good shape. But secondly, even though, Amanda, we just talked about how our credit scores aren't a reflection of our self worth, and you write about this stuff all the time. It's really hard to separate this in practice from how you feel about your credit score, especially if it goes down. Because so much of our idea of self worth in the society is around where you are financially, and that gets caught up with your credit score, too.
- [37:07]
Amanda Barroso
Well, listen, when I got that a 50 score, I said, hey, I'm NerdWallet, senior credit expert. Maybe this will get me a raise. And when that didn't happen, I kind of had to let it. I was like, hey, isn't this the best credential that you'd want your. Your credit writer to have? I don't know. So, yeah, I think about this stuff all the time. Am I bummed a little bit when I see it drop? Yes. But I know it's not that a reflection of. I. At least I try to know it's not a reflection of who I am or that I'm somehow bad with my money. Especially when something. An unexpected repair like, what am I going to do? Homeownership, man, it's expensive.
- [37:43]
Sean Pyles
Here's the catch. With having an A50 credit score, there's nowhere to go but down. And that's going to happen.
- [37:48]
Elizabeth Ayola
Yeah, it really is.
- [37:49]
Amanda Barroso
Absolutely. Okay, what about you guys?
- [37:52]
Elizabeth Ayola
Okay, 797 with Fico. I'll be honest with you guys. I didn't even check my vantage score because can we have a safe space, you know, for. I don't care. I don't care what it is. So I have a 797 with FICO. There was a time in my life where I would check my credit score every single month. I don't anymore. Like you guys have outlined, I'm doing all the things. I'm paying my bills on time. I'm keeping my utilization low. So, you know, as long as I'm doing those things, I know it's going to fluctuate. I think that's the other thing that I learned from checking it every month or every week. It's different every single month. Month or week. So why am I preoccupying myself with my credit score when I can focus on things like saving for retirement? That's probably an account that I check more than my credit score. Now it's 7 97. Okay. It's not 850, but like you guys said, what am I going to get with the 850 credit score? Nothing. And also to my credit, I started building my credit score because, you guys know, I lived in the uk. I moved back to the States like six years ago. It'll be six years ago this year. And I only started building my credit score about six or seven years ago because I had no credit here. Because when I lived here previously, I was in high school, didn't have any credit cards or anything. So I think That's a decent score for having built it over the past six or seven years. And like you said, Amanda, time. Right. So I know once I may be 10 years, in 15, 20, my score will go up, but again, it means
- [39:05]
Elizabeth Renter
nothing at this point.
- [39:06]
Amanda Barroso
Well, and that's also because you're at a stable place in your life. Let's say in six months, you need to buy a new car. True. Then you'll start checking in. Right. Because it's like, I want to. Hey, I want to get pre approved. I want to have really great terms for that. So, like, Sean, you were saying, for most of the time, our credit is just this thing floating in the background until we need to deploy it.
- [39:28]
Elizabeth Ayola
Right.
- [39:29]
Amanda Barroso
Most of us are not constantly applying for credit cards, loans, apartments, you know, all these types of things. But when it's there and we need it, okay, about three months before we think we might need something, we start checking in, see what we can do to boost it. Sometimes, like in my case, when you have just a surprise home repair, you're glad that maybe you were checking in a little more frequently.
- [39:53]
Elizabeth Ayola
Right.
- [39:53]
Amanda Barroso
Because surprises do happen. But, yeah, for the most part, it's. It's kind of floating there in the background. Yeah.
- [39:58]
Sean Pyles
Okay, well, I guess I'll share mine.
- [40:00]
Amanda Barroso
Oh, gosh. I mean, just fine. Go ahead.
- [40:04]
Sean Pyles
I logged into the NerdWallet app right before this recording to check my Vantage score, and it is 8:28 as of this recording.
- [40:11]
Amanda Barroso
Amazing.
- [40:12]
Sean Pyles
So not quite perfect. Still not getting a toaster like Leslie. I'm not disappointed in it, obviously. It's in a pretty solid place. I'm glad I have a buffer in case something happens. I'm hoping to pay off my student loans maybe this year. And that's my oldest line of credit. Or my oldest. Yeah. Oldest loan on my profile. And if I pay that off, I know my credit score is going to go down.
- [40:34]
Elizabeth Ayola
Yeah.
- [40:35]
Sean Pyles
And so I'm sort of almost excited about that just to test my sense of. Of independence and agency as a person in this world where I'm like, look, my credit score doesn't define me that much, so let me make it drop on purpose and see how I feel. I say that coming from a place of already having a good score. Right. So it's not like this is going to harm my financial life if I pay off this loan. But I feel most of the time fairly ambivalent about my score because I know I've done the right things and I've gotten it into a healthy place.
- [41:03]
Amanda Barroso
Look at you. I'm Proud of you, Sean.
- [41:05]
Sean Pyles
Thank you. I mean, I used to check my credit score every single week and I think that focus on it helped me get to where I am now where I can just sit back and relax.
- [41:14]
Amanda Barroso
Also, last year, didn't we read your credit report and wasn't utilization like 2% and I sent you on a mission for your honeymoon to like get it to 5% or something.
- [41:25]
Sean Pyles
I charged a lot on my credit card during my honeymoon, but I like to pay off my credit cards a couple times a month because I know I have a habit of overspending if I'm not monitoring things. So that's part of why my credit score stays higher is I have regularly low utilization. Well, Amanda, thank you so much for coming on and chatting with us about all of this.
- [41:43]
Amanda Barroso
Thank you guys. It's always fun to chat. And Leslie, I'm sorry you didn't get your toaster girl, but keep on keeping on.
- [41:50]
Sean Pyles
Yeah, and that's all we've got for this episode. Remember, listener, that we are here to answer your money questions, so send them our way. You can leave us a voicemail or text us on the nerd hotline at 901-730-6373. That's 901-730-Nerd. You can also email us at podcastnerdwallet.com or leave us a comment on Spotify or YouTube.
- [42:10]
Elizabeth Ayola
Follow Smart Money on your favorite podcast app. We really don't mind which one is your favorite, but whether that's Spotify, Apple Podcasts, iHeartRadio. We want you to automatically download new episodes on there.
- [42:22]
Sean Pyles
Here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
- [42:32]
Elizabeth Ayola
This episode was produced by Tess Vaglund. Hilary Georgi help with editing. Eve Krogman edits our audio and our video. And we want to say thank you to NerdWallet's editors for all of their help.
- [42:42]
Sean Pyles
And with that said, until next time, turn to the nerds. Hey Smart Money listeners. We have a brand new email newsletter and it's completely worth signing up for, especially since it's free.
- [42:57]
Elizabeth Ayola
Every issue has clips from recent episodes, links to stories you might have missed, and also behind the scenes commentary from me, Sean and our producer.
- [43:06]
Sean Pyles
Some of it is stuff that doesn't make it into the episodes, the context, the moments, the takes we didn't plan on sharing.
- [43:12]
Elizabeth Ayola
You can think of it as the group chat for Smart Money fans. I'm gonna be sharing inside details about parenting and money. Yes, I'll be sharing all the juicy stuff stuff.
- [43:22]
Sean Pyles
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- [43:35]
Elizabeth Ayola
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