Written by: Dan Kofke, Motivational Mentor
March is National Credit Education Month in the United States, which makes it the perfect time to reflect on the importance of credit. Most people know that a high credit score is good and a low credit score is bad, but there are far more nuanced elements involved. So, in honor of Credit Education Month, we will take a closer look at credit scores and how they can impact your financial wellness.
What Is National Credit Education Month?
There is no specific reason that March was chosen as the official month for credit education, but this does not take away from its importance. Just like May is “Healthy Vision Month” and April is “Financial Literacy Month,” March is “National Credit Education Month.” And like those other months, March draws awareness to an important topic that is often overlooked. In this case, it is credit education.
Why does credit education warrant its own month? Because millions of Americans have to deal with the negative effects of having no credit or low credit scores. In many cases, people may not be aware of how their behaviors are hurting their credit. Therefore, using March to reevaluate your credit score and better understand how credit works can help ensure a better future for you and your family.
The Importance of Credit Education
A good credit score can make your life easier and less expensive. Alternatively, a poor credit score can make it more difficult to buy a car, get a loan, or even secure a new job. Lenders, landlords, and many employers check your credit history to study your fiscal responsibility. If your score does not meet their standards, you could lose out on opportunities and have to spend more on things like credit card or mortgage interest.
But what is a good credit score? The higher the better, but anything above 700 is considered to be “good” credit. If you have a score above 750 or even 800, then you have “excellent” credit. This will allow you to negotiate lower interest rates on loans, car insurance, and credit cards. A good or excellent credit score also has the power to show your fiscal responsibility to anyone who wants to run a credit check on you.
Though an important aspect of Credit Education Month is reevaluating what your credit score can do for you, it is equally important to understand exactly what a credit score means. Most institutions (banks, lenders, etc.) use it as a way to measure fiscal responsibility. In other words, they want to make sure that you know how to manage your money.
However, the truth is that you can be very responsible with your money and have a poor credit score or no score at all. This is because your credit score is essentially a debt score. If you have never had any debt, you will not have a credit score. Similarly, if you only have one credit card that you do not use frequently, there will be a limit to how high your credit will go. This is because your credit score factors in the number of accounts (credit cards, loans, mortgages, etc.) you have, how long you have had those accounts, the percentage of available credit you use, and your ability to consistently make payments on time — among other things.
Thus, a good credit score is important to have, but at the same time, you shouldn’t accumulate debt just to watch your credit score go up. The key is to pay down your credit cards as quickly as possible (while still using them regularly) and make loan payments on time. As long as you take on some debt and make sound financial decisions, you will build up your credit over time.
Enhancing Credit Education For Your Workforce
While no one should take on unnecessary debt just to build credit, everyone should practice good financial habits and understand how their decisions can affect their credit score. Fortunately, if you work in HR for an organization that could benefit from financial education, Mentoro has the expertise and resources to educate your workforce on the power of credit. Mentoro offers essential financial education services and resources, as well as tips and tricks on building credit and improving overall financial wellness.
If you want to learn more about National Credit Education Month or you are interested in acquiring a financial wellness program for your organization, be sure to contact the experts at Mentoro today!