Is credit still important?
Even if you're not in the market for a loan, good credit can have a major impact. Landlords, insurers and employers frequently use credit information as a litmus test to see if the people they're dealing with are reliable and responsible. Bad credit can suggest you're a risky bet.
Your credit score isn't as important if you're retired and don't plan to borrow money anymore. However, there are still ways it can affect your life, such as impacting how much you pay for car insurance.
If you don't have good credit, you may miss out on securing a low-interest rate on a mortgage, personal loan or credit card, and wind up paying more during the term of your loan. But if you establish a good credit score, you can save money on interest payments and use the savings to invest in your future.
You can leverage great scores into great deals — on loans, credit cards, insurance premiums, apartments and cell phone plans. Bad scores can hammer you into missing out or paying more. Having good or excellent credit can provide significant savings over your lifetime.
Living well without credit is certainly possible. We'll be straightforward here: Many things in life are much easier when you have a good credit score. But lacking a credit score doesn't mean you'll be forced to go live in the woods. You can theoretically live your life without having any credit to your name.
Your FICO® Score falls within a range, from 740 to 799, that may be considered Very Good. A 780 FICO® Score is above the average credit score. Borrowers with scores in the Very Good range typically qualify for lenders' better interest rates and product offers.
A 750 credit score is often considered very good — or even excellent. A very good or excellent credit score can mean you're more likely to be approved for good offers and rates when it comes to mortgages, auto loans and credit cards with rewards and other perks.
He advocates for a life free of debt, suggesting that people should focus on paying off their existing debts and avoiding new debt. Instead of working to boost your score, let your credit score "dwindle until it's completely extinct," he said.
Credit cards make it all too easy to overspend. Buying on credit can also make your purchases more expensive, considering the interest you may pay on them. Getting into too much debt can not only hurt your credit score but also strain relationships with family and friends.
Having no credit is better than having bad credit, though both can hold you back. Bad credit shows potential lenders a negative track record of managing credit. Meanwhile, no credit means lenders can't tell how you'll handle repaying debts because you don't have much experience.
Does credit matter if you're rich?
Despite what many people think, your credit score is completely independent of your income.
| Age Bracket | 2022 |
|---|---|
| 18–25 | 679 (Good) |
| 26–41 | 687 (Good) |
| 42–57 | 706 (Good) |
| 58–76 | 742 (Very Good) |
A perfect credit score of 850 is hard to get, but an excellent credit score is more achievable. If you want to get the best credit cards, mortgages and competitive loan rates — which can save you money over time — excellent credit can help you qualify.
According to data from the Consumer Financial Protection Bureau (CFPB), as many as 26 million Americans are “credit invisible,” meaning they have no credit history.
Do unused credit cards hurt your score? Even if you may not use your card often (or at all) it's important to remember that it still affects two credit scoring factors: your length of history using credit and your utilization rate.
Living without credit cards may make budgeting easier. Budgeting can help you ensure you're intentional about where you spend your money and puts you in control. Credit cards can tempt you to spend money you don't have yet, since charges aren't due until the end of your next billing period.
While any score above 700 tends to be considered "good," an elite group of people have excellent scores that will snag them the most favorable rates. Only about 20% of Americans that have a credit score land above the 780 mark, which is considered the top tier, according to credit reporting agency TransUnion.
This depends on your financial situation. For those with a good credit score — around 670 and up — a $30,000 personal loan may be pretty easy to get.
Consider yourself in “good” shape if your credit score is above the average for people in your age group. Given that the average credit score for people aged 18 to 25 is 679, a score between 679 and 687 (the average for people aged 26 to 41) could be considered “good”.
While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
What is the average credit score in the United States?
In the U.S., the average credit score is 716, per Experian's latest data from the second quarter of 2023. And when you break down the average credit score by age, the typical American is hovering near or above that score.
| Generation | Average credit score (FICO) in 2023 |
|---|---|
| Generation Z (18-25) | 680 |
| Millennials (26-41) | 690 |
| Generation X (42-57) | 709 |
| Baby boomers (58-76) | 745 |
One of Ramsey's more famous stances is against credit cards. He argues that credit cards are dangerous financial products that can easily lead you into debt. He often advises his followers to cut up their cards and only use cash.
By 1986, Ramsey had amassed a portfolio worth over $4 million. However, when the Competitive Equality Banking Act of 1987 took effect, several banks changed ownership and called his $1.2 million in loans and lines of credit because he was over-leveraged. Ramsey was unable to pay and filed for bankruptcy in 1988.
If someone has a lot of money but also a lot of delinquencies, credit card issuers see that he's not able to pay a bill on time. So, unless millionaires want to pay more in interest than they need to and have access to fewer rewards, they should be maintaining a healthy credit score.
