Why do people obsess over a 800 credit score when this score is just as good?

Ralph
00:00:00

I wish I had never looked at that number.

Those were the tearful words from Jennifer, who emailed me at 2am devastated about her 765 credit score, she's put her entire life on hold, delaying buying her dream home, passing up a promising business opportunity, and even straining her marriage, all because she's obsessed with reaching that perfect 800.

What she didn't know and what I learned during my years as a crediting executive is that this obsession might be doing more than just causing sleepless nights. It could be blocking God's blessings in your life.

So today I'm going to share exactly why chasing that 800 score might be the very thing holding you back from that financial breakthrough and how one small mindset shift can transform your entire financial future.

So stay with me today as we explore the shocking truth about credit scores that your bank doesn't want you to know and discover how to find true financial peace without sacrificing your faith or your dreams. Plus, listen to this. I'm going to reveal three secret factors that matter more than any credit score.

These are factors that I use to approve millions in loans during my banking career. Are you ready to break free from the credit score trap and start living that abundant life God intended for you? Well, this show's for you.

Podcast Announcer
00:01:18

Welcome to the Ask Ralph Podcast, where listening to an experienced financial professional with over 30 years of experience can help you make sense of confusing questions, current headlines and industry trends about taxes, small business, financial decision making, investment strategies, and even the art of proper budgeting. Ask Ralph makes the complex simple by sharing his real world knowledge from a Christian perspective with all things financial.

Now here's your host, Ralph Estep Jr.

Ralph
00:01:47

I'm truly blessed to have you join me today as we explore this journey together, mastering our finances from that Christian perspective.

Now, if you missed yesterday's show, I talked about protecting yourself from computer hacking and I shared seven essential warning signs that could save your financial future. Listen, cybersecurity is a crucial part of your financial wellbeing in today's digital age.

So if you missed it, I'm going to encourage you to go check it out. Well, let me get right to it and share this heartfelt message that I got from Jennifer from Dallas.

The truth is, it arrived in my inbox at 2am Just a couple days ago and she wrote this. Dear Ralph, I'm writing this in tears, unable to sleep, just like so many nights before.

My credit score is 765 and I've been obsessively checking it every Day, sometimes multiple times a day. My husband says I'm becoming addicted to the credit monitoring apps, and he's probably right. The worst part, I'm putting my entire life on hold.

We've delayed buying our first home. A dream you've had since getting married.

Three years ago, I passed up a fantastic business opportunity to open a small Christian bookstore in our community because I convinced myself my credit score wasn't perfect enough. Every time I see that number 765, I feel like I'm failing.

My friend Jolene somehow maintains an 800 plus score and I can't help but compare myself to her. I've been praying for guidance, but the anxiety just keeps building.

I make all my payments on time, I have a stable income, and my debt to income ratio is healthy. Still, this number haunts me. Am I making a terrible mistake by fixating on reaching 800? Is my current score already good enough?

Please help me understand if I'm letting this obsession steal the joy from God's blessings in my life. And she said this in faith, Jennifer. Well, Jennifer, you've said a lot there, and your question deeply resonates with me.

And I know many listeners are sitting there silently nodding their heads right now because they probably feel the same way and they're recognizing their own struggles in your words. Well, today I'm going to unlock some secrets for you that will help you get past that obsession with that 800 score.

So again, thank you for sending me your question. And as always, don't forget, we do a live show every Tuesday night at 7pm Eastern Time. We can discuss these topics in real time.

You get to that by going to Ask Ralph podcast. So put that on your calendar every Tuesday night, 7:00pm Eastern Time. Ask ralphpodcast.com live.

Well, Jennifer, before we get into the meat and potatoes of today's show, let's look the script for, for some grounding. There's going to be some technical aspects of credit scores. But I found this verse that I think speaks directly to that anxiety you're feeling.

It's, it's that same anxiety about financial numbers and measurements. And it comes to us from the book of Matthew, chapter 6, verse 27. And it says this. Can any one of you, by worrying at a single hour to your life.

Well, let me think about, think about that for a second. Well, that's just direct and blunt. And this wisdom applies perfectly to your obsession with credit scores.

Well, I thought I'd start today by telling you about my CPAP journey. You know cpap, these things you wear because maybe you got sleep apnea. And I tried this about eight or 10 years ago.

I got the CPAP machine and I tried it for a year and let me just tell you, I could not sleep well. I guess about a year ago my wife started giving me that nudge in the middle of the night. Then it became more of a fist fight.

She says, ralph, you just won't stop snoring. So I finally broke down, I went to see the sleep doctor. They did an at home sleep test. And yep, they said you need one of these CPAP machines.

So I got this CPAP machine last week. And this thing has been a battle. Like I got it all set up. It's pretty cool. It's got that, the heated tube that goes to your nose.

And the whole point of it, if you don't know what I'm talking about, is to keep you breathing throughout the night. So I got this thing all set up and I'm downloading the app and I'm looking at this and I'm saying, oh, wait a minute, this is interesting.

They've got a scoring model. Well, we already have a sleep number bed that gives me a score every night for my sleeping on the bed. Well, now I've got a score for this cpap.

And let me just tell you, I'm a competitive dude. So now every day I'm obsessed. Did I get that hundred points? Did I get that 100 points on my sleep number bed? Did I get that 100 points on my CPAP?

And Jennifer, think about it. It's just like that elusive 800 point credit score. You don't have to score 800, I don't have to score 100. So let's talk about that today.

Let me take you back to my time as a credit union executive. And this really changed my perspective on credit scores.

Before getting involved with the credit union, I really didn't have a lot of understanding about this.

But one of the things I want to brag for a second, I was actually the first credit union in the area here to start doing what we call risk based lending, which is basically making loans based on your credit score. And think about it like this. You might be struggling with spiritual battles in your financial decisions.

And I witnessed countless people fighting this unnecessary war with her credit scores. And it was that, man, I have seen it. I've been in the trenches on the front line of this. Let me tell you about Vanessa.

Now, Vanessa was this dedicated entrepreneur. She came to me for a business loan. She wanted to open a beauty salon. I Mean, Vanessa was great at what she did.

We had the loan officer pool of credit. They brought it to me. I looked at the top of the credit score,775. I was like, well, this is a good loan.

But when I went and talked to Vanessa, she was devastated. She said, ralph, I'm embarrassed. My score is only 775. It wasn't 800. And she had this false belief that she had to have that 800 credit score.

Like that was somehow the pinnacle of credit. And like many other Christians, she's struggling with financial decisions.

And when I pulled up the hood and looked underneath the hood, she felt she wasn't doing enough. That 800 loose scores, it made her feel like she wasn't good enough. And she shared me.

She said, I've delayed my dream of opening my business for two years. Been checking that credit score every day. I've been waiting for that perfect number.

So here's what's fascinating and here's what transformed my understanding. The thing is, when you really look at credit, it's not just about that credit score.

Now some lenders, they're going to qualify you based on that credit score. I think they're making a huge mistake. I did a show the other day about choosing a credit union over a bank.

It's one of the things I like about a lot of credit units. They really get a little more in depth. So as a lending executive, let me tell you what we really looked at. We did look at your credit score.

I'm not going to lie to you and say we didn't, but we really focused in on the three Cs of credit. And the first one of those is character.

If you remember, a few days ago, I talked to you about this guy James that I met at a conference a few years ago. And he was that guy that he taught me all about integrating faith into my business decisions.

And really what he was talking about was having that character. And when we're looking at credit, we're looking at that same thing. We're looking at your character. We're looking at your payment history.

We're looking at your reliability. And here's a truth bomb. It's about integrity, not perfection. We're not looking for that 800 credit score.

And I'll talk to you about some statistics in a few minutes. But it's not about perfection. It's about integrity. It's that payment history, that reliability, that's really the key.

So number one C of the three Cs is character. Number two, capacity. This measures your Ability to repay the loan.

So when I was doing these examinations of these loans, I would look at your debt to income ratio. Basically how much debt do you have versus your income?

And if you were at, you know, 70 or 80%, I don't care what your credit score is, that was a red flag. But if you're in the 20s or 25s, I'm liking that, your capacity, we're also looking at your income stability.

Listen, if you just got a job yesterday in a new field, there's not much stability there. And then we're also looking at that bigger picture, that monthly income versus expenses.

And last but not least, as capacity, we're looking at your future earning potential. I remember several times I had a client that came in, maybe they had.

I shared with you the other day that one of the big groups of my credit union was the Chrysler employees manufacturing facility in Newark, Delaware. And when somebody would join the facility, I knew they had great earning potential. So I saw the capacity in that.

So that's the first, that's the second one. So first one, like I said, character. Second one, capacity. And the third one was very blunt. It's collateral.

We looking at your overall financial picture. We're looking at your assets, your savings, what do you own, any investments that you have and what emergency funds you have set aside.

And if we're doing a car loan, we're looking at the value of the car. If you're doing a home loan, we're looking at the value of the home. And it's all part of those things.

So you didn't hear me mention credit score much. It's those three Cs. And these are really the keys to making lending decisions. Now you could argue that these three Cs are baked into a credit score.

And the truth is they probably are. But this is really that secret sauce. It's that character, it's that capacity, it's that collateral.

And Jennifer, here's some statistics that I found that might help you sleep better tonight. And I was kind of surprised by these too. But think about this one. Only 20% of Americans have a credit score above 780.

So if your credit score is 780 and above, you're already in the top 20%. Here's something that's going to rock your world. Listen to this one.

The difference in loan terms between A score of 760 and 800 is typically less than a quarter of a percent of interest. We're not talking about a big deal here. Here's a dirty little secret.

Lenders don't want to tell you, most of the time their top tier rates start at 760 to 780. Might be saying, Ralph, what are you talking about? Well, most lenders have tiers.

Some of them call them top tier, some of them call them A, B, C, D, all those type of things. Well, they're in ranges. And what I have found is that anybody that's got a credit score over 760 is generally in that top range anyway.

So you're stressing about that 800, but it's really 40 points less and you're still in that top tier. And think about this one. 67% of major lenders consider a 760 plus credit score as that highest category.

So see, you're obsessing about this 800 credit score, but even the lenders know that 760 or 780 and above is really good. But here's what really matters, and this is the honest to God truth. I've seen people with perfect credit scores making poor financial decisions.

I saw it time and time again. Loan officer would bring me a loan, the credit score was 795. And this person had debt like crazy. They were maxed out on everything.

Now sometimes that's going to affect the credit score. But I have seen people with perfect credit scores making poor financial decision.

And then I've seen other people with low credit scores practicing excellent financial stewardship. It's like that dark night I spent in my office. I was staring at those impressive numbers, but I was feeling empty inside.

I shared that as part of a past episode a couple weeks ago. So you can have that fantastic credit score, but that doesn't necessarily mean that you're making great financial decisions.

You could have a low credit score. Maybe you're in that rebuilding phase you're building back that you're focusing in on that character, that capacity and that collateral.

Well, let me tell you about another guy and this guy's name. I'll use the name Tom. He was another one from my credit union days.

Now he came to me with a 785 score and again he's saying to me, ralph, he said, I'm sorry that it's not higher. But here's the deal. When I looked at Tom's complete financial picture, I was amazed. Think about this. Here's Tom. 785 score, which is in the top tier.

This guy also had six months of emergency savings. I don't know too many people that have that. He ran a successful small business and he even mentored entrepreneurs in his church.

And he was saying to himself, he was saying to me, even sorry about it not being hired. And Tom taught me something profound. And let me lay this on you.

Just as God doesn't want you to choose between serving him and being successful, you don't need to choose between financial stability and having a perfect credit score. Think about it this way. Your credit score is just one piece of your financial testimony.

It's like focusing so much on one verse from the Bible that you miss the beautiful message of it in its entirety. And listen, as Christians, we're called to be good stewards of our resources, not perfect scorekeepers.

So I guess I've got to, I've got to own this myself and not be so worried about that CPAP score tonight or that sleep number bed score. And listen to this. During my years at the credit union, I never once, and I thought about this to prepare for today's episode.

I never once rejected someone with a 765 credit score solely because they hadn't reached 800. I can't ever think of a situation where I said, well, I'm not going to apply this loan.

I'm not going to approve this loan because your credit score is not 800. In fact, here's what I'm going to tell you what I noticed. Those people obsessing over reaching that 800 score often delay important life decisions.

They miss opportunities for growth like you, Jennifer. They're suffering from that unnecessary anxiety.

They're apologizing for something, but they're forgetting to celebrate their current financial blessings. Look at tomorrow. 785 score, six months of savings, running a great business, doing all the things. That's the time to celebrate.

So just as I learned to find purpose and peace in my business decisions, you need to find peace in your credit score. Stop checking that thing ten times a day. I'm not saying don't check it at all.

If you listen to my show, you know, I talk about keep an eye on your credit, but here's the big picture takeaway. Remember, God cares more about your heart and how you use your resources than achieving a perfect number.

Now, I'm going to get to some action steps in just a moment. If you really want to focus on how to make your credit better, I'm going to do that in a few moments. But let me ask you this.

Let me ask you a real blunt question. Has this show made a difference in your life?

Have you had that, you know, that aha moment when something clicks about your finances and faith that could be exactly what someone else is searching for right now. And here's why your voice matters. Every day.

People just like you are looking for guidance and your story could be the nudge they need to transform their financial journey. And your honest review helps them find us in a sea of podcasts. So here's what I'm going to ask you to do. It has quick impact, but lasting difference.

Take 60 seconds. Go to askgroundpodcast.com review and share a review. Share your breakthrough moment. Help someone else find their path to financial wisdom.

Think about that most valuable lesson you've learned from this show. That insight you're hiding. It could be exactly what another listener needs to hear. Be their sign. Be their guide. Please do this for me.

Go to Ask Ralph Podcast and together. Because we're building a community where faith and finance work in harmony. And your review is more than feedback.

It's a beacon for others seeking the same clarity you found. Doesn't have to be complicated. Just give us a five star review and talk about one thing that's impacted you on the show.

Again, that's Ask Ralph podcast.com review. And I would really appreciate if you do it today.

Well, now let me get to those detailed action steps and I'm going to tell you, these steps have helped countless members of the community achieve financial peace without obsessing over that perfect score. So number one thing, Jennifer, I hope you're making notes. Number one thing, implement a healthy credit monitoring schedule.

Delete those stupid credit monitoring apps from your phone. If you want to have one, keep one. Set a calendar reminder for the first of each month and go take a look at your credit score then.

And I said use just one monitoring service, like online. I have Norton 360. So if something happens on my credit, it's going to pop up.

And then document your score in a simple spreadsheet to keep track of the trends. That way you can look at and say, oh, here's where it was, here's where it's going now. You may need to make course corrections.

You may find that your capacity has gotten bigger. You got a credit card max out or something like that, and that's affecting your credit score.

So I'm not saying don't change things, but celebrate those improvements no matter how small they are. If your credit score went up by three points, celebrate that, but stop obsessing on it.

So that's number one, implement that healthy credit monitoring schedule. Number two, create a financial gratitude practice. You know, I talk about this all the time.

Start a gratitude Journal specifically for financial blessings and document those weekly financial victories.

Because when you start to feel bad about yourself, you can go look at that journal, that gratitude journal and you can see how you're making victories. And when you're praying, include prayer requests about your financial journey.

It's okay to pray to God about your finances and share your progress with accountability partners and focus on what God has already provided. You could be that beacon of light to someone else just like I asked you for those reviews today.

Share that progress with other people because you might be what makes the difference in their life. So that's number two, Create a financial gratitude practice. Number three, establish a strong financial foundation just like Tom did.

Build that emergency fund covering six months of expenses. Now listen, I don't expect you to get there overnight, that's a big ask. But build that momentum.

Another thing you can do is set up automatic bill payments to maintain payment history. That's one of the things that hurts people. Most of the time your credit's going to take a ding if you make a late payment.

So set up those automatic payments. And I've talked about this time and time again. Keep that credit utilization below 30% on all your cards.

That is the big record to those credit scores. And like I said, review your credit report for heirs quarterly. You don't need to be doing this every day.

Another thing to do is consider joining the Ask Graph Show Insiders group. That's@askgroundpodcast.com group. So that's number three. Establish a strong financial foundation.

Keep an eye on it and keep an eye on what's moving forward. Now number four, this one is crucial. Jennifer, develop a holistic financial approach. This is where I'm going to encourage you.

Schedule a meeting with a financial advisor. You can schedule a meeting with me. Create a comprehensive budget that's aligned with your values.

Set up automatic contributions to your retirement accounts. You notice I'm not saying anything about credit. I'm talking about that holistic financial approach. Review your investment strategy.

Document your financial goals beyond just credit scores. You can't just obsess on that credit score. Look at your overall financial picture. Look at your budget. Do those retirement account contributions.

Look at your investment strategy. Build that emergency fund. Number five, build a support system. You don't have to walk this journey alone.

Join our supportive community of like minded believers. Connect with others who understand your journey.

Access proven financial solutions, learn faith based money management strategies and transform financial stress into peace of mind. Again, you don't hear me obsessing about credit scores. Number six. Practice financial stewardship. That's what this show is all about.

It's all about finding and practicing that financial stewardship. Set aside a percentage for charitable giving. Review financial practices. Do that monthly. See what you're doing.

Create a system for organizing financial document and like I said, mentor others. Maybe you'll find these faith based financial management plans you can help with.

And here's last but not least, the one key takeaway today, stop obsessing about your credit score. But this is the other key takeaway. Start each financial decision with prayer. Ask God for his wisdom and guidance.

Lord, I'm getting ready to make a decision. What would you have me to do? And then shut up and listen for his response. You might not like it, but he'll give you a response.

And remember, these steps work together synergistically to create just not better credit. But what we're trying to get to is true financial peace. And think about it.

Implementing these systematically, you're not just working towards financial freedom, which is what we're all trying to get to, but you're aligning your finances with your faith. You're putting that first. And let me just tell you something, everything else is going to come into congruence when you do that.

Now I know we've covered a lot about credit scores and why obsessing about 800 might be holding you back from God's plans for your financial life. Well, tomorrow I'm going to change the topic altogether.

I'm going to talk about some important new tax issues coming in 2025 that you need to prepare for. Now, a little spoiler alert. I'm going to give you some, but I think we're going to have a whole bunch of changes.

We've got a new administration coming in. We got a new president, we got a new Congress.

I think you might see some really amazing things happen in 2025, but I want to at least give you the things that we know about right now. Remember this. My passion is to help you achieve financial success.

As you can tell, my passion is about helping you live out your dreams and grow in your faith. It all goes together. And I know together we can master your finances from that Christian perspective.

So as I always end this show, stay financially savvy. Jennifer, stop obsessing about that credit score. You're never going to find perfection, my friend. Do your best.

So stay financially savvy and God bless you.

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