800.352.5837

Your Financial Success Might Just Depend on Your Credit Score

Jan 26, 2016

If you watch the NFL Playoffs this weekend it’s quite likely that at least a couple of commercials will pop-up for websites claiming to help you track your credit score. There are a number of sites out there and based on the amount of advertising it’s clearly big business…the question becomes why?

For most Americans your credit score is very important, but for physicians I would argue it’s even more important. As a physician (even while in training) you will have access to numerous lending opportunities that “regular” people don’t have access to. Everything from special mortgages, student loan refinancing opportunities, even unsecured loans are available to physicians. The hook however, is often your credit score.

A low credit score could prevent a physician from having access to these lending opportunities, and a less than ideal score could potentially raise interest rates on any loan offered. Adding 1% to a loan might not sound like much, but it can easily equate to thousands of dollars per year depending on the size of the loan. For example, a slightly higher interest rate on your mortgage due to a low credit score could cause an enormous amount of additional cost over time.

The bad news is most people don’t understand how their credit score is calculated. The good news is that the logistics are fairly simple.  The three main credit reporting bureaus (Equifax, Experian, and TransUnion) may calculate slightly different scores, but in general your credit score is composed of 5 main features. 

  • Payment History (35%): The biggest chunk of your score revolves around whether or not you pay your bills on time.
  • Amounts Owed (30%): This refers to how much credit you have access to versus how much credit you utilize. Maxing out your credit card every month is not a good thing, ideally you want to be using between 20-30% of your available credit on a monthly basis. One tip here would be to ask your bank to increase your credit limit, which could instantly jolt you into an ideal credit utilization ratio.
  • Length of Credit History (15%): Theoretically a longer credit history results in a higher credit score.
  •  Credit Mix (10%): They like to see a variance in types of credit used (credit cards, retail, mortgage, etc.)
  • New Credit (10%): This refers to hard inquiries into your credit. The more your credit is pulled, the more it shows a negative representation on your overall credit score. With that said, this is a small portion of your score.

Source: MyFico (http://www.myfico.com/crediteducation/whatsinyourscore.aspx)

So what is a good score? I typically counsel my clients to shoot for a score of at least 720. At that level, there isn’t much that you won’t qualify for from a lending standpoint. If you happen to be below that level it would be wise to start working with a financial professional to help build your credit score.  

Compliments of Wes Sharp, Financial Advisor for North Star Resource Group. As seen published in Med School Financial.

North Star Consultants, Inc., Insurance Products and Services| CRI Securities, LLC - Securities and Investments | Securian Financial Services, Inc. – Variable Products and Securities | North Star Resource Group offers securities and investment advisory services through CRI Securities, LLC and Securian Financial Services, Inc. Members FINRA/SIPC. 2701 University Avenue SE | Minneapolis, MN  55414 | 612-617-6000 | CRI Securities, LLC is affiliated with Securian Financial Services, Inc. and North Star Resource Group.  North Star Resource Group is not affiliated with Securian Financial Services, Inc. but is independently owned and operated. 2315374/DOFU 11-2018

Return to Wesley's Homepage



Tags: Credit score
Category: