Many of the most popular New Year's resolutions involve health and finances. They require similar approaches, like patience, discipline and self-control, and even their measurements are alike. Here are a few ways your credit score is like your weight.
1. It's Important to Your Health
Your weight isn't the only indicator of your overall health, but it's a good benchmark. Similarly, your credit score doesn't give a complete picture of your financial status — that's why lenders ask about other things, like your income and ability to repay a loan, when considering you for credit. It's not everything, but you certainly shouldn't ignore your score, because it contains a wealth of information about your financial health.
2. It Can Signal Other Problems
Suddenly gaining or losing 15 pounds isn't something to ignore. In the best case scenario, the change merely reflects a change in your eating or exercise habits — for better or worse — and you can use that information to adjust your behavior accordingly. Extreme weight fluctuations may indicate something more serious, so if you can't think of an explanation for them, you might need some help figuring out what's going on, before more damage occurs.
It's the same with credit score points. If you vastly change your credit card use from month to month, it won't be too surprising to see your score change 20 points or so, but if you haven't been doing anything different, the score change could point to a big problem. For example, credit card fraud and identity theft often result in severe drops in credit score, but if you're not checking your credit score, the unauthorized activity may go on, continuing to cause damage until someone catches it.
3. It Can Save You Money
Health problems are expensive, and it's no secret a lot of health issues are related to weight. Obesity puts you at risk for costly health issues like type 2 diabetes, high blood pressure, heart disease and some cancers, among other things, not to mention the higher insurance premiums you may pay because of your health history.
Credit scores have a similar impact on your finances. A few dozen credit score points may mean you pay hundreds of thousands more dollars in interest over your lifetime, because your score will affect what interest rates you qualify for when applying for loans. You can get a good idea of how much your credit score is costing you with this lifetime cost of debt calculator, which lets you see how much you can save by improving your credit.
Bad credit will affect you beyond interest rates. Some states charge higher auto insurance premiums for drivers with bad credit, and you may have trouble finding work or housing with poor credit, as well. Even if you find someone willing to rent to you or supply you utilities, they may require higher deposits upfront, to minimize their risk exposure when taking you on as a customer.