850 Credit Score or $600,000?
A good credit score comes with a lot of advantages, perks, and even opportunities. And many people tend to have misunderstandings about how credit scores actually work.
$600,000 vs 850 credit score
I came across a hypothetical situation on [Black] Twitter in the midst of users making jokes about “LLC Twitter”.
LLC Twitter started trending after a faction of people suggested $600 is more than enough to either flip, save, or start a business (hence the Limited Liability Company reference).
For context, if you’re not in the United States or not familiar with U.S. politics — the government has been debating whether to give its citizens either $600 or $2000 the last several months. (Spoiler alert: it won’t be the latter as the $600 are all but sure to start going out to Americans soon.)
A somewhat unrelated scenario came up while browsing through the jokes and memes, and it goes like this:
Would you take $600,000 or a 850 credit score?
The user replies that an 850 will be more beneficial throughout your lifetime and will save/make you more money.
I’m here to tell you why that philosophy is incorrect and just as ridiculous as picking a hypothetical dinner meeting with American rapper and businessman JAY-Z over $50,000 to “pick apart his brain”.
Cash Is King For A Reason
Yes, cash is still king even if some are speculating the U.S. dollar will lose some value next year, or you’re a believer Bitcoin and cryptocurrency will eventually go mainstream.
And that’s because, whenever you’re in a tight spot, some cash can get you out of it since it’s universal (for the most part).
It’s tangible; it can be exchanged for other currencies; and it’s readily accessible.
About one in four Americans don’t have $1,000 for an emergency. And the COVID-19 pandemic has assuredly exacerbated that issue.
So leaving cash on the table whether you’re in debt or strapped for emergency cash would be a boneheaded move and it’s just not realistic for many American’s to even consider leveraging 850 score with nothing in their name.
Consider this: one of the wealthiest men in the U.S. currently has both massive amounts of debts and a perfect credit score.
That would be one Donald J. Trump
Trump can keep borrowing money, because he can always liquidate his [real estate] assets if any of his bills here (or abroad) came due tomorrow.
A regular person, on the other hand, doesn’t have that luxury.
You taking the $600,000 and paying off $15,000 in debt still leaves you with $585,000 which is more than you were worth prior to that. And you can pick up a couple of investment properties along with other stock investments to diversify your portfolio.
The rest could be left to savings.
But what if you took the 850 score — how would you maintain it?
You can’t go to the bank and get a loan to start a business. Venture capitalists will know you don’t have any assets to liquidate in case things go south.
But with the money, you could always plan the numbers for opening up a franchise or starting your own business.
And sure, paying off your debts right away won’t boost your credit score; and you have to keep your accounts revolving, diversified, and keep your payments on-time.
But with investments, savings, a steady job, and cash in hand — you’ll be on your way to a higher credit score, regardless.
Why You Probably Shouldn’t Try To Achieve A 850 Score Anyways
An excellent 850 credit score isn’t impossible. It’s just that a 750 score is just as admirable and it sort of stops mattering after you pass that point.
What really counts is your your income, net worth, on-time payments, and many other factors are just as important. And at higher scores, you’re basically not as much of a liability as others with lower scores. Lenders see you as highly unlikely to default on your loan.
Trying to achieve such a high score such as 850 is like being the strongest guy at the gym and opting to take steroids.
If by some miracle that scenario ever presents itself, just take the cash.
Do you agree or disagree?
**Disclaimer: This article is not intended to be financial advice and it should not be misinterpreted as such. Always speak with a professional regarding your personal financial decisions.*