In recognition of National Credit Education Month, I wanted to share a few important insights about credit — what it is, how it can work for you, and how to spot when it may be working against you.
Credit plays a central role in your financial life, whether you’re applying for a mortgage, leasing a car, or simply trying to qualify for a better interest rate. But not all credit is created equal, and not all debt is productive. Below is a breakdown.
What credit and credit scores are:
Before we get into the nuances of credit, I want to start with a reminder of the definitions of credit and credit score.
In short, credit is a contract in which the borrower receives an initial sum of money or another unit of value in exchange for a promise to repay the lender, often with interest. A credit score, on the other hand, provides a snapshot of a person’s creditworthiness, with scores typically ranging from around 300 to 850 and higher numbers indicating better credit history.
When credit can be a tool:
- It helps build your credit score – A strong score can unlock better loan terms and lower interest rates.
- It enables major purchases – Credit allows you to buy a home, car, or fund education while paying over time.
- It offers emergency flexibility – A healthy credit line can serve as a safety net during unplanned events.
- It provides rewards and perks – Used responsibly, some credit cards offer cashback, travel benefits, or purchase protection.
When credit can hurt:
- If you carry high-interest balances – Revolving credit (like credit cards) often has rates above 20%, compounding quickly.
- If you’re using more than 30% of your available credit – This can negatively impact your credit score.
- If you open too many new accounts at once – Frequent credit inquiries can make you look risky to lenders.
- If you only focus on minimum payments – This often extends debt repayment by years and costs more in interest.
How to assess your current credit health:
Ask yourself:
- Do I know my current credit score and what factors are influencing it?
- Am I using credit to build long-term value (like a home) or to cover short-term gaps?
- Am I managing my credit balances and paying more than the minimum?
- When was the last time I checked my credit report for accuracy?
If you’re unsure how your current credit profile fits into your broader financial picture, especially as it relates to saving for retirement or estate planning, I’d be happy to discuss it with you.
In the meantime, here are a few resources to help you dig deeper:
- AnnualCreditReport.com – Access your free credit reports
- Consumer Financial Protection Bureau – Credit Reports & Scores
- FICO – What impacts your credit score
Understanding your credit is the first step in making it work for you, not against you. If you’d like to schedule a time to talk about how credit fits into your wealth management goals, please send us a message through our website’s “Partner With Us” page.
Thank you for reading!
Joe Ezernack
This material is intended for informational purposes only and should not be construed as legal, accounting, tax, investment, or other professional advice. Trademark Capital’s investment strategies are built using quantitative, proprietary algorithms that are designed to identify and react to changing market conditions. However, investors should be aware that no investment strategy or risk management technique can guarantee returns or eliminate risk in any given market environment. As with all investments, Trademark Capital Management’s investment strategies are subject to risk and may lose money. The investment strategies presented are not appropriate for every investor and individual clients should review with their financial advisors the terms and conditions and risk involved with specific products or services. Due to our active risk management, our managed portfolios may underperform during bull markets. Past performance is no guarantee of future results.
