Slow and Steady wins the (Credit) Race

Andrea Schmutz, M.S.
​USU Extension Assistant Professor

April is such an awesome month! Spring is in the air and hopefully your taxes are finished for another year. You may be thinking about what to plant in your vegetable garden or your flower beds. Or maybe you are finally thawing out from winter and want to sprawl out on the grass with a good book and bask in the sun’s warm embrace. However you choose to enjoy this wonderful month, don’t forget to celebrate April’s status as National Financial Literacy Month. First established when the United States Senate passed a resolution in 2003, the goal of this designation is to encourage programs and activities that promote financial literacy and the benefits of maintaining smart money management habits.
 
Here at Utah Money Moms, we’ve decided to celebrate Financial Literacy Month by focusing on credit reports and scores in the hopes of helping our readers gain confidence in their understanding of what they are, why they are important, and how to influence them.
 
When it comes to learning, I love to associate new information with a story. Maybe it’s because I truly subscribe to the Mary Poppins idea of “a spoonful of sugar helps the medicine go down.” Or, it may have something to do with the Indian Proverb that says, “Tell me a fact and I’ll learn. Tell me the truth and I’ll believe. But tell me a story and it will live in my heart forever.”

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So, who’s in the mood for a story? Let’s look at the Aesop fable about the hare and the tortoise (courtesy of the Library of Congress):

A Hare was making fun of the Tortoise one day for being so slow. "Do you ever get anywhere?" he asked with a mocking laugh.
 
"Yes," replied the Tortoise, "and I get there sooner than you think. I'll run you a race and prove it."
 
The Hare was much amused at the idea of running a race with the Tortoise, but for the fun of the thing he agreed. So the Fox, who had consented to act as judge, marked the distance and started the runners off.
 
The Hare was soon far out of sight, and to make the Tortoise feel very deeply how ridiculous it was for him to try a race with a Hare, he lay down beside the course to take a nap until the Tortoise should catch up.
 
The Tortoise meanwhile kept going slowly but steadily, and, after a time, passed the place where the Hare was sleeping. But the Hare slept on very peacefully; and when at last he did wake up, the Tortoise was near the goal. The Hare now ran his swiftest, but he could not overtake the Tortoise in time.
 
Traditionally, the moral of this story is “slow and steady wins the race”. If we dig a little deeper, we can relate the experiences of the two animals to the process of building a strong credit score.

1. Believe in yourself. The tortoise believed in himself - he had the confidence to challenge the hare to a race when the odds were stacked against him. Your credit score may not be where you want it, but with some work, you are capable of making changes that will help it improve. You have to start by believing you can do it.
2. Carelessness can be costly. The hare was overconfident in his ability to win and became careless in his effort, which cost him the race. Avoid being careless with your credit score - fact check your credit reports regularly and look for incorrect information. Errors on your report can affect your score negatively. If you spot inaccuracies, dispute them by contacting the credit reporting bureau and the lender. The Consumer Financial Protection Bureau (consumerfinance.gov) outlines the step by step process for disputing an error.
3. You can win the prize in small steps with steady effort. The tortoise’s steps are relatively small compared to the hare, but he maintained a steady effort which resulted in victory.
   1. Small step #1 - One small step that makes a big difference is paying your bills on time, every time. If you are struggling to pay a bill and are tempted to skip a payment, reach out to the lender to see if there are any accommodations that can be made. A skipped payment results in a significant drop in your credit score.
   2. Small step #2 - Keep your credit utilization low. Credit utilization is a fancy way of saying how much of your available credit you are using. For example, if you have a $1000 credit limit, and you’re spending $500 on it, your utilization is 50%. The general recommendation is to maintain a utilization rate of 30% or lower. Credit scoring models often look at your credit utilization rate when calculating your score. If your utilization is low, they recognize that you are keeping your spending in check; managing your credit by not overspending can help you reach higher credit scores.

 
The moral of the story when it comes to building credit or repairing bad credit, is to emulate the tortoise - be patient and disciplined and you will win the race. There is no magic formula, and quick fix efforts may backfire, but managing your credit responsibly over time will ensure that you emerge the victor.
 
Parting thought: It’s hard to beat a person who never gives up.  - Babe Ruth

Resources:
“How Do I Get and Keep a Good Credit Score?” Consumer Financial Protection Bureau, United States Government, 29 Mar. 2019, https://bit.ly/3dovltj.  
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Stone, B. (Host). (n.d.). Managing your money, part 3: Understanding and protecting your credit. [Audio podcast transcript]. In Financial inTuition Podcast. Consumer Financial Protection Bureau. https://www.consumerfinance.gov/consumer-tools/educator-tools/students/financial-intuition/managing-your-money-part-3/

“What Is a Credit Utilization Rate?” Experian, Experian, 20 Oct. 2020, www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate