Day 5: Borrow Money – Building credit for wealth creation 

Welcome to Day 5 of the 7-Day Financial Wellness Kickstart series!

If you haven’t read Day 4, click here to review

In today’s lesson, you’ll learn all about credit and how to access your credit reports and scores, along with tips to improve, maintain and monitor your credit.

Day 5 Money mantraI am more than my credit score.

I want to shift your mindset a bit before we go deeper into credit and borrowing. 

There’s a lot of emphasis on credit scores because a three-digit number is a simple way to understand you’re borrowing history. But your credit score only paints a partial picture of how you’re doing financially.

With a high credit score, your access to borrow money increases, but it does not mean you’re creating wealth with those purchases. 

A credit score only shows how you’re using other people’s money. It does not show how you’re managing or growing your money.

The misunderstanding of how credit scores work causes people to pay more on interest and often leads to debt. Some are even willing to carry credit card balances month to month and pay interest, believing it increases their score. Hint: it does not.

A few people fixate on increasing their credit score to the coveted 850 but don’t do the work to increase their net worth. 

Keep this in mind: you cannot increase your credit score past three digits, but you can grow your net worth way past three digits.

With all that said, a healthy money mindset can support your creditworthiness and financial wellness. 


Credit is a tool that allows you to afford purchases of goods and services that can contribute to wealth building. Think of a mortgage on a house that appreciates in value or student loans to afford college tuition that leads to a high-paying career.

And with better credit, you can borrow money with better terms and lower interest rates: saving you money.

Now, it’s time to increase your credit knowledge.

The following are the essential things you need to know.

What’s a credit report?

A credit report contains personal information such as your name, address, list of employers, credit inquiries, history, and the status of your credit accounts. 

Account information includes your payment history, number of credit accounts, credit limits, credit used, and any collection accounts or judgments and liens.

This information is collected by three major credit bureaus: Experian, Equifax, and TransUnion

What information is found in your credit report? The report lists information grouped into five sections.

  1. Personal Information

This section includes your personal information, such as your name, social security, and date of birth. It will also list your current and previous addresses and phone numbers too. Additionally, this section will show current and previous employers.

  1. Credit Accounts

The credit section details your relationship with creditors and public agencies and shows your history of paying bills. This will include information provided by:

  • Retail stores
  • Banks and credit unions
  • Finance companies
  • Student loans and loan servicers
  • Mortgage companies
  • State and Federal Courts
  1. Inquiries

The inquiry section lists companies that have accessed your credit report. These companies receive your I.D. or other information to offer you credit, provide a service, or for employment. 

There are two types of inquiries: soft and hard. Hard inquiries are for credit applications and affect your credit score. In contrast, soft inquiries such as pre-approvals or credit checks by existing credit relationships do not impact your credit score.

  1. Collection Items

Collection items reflect unpaid debts that have been sold or transferred from the original creditor to a collection agency. They become separate records listed in your report and impact your credit score.

  1. Public Records

The public records section lists bankruptcies. Due to recent federal regulations, it no longer includes liens, civil suits, and judgments.

Now that you know what’s in a report, you might wonder what’s not included.

  • Your credit report will not include information such as your marital status, ethnicity or race, religion, political affiliation, or disabilities. 
  • It does not show savings or investment accounts or financial items unrelated to debt.
  • It does not include your income (and income is not factored into your credit score).
  • By law, medical information is not reported, but medical debt sold to collection agencies may be reported after a period of time.

The importance of credit scores

There’s a debate that rages on about credit scores. I’m not going to tell you credit scores are useless or meaningless. They are a part of our economic reality. My goal with this lesson is to focus on what you need to know, how to get them, ways to improve or maintain scores, and when to stop worrying.

Okay, let’s start with defining credit scores.

A credit score is a number, roughly between 300 and 850, that measures your creditworthiness. This score represents the answer from a mathematical formula that assigns numerical values to various pieces of information in your credit report. Three main credit bureaus collect your credit history–Experian, Equifax, and TransUnion. Information found in these reports is used in the scoring.

How is a credit score used?

It makes it easier for lenders to make loan decisions systematically. Credit scores are a reflection of how you’ve handled credit in the past and are used to determine your potential credit relationship in the future.

You have more than one credit score. 

In fact, you have multiple credit scores. At one point, I challenged myself to see how many credit scores I had and reached 24 different scores. I got my credit scores through the credit bureaus, free credit monitoring services, my credit union, a few credit cards, and directly through FICO®. 

It can get confusing because one company has one score, you have another from a credit monitoring app, and a lender has its own score too. The multitude and variation in scores are due to different scoring methodologies. That’s why you can have dozens, if not hundreds, of credit score variations.

FICO® is the most talked about credit score. They are a company that pioneered a credit scoring system based on information found in your report. Financial institutions widely use FICO’s scoring methodology. But there are different scoring models out there.

Credit scores vary greatly as well. You might get a score of 725 from one company and learn you’re score is 680 with another. That’s all due to the different scoring models used.

What’s important are two things I want you to know:

  • how your score is calculated, 
  • and where the score falls within a range.

How is your score calculated?

Using the most popular credit scoring methodology, your score includes the following:

  • Your bill-paying history,
  • The number of accounts you have and what kind,
  • How much of your available credit you are using,
  • How long have you had your accounts open,
  • Your recent credit activity,
  • Whether you have had a debt collection, foreclosure, or bankruptcy, and how old they are.

Based on publicly available information, the FICO® Score includes 5 factors. They include:

  • Payment history (35%) – the largest percentage because paying on time is important for lenders to know.
  • Amounts owed (30%) – also known as capacity. It’s based on the amount of outstanding credit you have against your available credit limits.
  • Length of credit history (15%) – how long you’ve had credit plays a role in your credit score. Longer credit histories are viewed positively. Adding new accounts can lower your overall credit history length.
  • Types of credit in use (10%) – this is based on the mixture of credit such as credit cards, personal loans, mortgages, auto loans, etc. A good variety is generally accepted as strengthening credit scores.
  • Account inquiries (10%) – applying for credit impacts your credit score, and having too many recent loan applications (or inquiries) can have a major negative impact. Apply for credit when absolutely necessary.

There is a lot of ground to cover regarding credit, but I will keep this within the confines of the Kickstart series.

If you’re wondering how to establish or improve your credit, you can find additional information in the resources section.

Borrowing better

Credit isn’t inherently bad. It can enable you to afford things that improve your quality of life. As I shared earlier, many people can’t afford to buy a home in cash or pay college tuition without a loan.

There can be an argument made for not buying things we can’t pay for in cash, but that sentiment is often shared by some who have achieved financial success after utilizing credit themselves.

I, personally, am not against credit. But I am vocal in my belief that credit is a tool. And we must learn to use the tool to help us create wealth.

Say it with me: credit is a tool to create wealth. 

Day 5 Exercise

For today’s assignment, I want you to access your credit report and get a credit score. Use the workbook to help you complete this assignment.

  1. Visit to access one of your credit reports from one of the three major credit bureaus. Then, review the sections you’ve learned in this lesson. is the official website to access your free credit report mandated by federal law.

  1. Know your score. Get a free credit score through an app by visiting for options. 
Breathwork exercise: 2-to-4 breathing
Breathwork can quickly and positively affect your feelings.

Today’s practice is the 2 to 4 breathwork. You’ll inhale for 2 counts and exhale slowly for 4 counts. Repeat 5 times.

1. Take a comfortable seated position.
2. Tall back with your feet on the floor.
3. Relax your shoulders.
4. Close your eyes if you’re comfortable.
5. Take a deep breath in through the nose for 2 (count up: 1, 2).
6. Pause at the top for 1 count.
7. Release the breath slowly through the nose for 4 (count down: 4, 3, 2, 1).
8. Repeat 4 more times.

Progress check-in

In this lesson, you learned credit fundamentals, such as what’s included in a credit report and how credit scores are calculated.

And that’s it for today! See you tomorrow for Day 5.

With you on the journey,


Author of Happy Money Happy Life and Founder of The Smile Money

Additional reading

Complete guide to credit reports and scores

Tips to improve credit scores

How to achieve debt-freedom

Chapter 8 in You Only Live Once

Helpful resources

Access hundreds of articles on each of these pillars on Go ahead and dive deeper into areas you need help in right away.

And find the best loan options and credit apps on

Get a copy of Happy Money Happy Life to start borrowing for a healthier, wealthier, and happier life.

Day 6 Preview: Protect Money–Safeguarding your assets

Tomorrow, you’ll learn how to protect your identity and what to look for to ensure your wealth is protected.

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