I've talked about the credit score before (see Your Credit Score - Demystified). By virtue of you being a FPMD reader, there's a very good chance you already know quite a bit about credit scores. I won't explain why it's good to have a high credit score. But I do want to address some of misconceptions I've seen. Read on to see why you should treat your credit score like your board score.
For the non-physician readers in the audience, board exams are a series of tests we have to take as healthcare providers in America to ensure we have achieved the appropriate level of competency to practice medicine. Honestly it's very much like any other form of standardized testing - questions are arbitrary and may or may not be useful in your future career. But the idea is that if you pass your Board exams, you've earn the right to sit at the big boy's table. To most FPMD readers, the most familiar Board exam is the United States Medical Licensing Exam (USMLE). Let's talk about a few reasons why you should treat your credit score like your USMLE score:
- A higher USMLE score opens more doors. Haven't made up your mind about what specialty to practice? A tried-and-true strategy would be to study hard to score off the charts on your USMLE Step 1 exam. A high Step score keeps the door open to all specialties in case you decide to go into, say dermatology or plastics in the future. Similarly, a high credit score keeps the door to lenders open in case you need to borrow money in the future for a car, a house etc.
- But it doesn't mean you should go into dermatology. Say you scored a whopping 290 on your USMLE Step 1 exam, you did not just prove that you are "too smart" for family medicine. Rather, you should choose your medical specialty carefully based on the amount of perceived future happiness it will bring to you and your family. Similarly, while having a high credit score means that more lenders will be willing to loan you money at better terms, it does not mean you should start borrowing for anything and everything you want. And if you do, it's a surefire way to bring your credit score down.
- And it doesn't predict the future. You did well on your USMLEs because you studied hard and absorbed a ridiculous amount of information before the exam. But I would be frank with you - I don't think I can remember even 50% of the information I needed to know to pass the exam! Whether or not you believe in the 10,000 hour rule, the name of the game in medicine is repetition. What you learned but never use, you eventually lose. Similarly, the good habits that earned you a high credit score - most importantly mindful borrowing and on time payments - will have to continue in order for you to reap the benefits.
- It can be a status symbol, but beware your audience. Let's face it, "Board Licensed Physician" has a nice ring to it. And if you did really well on your exam, you would definitely want to tell someone about it. But we can all agree, bragging about your high score to your classmates is socially unacceptable. But telling your parents, mentors, or friends & colleagues in another industry is perfectly okay. Similarly, your credit score may mean a lot to your mortgage officer but your colleague down the hall probably doesn't care all that much about your credit score.
- It may mean different things to different people. Even when you know your audience, you have no control in how they perceive your USMLE score or your credit score. For example, some programs directors pay extremely close attention to test scores while others may emphasize your letters of recommendation or your extracurricular "Plus Ones". Similarly, different lenders may weigh different components of your credit score differently.
I hope this help highlight some similarities between credit scores and board scores. Bottom line: if you approach your credit with the same level of seriousness and hard work you gave to the USMLEs, you will find long lines of lenders vying for your business in the future.
Chad Chubb, CFP ® founded WealthKeel LLC to help physicians navigate the complexities of financial planning. Today, WealthKeel utilizes true financial planning and custom-craft plans for residents and young doctors in the Philadelphia area and across the United States. From investments to insurance and student loans to goal planning, they tailor a plan to address your specific needs and circumstances.
Schedule your free introduction call and see if they are a good fit for you.