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Lin-Manuel Miranda knows something about money.
The New York Times reported in June 2016 that the 37-year-old creator of the hit Broadway musical ‘Hamilton’ was positioned to make more than $6 million that year alone, thanks to his multiple roles (author, actor, rights-holder) in the production.
But it wasn’t always that way. He told Morgan Stanley in an interview published on its website, “there is so much I wish I knew about money when I was first starting out my adult life.”
In particular, he wishes he’d known more about credit. He told Morgan Stanley:
Growing up, I was always cautious about spending. In fact, I was so nervous about incurring debt that I didn’t open my first credit card until age 28, after my first show had opened on Broadway. As a result, even though I had enough money in the bank, I didn’t have sufficient credit history to purchase my first apartment. My father had to help me buy it by co-signing the mortgage.
Miranda’s story perfectly illustrates one of the greatest challenges of good credit: You never think about it until you need it. And if you never think about it, you probably don’t have it.
For those of us who are as shy of credit cards as a 20-something Miranda, “credit” typically refers to two metrics: your credit history, which details your interactions with various creditors and loans, and your three-digit credit score, which illustrates your trustworthiness in three-digit shorthand for lenders who might be considering spotting you some cash.
You build credit by borrowing money, whether through credit cards, student loans, or other avenues, and then responsibly paying it back. The longer and more responsibly you engage with credit, the higher your score.
It sounds like something you don’t need to worry about – what if I don’t plan on borrowing money? – but Miranda’s story perfectly illustrates how disregarding credit can trip you up. Even if you’re not buying a home like he was, landlords and management companies in competitive real estate markets like New York are known for requesting your credit score. They might not deny you based on low or lacking credit, but you can bet they’ll increase the interest rate of people who are less “credit-worthy,” charging you more for the privilege of borrowing.
To stay on top of your credit, you can get your free credit report once per year at AnnualCreditReport.com, and your credit score – which might vary slightly from the official scores as determined by the three credit bureaus that generate it, but is pretty close to what a lender would see – as often as you’d like, for free, from Credit.com, Credit Sesame, or Credit Karma.