When they steamrolled LeBron James and the Miami Heat to win the NBA title last summer, the San Antonio Spurs were heralded as the epitome of the word “team.”
Sure, they had All-Stars and future Hall of Famers on their roster like the Heat did, but what set the Spurs apart was guys who will likely never be thought of as Hall of Famers – guys named Patty and Boris and Tiago. These are guys the casual sports fan had never heard of, but the way they meshed with the Spurs’ superstars was the difference between winning a championship and going home disappointed.
It was a textbook example of a diverse group coming together in pursuit of a goal and becoming greater than the sum of its parts. We see this happen in all aspects of life. And when it happens, you can take away lessons that you can apply to the basketball court, the classroom, the office and even to your own finances.
Take credit scores, for example. Building a great credit score has many similarities to building a championship basketball team. Here are a few:
1. Some pieces of the puzzle are more important than others … In basketball, perhaps more than any other sport, one or two great players can completely change the fortunes of a team. LeBron James and Kevin Love are going to try to do that in Cleveland this season. Michael Jordan did it in Chicago. Tim Duncan and David Robinson did it in San Antonio.
Your payment history and credit utilization ratiohold that level of importance for your credit score. Your payment history makes up 35 percent of your FICO score, and your credit utilization – how much debt you have compared to your credit limit – is 30 percent of your score. That means nearly two-thirds of your credit score is based on those two pieces, so you have to get those right or the rest of it doesn’t matter.
2. … but one bad piece can keep you from reaching your goals. You expect great players to play big every night. But as the Spurs showed, any team’s best chance to win comes when all its players play at a high level. It’s the same with credit scoring. If you’ve got a great payment history and utilization ratio, you’re going to have a good score, but if you want your score to reach the stratosphere, you’ve got to have all the other pieces in place as well.
You need to have a good length of credit history (15 percent of your score) and a good mix of credit (10 percent), such as a mortgage or car loan alongside that credit card. And you shouldn’t apply for too much new credit (10 percent) because that can make lenders view you as a greater risk.
3. Don’t sweat the small losses. NBA teams know they’re not going to win every game. Spurs coach Gregg Popovich has even ruffled some feathers in the league by not playing his star players – sometimes three or four of them at a time – for a game or two here and there in order to rest them for the playoffs. In credit scoring, you should be willing to occasionally suffer some short-term losses to achieve some long-term wins.
For example, say you’re going to buy a house in the next year. It can be a wise move for you to get a new credit card in order to lower your utilization rate. Getting that new card may temporarily ding your credit score slightly. However, in the long term, your improved utilization ratio will bump up your credit score, improving your chances of getting a good interest rate on your mortgage.
4. Remember that turnarounds rarely happen overnight. As previously mentioned, one transcendent player can help turn around a franchise. But the reality is that most teams climb from the outhouse to the penthouse slowly. That’s certainly true with credit scoring as well. Sure, you might find a major mistake on your credit report and get a huge bump in your score just from removing that. (For example, if there’s an incorrect late payment – or even a bankruptcy – on your report.)
But more likely, you’ll have to earn your improved credit score by putting in the work and doing the small things: paying your monthly bills on time, every time; lowering your debt in small steps; adding new credit when you can afford it. Like an NBA season, it can feel like a slog – and there will definitely be times when you’re tired and just don’t want to put in the work anymore. However, a day will come when you get a mortgage or a new car with a great interest rate, and then you’ll realize just how important all that work was – and just how much money it saved you. Then you’ll know it was all worth it.