Welcome back to my Saturday roadmap series, this is week 2. This series focuses on teaching a valuable skill or giving tips to everyday items. With a focus on housing and food. Today’s topic credit.
How often do you check your credit score? The recommended amount is at least once every 6 months. I try to do so weekly, but it’s kind of an obsession. Credit is sadly a way of life a number burdened to us in order to make us more valuable to financial institutions. I used to hate the idea and thought of credit. Understanding it however has helped me flip that view.
Credit in definition is to check your “credit worthiness,” what does that mean? Credit gives lenders an exact tangible amount of 4 different features about your life or the 4 Cs. Character, Capital, Capacity and Collateral. Character looks at your payment history. Capital looks at your savings. Capacity looks at your job history. Collateral looks at any asset they can take if you can’t pay back the loan. This is simplified into a number value between 300 to 850. 850 being the best, and 300 the worst. With that number value it takes the fear and guess out of the lender’s hands. Good credit equals a good consumer.
The problem however is the values given to each C of credit. Payment and History are extremely important. You need to have history and you need to pay the bill.
My tips: Start building credit early. Get a secured credit card or low credit limit card. Start making payments. If you have student loans, car loans, car insurance or a mortgage. Pay on time, pay often and stay up to date with all your finances. Your credit will build by doing so. If you have high amounts of credit debt. Pay it off slowly, work with non profit debt management companies. Never close the card. You close the card and you lose your credit history.
Last thing I want to leave you with. Don’t fret it, credit is like a social security number for us in the US. We have to have it, some days it’s good, some days it’s bad if you know the game, you can become a player.
Now get out there and build some credit.
Housed and Fed 