Invest in building your credit. Your credit score and report should be something that you take time to build and maintain and not find out where it stands when you are turned down for a credit card. Credit is the number one thing that can keep people from realizing their financial goals. With bad credit or no credit, opportunity to raise capital for personal and business expenses is very slim. This just doesn’t include those who don’t have a lot of money. Many people both rich and poor are capable of defaulting on loans because they can’t pay their bills. I see people every day with thousands and thousands of dollars and they can’t even qualify for a credit card because they don’t take care of their finances or are drowning in insurmountable debt. This includes professors, doctors, and lawyers. I see others who can’t even qualify for a bank account because they have over-drafted so much that the bank won’t even let them open a checking account. So why do you need to have good credit?
It all goes back to saving money. When you want to apply for a mortgage or a car loan, having a 740 or higher credit score is the number one thing that is your bargaining tool with the banks and car dealerships to get a lower interest rate. A lower interest rate obviously means saving you more money over time. That extra money you save can then free up your finances and give you that vacation you always wanted or more money in retirement.
Just to provide an example….The difference between a 3.5% interest rate on a $200,000 (30) year mortgage and a 4.5% interest rate on a 30 year mortgage is $41,000! That is a lot of money that I personally would like to use elsewhere. The interest rate is even worse for credit cards, many times being as high as 25 or 26%. That is why it is so important not to carry a balance on a credit card each month, so you can keep yourself from falling into debt.
So how do YOU get good credit?
Check your Credit Report….use your free credit report request from all three credit bureaus by accessing annualcreditreport.com. This does not count as a credit pull. You may be surprised to find some information that you had no idea had been negatively affecting your credit all along. Sometimes you will even find information such as credit cards or loans that aren’t supposed to be under your name and you can file disputes with the credit bureaus to have it removed from your report.
Pay your Bills…..Make all your payments early or on time! I can’t stress this enough. Make sure you know When you are supposed to pay your bills and don’t wait until the day the payment is due to find out you don’t have enough money to make the payment. Plan ahead. Credit history is key when lenders are deciding whether or not you will be a good candidate for financing. If you don’t pay your bills on time, that means they don’t get paid on time.
Establish Credit….have one or two credit cards and ask for a credit limit raise each year until you have a comfortable limit. Having a higher limit doesn’t mean you should go out and spend more money on credit. It just shows lenders that you are more capable of managing a higher credit limit and thus more responsible. It is also very important to stay below 30% of the credit limit you do have. (Example: If you have a $10,000 credit limit, don’t use more than $3,000 before you pay off your balance.) If you carry high balances on the credit cards, which can be considered high if above 30%, this actually can hurt your credit score. It is good to have a well rounded credit report too. While having a mortgage, credit card, and auto loan might sound like insurmountable debt to some it is a good way to build and establish a well rounded credit history because of the different types of loans. Just make sure that you can afford the payments. My ultimate suggestion is to pay off credit cards each month. Pay your mortgage payment on time, and if you take out a car loan, try and pay it off shortly after financing it. The keeps more money in your pocket for the long run.
Watch out for Credit Inquiries….There is no reason to have more than one or two credit cards! The more credit inquiries you have the lower your credit score will move. If you are applying at many places for credit (i.e. loans, credit cards, mortgages) the credit bureau responds accordingly by lowering your credit score. When a company does a hard pull of your credit for a loan or credit card, this stays on your credit report for two years. That means you need to really consider whether or not you should apply for something, especially if you are planning to buy a house in the future.
In summary, take care of your credit. Don’t let it be that thing that hovers over you and haunts you. Download your credit report today, and start working on ways to build and maintain it.
Please respond to me with any questions, and I will help you understand more on how to build and maintain your credit.
BaldwInVest 
I met a person today who had 10 credit cards with a balance on each of them. She consolidated all of them into a $15,000 personal loan and we were able to lower her interest rate to 17%. That may seem high, but she was happy because she was paying 26%! Needless to say, be careful how you use your credit cards. Don’t go signing up for every credit card just because you someone offers you a 5% or 10% discount. It could end up costing you dearly.