Having good credit is essential in conducting business and since most transactions are done on credit, this point is very important. As a result, we shouldn’t take this issue likely as it can save you not just a lot of money in financing cost but it can also strengthen and destroy personal relationships.
I believe many of us wished that we understood how important is was in having good credit earlier in our lives as it would have saved us a lot of money. Personally, that’s how I feel about having good credit as it has helped me in my career. It has also hurt me when I got reckless and damaged it. Plus, you need to know that working to repair your credit, once it has been damaged, it takes more time than you think, so you don’t want to be in that position.
We don’t realize it but these bad credit habits can start very early in your life and if not corrected can get worst over the years. I remember the next door neighbor borrowed twenty-five dollars and promised to pay it back. She came over again several times and did the same without paying the first loan back which became ignoring. She came another time and borrowed three potatoes and our last two onions and my mother said it was okay. I was angry because this was a negative trend of hers and although my mother didn’t mind, I was pissed.
After awhile, her bad children started coming over to borrow things, as well. Their credit was worst than their mother’s as they wore brand new sneakers and I couldn’t afford to do the same. To be honest, I was tired of their actions but my mother kept on helping them out. I reminded my mother that they were a bad credit risk and we wouldn’t get back what they had borrowed. I don’t recall that they have ever paid us back the money or returned the potatoes and the onions.
In running into those family members later on in life, they were in the same poor credit situation. They were still trying to borrow from others to support their lifestyle. I told them that I was sorry for their predicament but I couldn’t help them. I wanted to tell them that they had damaged their credit with me and since my mother was no longer around to bail them out, they were out of luck.
I have learned from experience that once you borrow something and return it on a timely basis, this builds a strong relationship with your lender. This can be a monetary transaction or a non-monetary transaction, as this still applies.
This creditability relationship is very important as it can help you in emergency situations. If you can maintain this good credit relationship with your lenders and the people who are in your corner, there is a low probability that you can’t go to them again down the road.
The example noted about my next door neighbor demonstrates that when you fail to take care of your credit your credit won’t take care of you. However, these are some of the benefits that you will get if you choose to do take care of your credit.
Some of the advantages are the following:
First, you can come back again to borrow when another need for you comes up. This is a very important point that I learned to appreciate even more, as I got older. When you are in a tight spot and have someone who will help you out without giving you a lecture, you can’t believe the feeling of relief that you will get.
Second, the better you handle these transactions of trust the better your track record will be. This translates into a higher credit score that others can use to determine whether you are a reliable borrower. No one wants to lend to a deadbeat because you may not get it back.
Third, as your credit score rises the better the terms that you will receive when you need to borrow. There is a big difference in money savings in borrowing at under 10% and borrow at 29%. This is a very simple principle to follow but people just don’t do it. As a result, that’s why we have so many people having such poor credit scores in today’s economy.
Fourth, having good credit scores is now incorporated into the other aspects of our daily lives. For example, you can’t get your utilities turned on, you can’t buy car insurance, you can’t rent an apartment, you can’t buy clothing from department stores, and the list goes on and on.
Fifth, in having good credit this will help you in purchasing a home, buying a new car, borrowing money at zero % to go on vacation, which I have done several times. You can also get an equity loan to fix up your home, reduce your high-interest debt, and more importantly to use your credit card to fix water leaks, roof damages, electricity problems, repair your car, and you get the point. I have gone through each of these repair situations and it’s not something you want to be a part of when you don’t have the funds and have to use credit.
Sixth, there is also some advantageous investment opportunities open to the more sophisticated investor. They are able to borrow funds at a very low rate and invest those funds into a financial product that gives them a higher return than what they have borrowed. These are the type of wealth building transactions that the rich people do all the time, but you can’t do the same unless you have good credit.
In closing, I’m not telling you anything new or that you are not aware of concerning having good credit scores. However, we all need to be reminded how our credit scores and our credibility can have a big impact on our lives in handling business transactions and our personal lives. All financial lending institutions use your credit score as a metric to determine to lend you money or not. Since borrowing funds on credit represents over 75% of all our activity you have to stay on top of this. It also can turn a good relationship into a bad one like the next door neighbors, who I rather not run into again. I’m still pissed off for borrowing our potatoes and our last two onions, as that hurt me so much that I’m still talking about it. Thus, I have provided an example in this note if you take care of your credit, it will take care of you. However, if you don’t take care of your credit, don’t knock on my door, we are all out.