The Character of Credit

Microsoft Office

Microsoft Office

It’s Time to Know the Score

I grew up in a house where my grandfather paid cash for everything. He was an employee and an entrepreneur. He didn’t believe in paying interest on anything. He built his home debt free, his family owned 167 acres of land debt free, and he paid for his cars in cash every few years. After living 95 years, he still didn’t believe in creating debt. My grandfather was a man of conviction and great character. He would NEVER co-sign for anyone either. He used to say “Sweetpea, keep your name good and stay out of debt because it makes you a slave to the man.” Well, I don’t know who the man is, but according to the Bible, I’m guessing it’s the lender.

Keep your name good and stay out of debt because it makes you a slave to the man.

Proverbs 22:1 says a “good name is better to have than money.” If the Bible cares about your name, shouldn’t you? Many people don’t link their credit report with character, but Psalm 37:21 says,

The wicked borrow and do not repay.

I’m not here to interpret the Gospel, but I will tell you the numbers don’t lie and your credit report IS a part of your character. It’s a part of who you WERE, NOT WHO YOU HAVE TO REMAIN. If you have “bad credit”, you can choose to change. I believe faith makes all things possible — so you may purchase a home or get a car with bad credit, but you won’t get the best rate available without divine intervention. Driving a new car with a 21% interest rate is not a testimony to me. It just means you pay a lot more for the car, AND you’ve made the lender even richer. Truth is, people with bad credit pay more. I would rather have a good reputation, a low or NO interest rate, and money in my pocket. Good credit will help me do that.

People with bad credit pay more.

While there are circumstances that contribute to people having less-than-stellar credit like the loss of a job, that is a minority of the indebted masses who got into debt ON PURPOSE. Did you know that only 15% of banks’ lending goes to “A” credit borrowers, while the majority of borrowers have “C” credit and below? It’s important to have good credit if you want to do business in the world or plan on buying property AND getting a great rate. It’s time to take your credit seriously! Many people don’t understand credit rules, what FICO is, or what determinants make up your credit score. You should know this three-digit number will:

  • Conclude the interest rate you pay for your mortgage
  • If you can rent an apartment, AND most recently…
  • Employment opportunities.

Ultimately, it’s a tool that lenders use to see how good a steward you will be with a loan based on how you’ve managed your financial matters in the past. A high FICO score is like having a great name in the marketplace so you can get the best marketplace deals. So what’s the bottom line?

It’s important to have good credit if you want to do business in the world or plan on buying property AND getting a great rate.

Your FICO score is determined by the history of your paying bills on time, your spending habits, and how much debt you carry. If you are serious about having a good name, here are a few steps you can take.

  1. Check your credit report for mistakes. Studies show that 25% of all credit reports have errors on them.
  2. Pay your bills on time. Bill paying habits make up 35% of your FICO score. ON-TIME means ON TIME, not a day late.
  3. Stop applying for store credit cards and manage debt to credit limit ratios.
  4. DON’T co-sign for people. There is a reason why they can’t get credit on their own. If the company doesn’t trust them, neither should you. 
  5. Cash is King. Use it often (on average you spend 30% more when you pay with credit).
  6. Pay down existing credit card debt.
  7. Seek wisdom on ways to increase your income and use this to pay down debt.

Remember, good character is built one action at a time – and lost one action at a time too.

LaShawne Holland is America’s Wealth Activator and she is on a mission to help women forever improve their money mindsets so they can activate lasting wealth. Holland has taught personal finance and wealth empowerment to thousands of women and families at conferences, workshops, symposiums, and one-on-one advisory sessions since 1995 and is now one of the nation’s leading experts. Her work has been featured in over 350 media outlets, including Yahoo! Finance, The Wall Street Journal, Market Watch, Bloomberg Businessweek, Reuters and Beyond the Dow. Holland welcomes invitations to share her financial empowerment tips, inspiring keynotes, practical and tactical wealth activating workshops, as well as programs with radio, TV, and conference audiences. To learn more, visit www.lashawneholland.com, or send email to customer_service@lashawneholland.com.

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