Happy Holidays! This time of year is a great time to remind ourselves about credit and how we can establish, build, and maintain excellent credit. An article on balance.com explains some of the benefits of having great credit such as lower interest rates, greater negotiating power, and an easier time getting loans on anything from cars, to apartments, to homes. Frankly having great credit makes life more affordable, as lower credit scores leader to higher payments and deposits.
Kumi Rauf, the founder of Escape Artist, someone who helps you travel more and spend less, recently posted about how he used to look at credit and a useful analogy about ow to remove some of the stigmas around building an excellent credit score.
“Looking back I realize that I didn’t understand credit at all. In college and shortly thereafter a lot of my friends were in debt so I stayed away from it thinking that would solve the problem. Nope. All it did was give me a low credit score due to not building enough up. I began to understand that your FICO score is essentially a measure of trust, but I like to think of it analogously like a conversation:
- When someone compliments you it’s good to give them a compliment back at the same caliber in a relatively quick timeframe (pay your balances back in full every month. If you spend $100, pay off a $100)
- Try to listen more than you talk (your credit utilization should not exceed 30%)
- Talking about multiple subjects shows your knowledge (having different types of credit is good)
- The length of time you know the person you’re speaking with counts (your payment history/credit history account for half of your score)
- Don’t start too many conversations at once (a lot of new credit can look bad to future creditors)
- Don’t speak at maximum volume (never max out a card)
Having a good credit score is a big part of getting a good interest rate on new lines of credit, or being able to get any new credit at all. You also can get credit cards with great perks that make life cheaper, easier, or both.
Get a free copy of your credit report every 12 months from each credit reporting company at annualcreditreport.com. Other tips are to fight negative occurrences on your credit report. Keep an eye on your score for free with creditkarma.com or creditsesame.com.”
Merry Christmas and a Prosperous New Year!
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