The Good, The Bad And The Ugly Credit
Friday, April 26, 2013, 1:00 AM | Leave Comment
It’s very hard to establish a good credit in this extremely bad economy – some experts suggest it’s in the state of recovery, others say the worst since the last Great/Worst Depression. It’s increasingly difficult to keep your head above water.
However, there are ways you can build and improve your credit history.
Understanding how different kinds of credit can give you the convenience and comfort in your financial life is the first thing to do.
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Credit Card Wonders
In 1983, I got my first credit card. I was so happy. In the last 25 years, I have very seldom carried more than $20 or $30 in my wallet. I have used my credit card for everything from a gallon of milk to furniture and beyond.
However, I buy things only when I know, by the end of the month, I am able to pay off the balance – in the next 3-4 weeks, that is, by the end of the grace period.
So, in a sense it has done “wonders” for my family. The key to establishing good credit is to satisfy our needs first. We are temporarily renting now. We pay our rent with credit card.
On this blog, I present information and resources you need, in a simple and understandable way, to learn about credit, get your free annual report now and take steps to improve your credit score, and use credit cards to your advantage so that you get all of the credit pluses, and not the minuses, you need in your life.
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Credit
Credit is nothing but borrowing money which in reality is renting money. Keep this in mind that it’s not your money. Borrowing/renting does not make you the owner of that money but only for a short period of time.
You use the money to your advantage for whatever purpose you have borrowed it. After using it, efficiently and within limits, you must return it to its proper owner at the end of the mutually agreed upon period.
Credit cards are the most common way to establish credit. Most credit card debt is unsecured. That means, there is no collateral assets of yours. The lender did not demand it. You default on that credit card debt, you don’t lose anything else except, of course, your credit score.
When you borrow money to finance your home, the mortgage is a secured loan. You default on your mortgage, you lose your home. That’s collateral damage.
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The Good
In the Western world, credit can make or break every financial aspect of your life. Good credit is the lifeblood of your livelihood. Whatever happens in the world of interest rate, credit scores, the national economy, you must always be at the top of your credit.
Change your mindset. Learn to use credit to your advantage and not to fill up pockets of the credit vendor. You can better the quality of life with credit.
As long as you are mindful of the fact that you are renting money and it belongs to its owner, you will use it to your benefit and then return it.
Your credit score affects your ability to qualify for loans, and credit cards have a significant effect on your credit, both positively and negatively.
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The Bad
If you are not mindful of how credit works and end up with a poor credit rating, it can hurt you financially and sometimes even personally.
Bad credit gets created when you borrow money with the intention, of course, that you will pay it back to its owner.
However, because of the messy and lousy economy we are in, you are unable to pay it as you had originally planned.
Bad credit can impact you in many ways:
- Lower FICO score
- Inability to get loans
- Higher cost of borrowing
If you have bad credit, there are things that you can do today to improve your credit:
- Change your mindset
- Spend less, save more
- Take steps to be debt free
- Establish a good track record of payment history
It is never too late to start rebuilding your bad credit to turn your credit problems around.
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And the Ugly
Like I said before, when you use credit card to buy something, you actually rent money for certain period of time. You must, at some point, return that money.
The ugliness comes when, at the time, when you were renting the money, you had no intention of returning it to its owner. Only a schmuck would do that.
When it comes to ugliness, nothing whatsoever – interest rate, credit score, the economy – bothers the schmucks of the world. In my opinion, they are the lowest of the lowest.
In a Nutshell
Always be on a lookout to better your credit rating.
Credit is like fire. With fire, you can do wonders when you put it to good use. On the other hand, with fire, you can destroy your life and others’ as well.
With good credit, you can do wonders and lead a happy and satisfied life, financially. With bad credit, you can destroy your life and others’ as well, financially and otherwise.
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