The word credit has many uses and refers to a variety actions. Let’s examine.
It may be used as a type of bookkeeping entry. Someone may be given credit for some piece of work such as writing or acting. In my world of providing education, credit is a system of measuring coursework. Lastly, credit may refer to finance and for purposes of this article we will focus on that medium.
If cash is king then credit must be the queen and the rest of the court. In today’s environment securing a high credit standing should be a high priority. There are ways to increase your credit score. The first step is to be educated and knowledgeable about what is on your credit report and taking action to clear any incorrect items.
Protecting your credit is paramount to financial freedom. In a time where more and more individuals consider strategic default, you must have your eyes wide open to those decisions and potential consequences. A short sale can affect your credit anywhere from 80-100 points where a foreclosure has a potential hit of 250-280 points. So making choices in your financial life has a long lasting ripple effect.
As I eluded to earlier education is my focus and as I have delivered consumer education programs on avoiding foreclosure and understanding its implications I have come to realize how important teaching our children is in matters related to finance. We are beginning to see more and more elementary schools that provide debit cards for their students with the school’s goal being easier accounting. Think of it as the “new” lunch money mechanism. As I was discussing this phenomenon with a colleague he stated that this shoots his budget up as his child uses this card at school for food and non-food items.
One of the best ways to be taught and to teach an appreciation for money is to physically touch and see your money. With checks, and credit/debit cards it is easy to be unaware of how much you are really spending. At least with the school debit card there is an opportunity as a parent to have the teaching moment and lay ground rules to children with regard to spending.
Discipline is a fundamental principal as it relates to the handling of finances. Commitments must be taken seriously as buying decisions don’t just affect today but can impact those in the future. Learning those lessons can be hard. Having a plan and sticking to it will help you realize your dreams especially in the financial world.
When a mistake or misstep has occurred all is not lost. That is the beautiful attribute about time. Time does heal all wounds. So if credit has been impacted in the past, time and strategic planning can heal the wound. There are groups out there who can help repair past mistakes but as with any service purchasing get references and do your homework.
The old adage what you don’t know won’t hurt you could never be farther from the truth, what you don’t know can and will hurt you as it relates to building your credit. As we close, credit also means positive. No matter what has happened in the past, it is the past, move on and take those positive steps in building your credit and your financial freedom at the same time.