Roadblocks to Wealth: Obtaining Credit
Monday, September 3rd, 2007Everyone has perfect credit right?
For any person to build a business, buy real estate or invest in stocks you need cash. This can be your savings, or an inheritance but for most of us it is in the form of a Loan.
Credit of course is what many lenders would look at to determine if you should get a loan.
If you have good credit: Congratulations, you have eliminated a potential roadblock with your money management.
If you have bad credit: Visit Budget your way to Billions Part III: The Technique to get your personal budget on track and start paying those bills.
Everyone should go to www.annualcreditreport.com and get a free copy of your credit report from all three credit bureaus. For a small fee you can get your credit score. I recommend just picking one. The score is probably about the same unless there are errors on your credit report. There should be nothing on these reports that surprises you. Please make sure that all the information is correct and file a dispute for anything that is not.
If you suffer from lack of credit then get out there an establish it. Credit cards are nothing to be afraid of if you exercise discipline. To save on interest charges you should pay off your balance every month. However, if you want to build up reputation with a bank I recommend that you don’t pay balances off completely. Banks make $0.00 when you pay off your credit cards, but they do make money from interest. I have never worked for a credit card issuer but I suspect they have extensive mathematical models that rank customers based on credit worthiness AND profitability.
To build credit take these steps:
1. Open up at least 2 credit cards, and pay them EVERY month.
2. Open a car loan that is within your budget. (This is easier than you may think)
3. Stop by a local bank and see if you can apply for a personal unsecured line of credit. This can be as small as $500 or $1000.
The most important step is the focus you will need to pay all of these on time every time once you establish them.
If you need help with discipline I suggest checking out our Discipline category.
You’ll see much more on credit in the future. Please bookmark us!
A.D.