Why don’t we talk about credit?
As an adult I’ve found it so strange to look back on the things classes focused on during all of the years I spent in school. It feels like we never spent any time talking about things that would have such an impact on our day-to-day adult lives. I spent years studying algebra, dissecting animals and relearning some of the same pieces of history year after year… but never learned about the importance of credit scores, tax returns or negotiating a salary. For some reason, all of these things are still seen as taboo, especially for women to talk about.
I can tell you I’d use information about finances WAY more than I use the biology of a frog. In the past four months we’ve bought a new house and now, drumroll, a new van! Making large purchases is stressful. All of the paperwork for financing is such a headache. And having poor credit makes it even tougher. Not only does it make it harder to find the right lender, it can cost you even more, as those with poor credit scores typically are approved with higher interest rates.
I got my first credit card right after I turned 18.
I come from a family of savers and responsible spenders. Those who buy just the things they need, who carefully think through purchases before making them. My parents don’t believe in debt, other than a mortgage. They save up for any large purchases (vacation, cars, etc.) and don’t make the purchase until they have set aside that specific amount of money. Me? I got my first credit card at age 18.
As soon as I turned 18 I started getting the pre-approved offers in the mail. Having a credit card opened an entirely new world. A world of being able to order online from my favorite stores. Then I’d just use my “real money” to pay the credit card bill, you know, the money that wasn’t in my bank account YET. The money I knew would be on my next paycheck.
I am impulsive and if I want something, I need it. Clothes here, shoes there, new nail polish but then paying for a mani/pedi. Being able to slide a card without worrying about whether the money was there “right now” was just too easy for me.
Over the course of the next year or so, I found myself with more than one card, just making the minimum payments. It continued for close to a year before I finally told my mom. Not only is she is an accountant, but she is, like I said before, a responsible spender. She suggested I cut up all of the cards and she helped me create a budget to allow me to pay them off quickly. I was so lucky she was able to get me back on the right path.
Bad Credit, Good Credit, No Credit?
Fast forward six years, I was out of college and working an “adult” job, commuting an hour to work each day. I needed a reliable car with better gas mileage. I went car shopping with my dad. It was a Saturday and we drove a few hours to Chicago to a dealership that had a few I was interested in. I found one and was so, so excited. When it came time to pay, my dad tried to write a check. (I was going to just pay them back instead of having to pay interest on a car loan) but the dealership said since it was a Saturday afternoon, they couldn’t cash the check immediately to know it was “good”. We would have to finance the car and then when they cashed the check on Monday they could close out the financing. They ran my credit and told me they couldn’t approve me on my own because I didn’t have “enough” credit. It wasn’t good or bad, it just wasn’t enough.
I knew there was bad credit and good credit… but no credit? I had no idea that was lumped in with “bad” credit in terms of what I would be approved for. But I had student loans during college! Lots of them. My parents paid them off 6 months after I graduated. Shouldn’t that have given me “good” credit? The car dealership said paying them off so quickly was the “problem.” We should’ve waited at least a year to pay them off to show I was responsible, to prove I could make the payments on time. Who. Knew.
From there I realized I needed to build up my credit. My dad co-signed for that car and I made payments on it for a year to help my credit. After that I got married and soon realized the better score I had, the better mortgage rates we would be approved for.
After tons of research, I found an easy way to build my credit was to sign up for a few store credit cards with great rewards, but the key is paying them off each month, yet cashing in on the rewards! Finding stores that would let me pay down my balance right at the counter after making my purchase made it easy. And while it doesn’t happen instantly, my credit skyrocketed within about 18 months. Having an Excellent credit score means we can get a better rate on a car or mortgage vs. what I could get when I had “no” credit.
Credit is Important for More Than Borrowing Money
Maybe you don’t want to finance a car. Maybe buying a home seems too far away. Maybe you don’t want a credit card because you only pay in cash. But it’s important to realize credit isn’t only important if you want to borrow money. I’ve had my credit run for everything from buying a cell phone to renting an apartment to signing up for cable to opening a bank account. Companies don’t want to do business with someone who doesn’t make payments on time.
I wish credit was talked about more often. I wish we taught kids how important it is in school. Geeze, I hope I can go to a class on it when it’s time to talk to my own children about it. Once you start researching, it’s eye-opening to see what you can do for your children to start them off on the right age with their credit. And luckily for my youngest brother, my parents were able to do just that for him.
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