There is a carryout restaurant (inside of a gas station) not too far from where I live. They sell some of the best middle eastern food we have had in the area. We order food from there nearly once a week, but they never tell you how long it might be until your food is done. So commonly I will call in the order and go pick it up, by the time I get there I wait 5-10 minutes for my food to be ready. As I listen to people come into the gas station and yell at the gas station employee. (These people deserve more credit for having “tough skin”)
This recent experience I was waiting and I hear laughter from a guy sitting at the one table there as he looks at his phone. I, like most continue to stair down at my phone. Until I hear “hey, what do you think of the new president?” My first thought is “what a heck of a question to start a conversation randomly. What’s this guys intent?” I gave a common answer I give most, “regardless of who is in office I’m still going to do my day to day going to work and doing things that I planned on doing. If something dramatic changes that, I plan to adapt.” He followed with asking details about my understanding of liberals and conservatives, which led us into a conversation about equality. I did express the great thing about change is that he and I were able to hold a peaceful conversation (he and I with different ethnic and racial backgrounds). However everyones upbringing and perception on the world around them is different based on interpretation.
He discussed where he lived and that he recently procured a vehicle at a loan at 24% interest. Shocked I asked about his credit, which he seemingly did not know the number to. He had no credit cards and explained that no one taught him about credit or finances. This is what inspires me to share what I have learned through reading, discussions of individuals well smarter than I, as well as my personal experiences. Some action steps I mentioned for him to take:
“If you can responsibly manage a credit card and pay it off each month, you can get a cash back rewards card” This will literally allow you to make money back on expenses you were going to accrue anyways. However I did inform him that credit cards typically hold a high interest rate and statistically according to Dave Ramsey around 80% if individuals do not pay off their cards monthly.
Another is reach out to a bank to see if there is any chance of refinancing to a lower interest rate. He stating still owing around $15,000 on his vehicle and ultimately is costing him over $30,000. I mentioned ” You’re paying for a Dodge Challenger when driving a Honda”.
I ensured he understood that credit score can make a dramatic affect on what you pay long term on any loans and would cost him even more on a house loan.
For example:
Someone with credit score of 630 would as of today quality for a house loan at 4.10% (assuming you can even find a lender)
Someone with a 750 credit score can get a loan at 2.80% on that same house (with several options of lending available)
https://www.nerdwallet.com/mortgages/mortgage-rates/michigan
With a purchase of a house in Detroit, MI at $100,000 with 20% down. The Loan value would be $80,000. When you apply the interest rates, we will get two different numbers.
Tricky because in the end you will ultimately pay $159,320 with a 4.10% interest rate. Compared to $138,440 with a 2.80% interest rate. Which is the difference of $20,880 when everything is paid off.
All of these numbers are boring and confusing, what’s your point?
Having good credit can save you long term to help you keep your money and do more of what you wish to with it.
Action steps you can do to help your credit:
1.) Pay your bills on time, if possible pay them off. This will improve whats called your debt to income ratio which lenders will consider when giving you a loan.
2.) If you can responsibly manage a credit card, ask for a credit increase, this will improve the percentage of credit utilization. The lower the percentage of debt you have based on what you have accessible to you, the better your credit looks to lenders.
3.) Keep your old accounts open. This one is trick because it is a slow process. Opening new accounts will temporarily affect your credit score because of he age or length you have had this account (credit card or loan).
4.) Check your credit score often, if you’re unsure about anything on there. Feel free to challenge it, but be sure it is a legitimate error on their end and not yours. If you do not track it, you do not know how it is performing. You are then less likely to make modifications in habits to improve this.
Cool but how do I check my credit score?
If a website attempts to sell you on paying them to access your credit score, DONT. This information should be free. The cool thing is if you apply for a loan, banks will run your numbers and they have to share this with you.
I use an app called Mint, which I am a fan of because you can check it daily if you wish and it gives you a good explanation of your credit score and why your score is what it is.
I also use my bank and a credit card companies online platform to check my credit. There are many ways to check your credit score, the great thing is. If you’re reading this, you have internet. If you have the internet, you can learn about almost anything.
Hopefully this is some helpful content. If there is anything any of you would rater hear about let me know!
Have a great day!
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