Typically when people think of building wealth they are not focusing on credit scores but on assets, cash flow, and investments. Wealth is not quite so one-dimensional; it has a financial side to it, a spiritual side to it, and a credit side to it. Most people are oblivious to the importance of their credit score until they experience a financial backlash. Home insurance rates are now tied to your credit score. Potential employers can use it to determine if you are good candidate for employment. And of course, some lenders wont do business with you if your credit score is low and if they do, your interest rates are always high. Im told some people are now paying up to 30%. OUCH! Try to get a reasonable mortgage interest rate with a low credit score; its impossible. We refinanced our home and lowered our interest rate by 1% and it saved us $145 per month. Now swing the other way and you can see how a person purchasing a nice home with a higher interest rate attached to it could price themselves right out of the market because they couldnt afford the payments; the interest payments. Credit is a very sharp 2-edged sword. You must have it, cant live very comfortably without it, but mismanaging it could destroy you financially. You ever try to buy an airline ticket or rent a car for cash? Some banks wont even give you a debit Visa or MasterCard attached to your own checking account if you have a low credit score. That really makes no sense but that seems to be an emerging trend. This cycle of increasing consumer debt was directly responsible for the change in the bankruptcy laws in order to protect the lenders from the rising number of filings. Our society is being negatively impacted because when people cant consume anymore, the economy stalls. I guess lenders are looking for a new generation of consumers because even high school kids are getting credit cards sent to them in the mail you have been pre-approved to go into debt. Parents beware if your children are getting credit card applications sent in the mail. Its often a mistake on the lenders part or is it? College kids are prime candidates for credit card offers, after all, they are grown and they tend to think credit is the same as free money. Before they even have real jobs, theyre lured into the credit trap. By the time they graduate, the school loans and credit card debt are just enough to make sure they step onto the playing field with a handicap. Its often difficult for parents to impress upon their children the foils of excessive debt, especially when they are steeped deep in their own real-time experience of financial overwhelm. What does all this mean, you ask? It means we have to start paying attention to how we, the consumer, are being herded into thorny, unsavory pastures. Overextended credit and an unstable job market can literally devastate the lives of those who are caught in between the proverbial rock and the hard place. I know this feels like a very gloomy story with no happy ending in sight. But I think we have an amazing opportunity here to become responsible and accountable for our finances and our lives. Ive been in the midst of financial chaos and it took some time, not a lot of time, a couple of years actually, to put myself in a different place financially. Its so possible to do; a person has to be unconscious to let a financial downward spiral continue without intervention. If you want a true measure of peace and prosperity, you have to put your house, your financial house in order. It doesnt matter how much money you make if its all going to pay for last years trophies and to keep yourself from being pulled under financially by a lifestyle you can no longer afford. When you are financially strapped, you cant prepare for rainy days or sunny retirements. Living at the edge of your income and buried in debt is like casting yourself as the victim in a very tragic story. Life doesnt give academy awards for best drama so whats the point? The new economic stratification wont be about race or income; its going to be about credit. Even if you have good credit, excellent credit will put more money in your pocket. Have you checked out your credit scores lately? How are you doing in the new game? Even if you are not fairing so well right now there are things you can do to turn things around. Repairing your credit is not a quick fix but believe me, if you dont do something now its gonna cost you later. Copyright 2006 Robin Harris, DesignerLife |
