USING CREDIT RESPONSIBLY
In my early twenties receiving my first credit cards, I poorly managed them. I maxed out, made late payments, making only the minimum payments, and didn't understand interest rates. Although, my mother discussed with me the importance of being a good steward, I didn't listen. I learned so many hard knocked lessons during my early twenties, that I could've avoided if I applied the lessons I was taught. By the time I was in my late twenties, I disciplined myself to be a good steward over my finances, built and maintained a good credit score. Here is an interview of me discussing my background.
From personal experience and educating myself on using credit responsibly, here are some principles I live by:
- Borrow only what I have. Meaning if I don’t have it in the bank don’t borrow it.
- Borrow to increase wealth. Mean invest in opportunities that increase assets and decrease liabilities. Examples: buying real estate, start a business, buy an existing business, expand your business.
- Keep my credit cards under 20% utilization.
- Pay more than minimum payment.
- Have an exit strategy. Mean have a plan on paying off the credit card or loan before applying.
- Apply for credit based on the reason, interest rates, benefits, and introductory offers.
- When I am not applying for credit, I freeze my credit through all three credit reporting bureaus. Here is an article to show you how to freeze your credit.
- I monitor my credit to check for discrepancies and identity theft.
This article from The Balance gives some great tips on using credit the right way.
I challenge you to review your credit report, check your credit score, and start making steps to managing your credit the right way.