Bad Credit, So What!

Several years ago, there was a commercial on television for a company that advertised itself by saying “Bad Credit, So What!”  They even had a website called BadCreditSoWhat.com where they promised to approve almost anybody for a car loan.  Sadly, the fact that this company’s whole marketing campaign was focused on “Bad Credit” indicated the extent of the consumer credit problem in America; most people know the pain of dealing with never-disappearing credit card balances, or denials from lending institutions for bad credit, but few have experienced the power and satisfaction of having a very high credit score* (above 720).

Your credit score plays an essential role in your financial success because we are a credit-driven society.  For example, unless you can purchase a home with cash, you need a mortgage to realize one of the key “American Dreams”, home ownership – lenders do not want to lend to people that they do not trust will pay back on their loan and they use the credit score to determine how much the “trust you.”

So to open the doors to your financial dreams, you need to actively manage and protect your credit score as aggressively as you can.

Your credit score is the GPA of your finances

The first time most people begin to think about their credit is when they are faced with a major purchase (car or home) or when they receive a rejection letter in the mail for a loan application.  Only then do the red lights go off and they begin to pay attention to their credit.  This should not be the case.

You credit score is like your Grade Point Average (GPA) in school – it tells a lender how well you have managed your usage of credit over the last 7 years (sometimes even longer).  If you only look at your credit when you are faced with an application for a loan, you are like a student who didn’t pay attention in all the classes and didn’t study for the finals, but expects to get a 4.0 GPA – hardly ever happens!

Very few students can pull off this feat because it requires either natural talent or a great amount of luck.  The same is true in your finances: some people naturally manage their finances well (very few) and some people are just plain lucky; don’t gamble with your future by hoping that you fall into one of those buckets, because you most likely don’t.

As you seek to achieve the Millionaire Realm, your credit score is a very good indicator of whether or not you are on the right track with your wealth building plan and you need to make sure that you (not your creditors) control your credit score and ultimately, your financial destiny.

What a high score can do for you

Simply put; a high credit score will earn you the “red carpet treatment,” in the financial world.  The more a lender can predict that they will earn the money they intend to on the loan you are applying for, the more welcoming they are of your business.  The process for getting a mortgage when you have a high credit score vs. when you have an average or low score are like night and day.  The person with the high credit score can get a loan with less paperwork, provide less documentation, close their loan faster and get the best rate out there – wouldn’t you like that to be you!

It can be, and in some later articles, we will go over strategies and techniques for fixing your credit and then raising your credit score.

Managing vs. ‘Fixing’ your credit

When you have a low credit score, it is very easy to focus on finding ways to “fix” your credit, but in the Millionaire Realm, you have to think bigger and focus on managing your credit.  What that means is that you need to determine the root cause of your credit problems before you even try to come up with solutions.

For example, if your credit report is full of late payments, you have to figure out why you are always late on your bills and work on resolving that issue first.  On the other hand, if there is a lot of fraudulent activity that ruined your credit, but was not your fault, you have to come up with a plan to clear your good name.

With the mindset of managing vs. “fixing” your credit, once you have resolved the issues on your credit report, or built up a good credit score, you still continue to monitor your credit standing and make sure that no more blemishes appear on your credit report (whether or not they are your fault) because you understand the value of keeping your credit score as high as possible.

Instead of begging companies that say “bad credit, so what!” to give you a loan and charge you obscenely high interest rates, you can walk into a bank and command the respect of a Millionaire-in-Training!

What does this mean to you?

If you are going to walk tall in the financial world, you need proof that you keep your promises when it comes to financial obligations.  One of the easiest ways to do this is to maintain a “clean” credit report, which in turn will keep your credit score high.  Check your credit at least once a year and deal with any issues you find immediately.

*Credit score – A single numerical score, based on an individual’s credit history, which measures that individual’s credit worthiness. The most widely used credit score is called FICO for Fair Isaac Co. which developed it.  Scores range from low 400s – 900.  The lower your score, the less likely you are to get a loan – most lenders do not lend to individuals with scores below 500.

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