Credit is one of the most poorly understood financial structures in the life of the average American. Everybody knows that mot people have credit scores (whatever those are) and that wise spending and paying off your credit bill make a score go up. That’s about where most people stop.
Instead of learning how credit really works, people rely on their guts for day-to-day decision making, hoping that everything will turn out right in the end. Unfortunately, debt and poor credit behaviors come together fast. People with little understanding and strategy get weighed down financially, often in ways that they don’t even notice.
Companies like Vantage Acceptance of Woodland Hills, California (to provide one example of many) help people comprehend their credit, and set the stage for better credit health in the future. Here are some of the ways that the average person can improve their credit standing.
Improving Your Credit Standing
Woodland Hills, California is known for wealth. Not everybody is actually wealthy but even fewer people with money also have sterling credit. Credit doesn’t work the same way wealth does. More isn’t always better.
It’s possible for someone to be very wealthy indeed, while having credit history that is very much in the toilet. Part of the problem is the extent to which an individual relies on credit, compared to their own liquid resources. Creditors don’t like it when it looks like someone is living off of credit.
Most creditors can’t look into your bank accounts to see how much cash you have. However, they can look at how much of your credit limit is used every month. If you have $30,000 in available credit and you carry a balance of $26,500, this is a sign that you might be in financial distress.
Credit is expensive in most cases. To carry such a balance, you could be paying anywhere from 10% to 30%+ in interest every year. Your creditors know that you know this and that you’d likely pay down your balance if you possibly could. By carrying a balance, you look like you don’t have any other options.
This is one of many factors that lowers your credit score. Any time you behave in a way that makes you look financially vulnerable (like missing a bill payment, requesting a mortgage loan, opening up two credit cards in as many months, etc.), your creditors can only assume that you may be somewhat financially overextended. By lowering your credit score (a function tracked by the three credit reporting agencies), you will find it less easy to borrow. This will help stop potentially reckless behaviors in their tracks and keep future lenders from losing money when you go bankrupt and can’t pay it back.
There are so many other factors which go into good and bad credit, they are too many to enumerate here. Suffice to say that they appeal to common sense. But you’re not born knowing this stuff. By using the services of Vantage Acceptance or any other similar provider, you can learn the steps to bringing your credit back to a healthy place. This will save you lots of money in the long run and help initiate good financial habits.
Questions for Discussion: How has your credit been hurt or helped by your behaviors? If you had bad credit, what have you done to repair it? Is credit worth it or do you think it’s fine to live a completely debt free life?