By popular demand and by order of necessity, The Delasol Group brings to you an exclusive four-part series on Credit. In this mini-course, we are going to focus on ECONtreprenurial credit & debt management; that is to say, how to use your credit wisely and not allow it to use you! We eagerly welcome comments and suggestions to appropriately educate the masses on this hot topic.
First things first: Why is it important to establish credit?
The primary reason is because credit allows us to purchase things we do not have the cash for. Now don't be alarmed, there are many smart purchases that you may not have the money for, such as a home or an education. For these things - and other big money purchases - you need credit. It's not mandatory, but it's not common that you can shell out $25,000 in cash for a car or $300,000 for a house.
Another reason we establish credit is because borrowing money and paying it back responsibly allows us to borrow more money. If you are a small business owner, you will need to show some proof of paying regularly on your debts before a bank will give you a loan to expand. If you are a parent, you will need evidence of consistent debt payments to secure a student loan for your child's college education. Just like the saying, "It takes money to make money" it is also true that "it takes credit to get credit!"
Finally, the best deals go to people with good credit. You can expect lower interest rates on homes, cars and credit cards than someone who has a more troubled credit history.
Okay, so how can I build credit or turn my bad credit into something good?
Excellent question! There are two ways to establish or turnaround your credit:
1. Get your free Credit Report.
2. Check out Pay Rent Build Credit.
3. Purchase something on credit and pay it back on time and in full. Repeat.
Every 12 months you are eligible to get a free credit report. Every time you go to borrow money, rent an apartment or purchase a car, someone looks at your credit report to see if you are creditworthy or not. In recent years, it is common for potential employers to pull your credit report too, to ensure that as an employee you won't be more of a Liability than an Asset. Knowing what's on your credit report will save you from disappointment or embarrassment, and will let you know exactly where you need to start repairing your credit. There's only one place where you can get your free credit report. Click here to get yours!
Pay Rent Build Credit is a service that provides people with no or poor credit to build their credit without going deeper into debt. PRBC is a credit repository*, just like Equifax, Transunion and Experian. What makes PRBC different is that it is the first credit bureau to allow people to enroll themselves and lets them demonstrate their creditworthiness from non-debt bill payments. Things like Rent Cable, Daycare, Insurance, Cell Phone, Electric and Natural Gas payments. The "Big Three" repositories don't give you that option. The company gives you two options. If you have been paying on your bills regularly and on time, you can order a verification and key in payments you have made. If you would like PRBC to begin to track your timely bill payments, you should sign up to pay your bills online through one of PRBC's partners. PRBC then uses your timely bill payment history to create a credit report for you with both debt and non-debt payments. Pretty nifty idea! The Delasol Group fully supports this effort and invites you to view the website and watch the brief clip below on PRBC:
Now the third method of building credit - by actually using it - is usually either a complete bust or a bang! The Delasol Group would like to walk you through monitoring credit with your credit report in part 2 of our Credit Education Series. Stay Tuned!
* A Credit Repository is an organization that collects, updates, stores and reports financial information for people who make payments on stuff.
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