Ballerific Finances: Understanding How Credit Works- blogged by @niksofly

Individuals forget about their credit until they want or need something and don’t have the initial capital to get the things they are considering for purchase. Contrary to some beliefs, cash is not more valuable than a prime credit score. Yes, cash is accepted everywhere, but what happens when you want to purchase a home? You have the income, job stability, but your credit worthiness is less than stellar. Try purchasing a car with subprime credit. You may get financed, but you can be paying an extra $10,000 on top of the car’s purchase price if your rate extends into the double digits.  I’ve seen people with 17.9 % interest rate. That means a car that costs them around $20K will now cost them 30K if they pay according to the financed length of time. Who has an extra $10K to give wealthy corporations?

There is nothing Ballerific about credit denial or extremely high interest rates. In order for you to ball correctly, you must ensure that your credit is in shape and if it’s not, you can whip up a work out plan to get it on track. You want your credit score at about 720. This qualifies you for prime interest rates and larger credit limits. Essentially you be lent more money for less.

Credit is extremely important. Some corporations use potential employees’ credit as a facet of consideration for employment-odd, but logical. Your credit demonstrates trustworthiness, stability, responsibility and most of all financial management and it is definitely more than paying your bills on time. In fact, there are several factors that go into creating the overall picture of your credit . Creditors look at the length of your credit history, the number of accounts you have opened, payment history, credit utilization, derogatory marks and hard inquiries.

Length : There are plenty of young adults that pay their bills on time, however their scores aren’t top tier. It is because the length of their credit history is rather short. Credit is like wine- it gets better with time. The longer you have it, the better your score.

Accounts Opened: sometimes we get accounts and the lender irritates us so we pay them off and close the account. This could adversely affect you credit score as it shortens the length of credit history and open accounts. The ideal thing to do is to have the account open and just limit its use.

Payment History: The number of times you make a payment on time is essential.  While a 90% average in school is perfectly fine, you need to aim for at least 98-99%. Life happens, but so do on-time payments. Try to minimize late payments. 100% is preferred, but anything under a 98% score can adversely affect your credit. If you are going to be late, set up arrangements or take advantage of grace periods allowed by many lending institutions.

Credit Utilization: I’ve known people to max out their credit limit and make the minimum monthly payment. While their payment history is well, their utilization is poor. Yes, carrying a balance demonstrates an aspect of responsibility and financial management, but when the balance exceeds 30% of your credit limit, then it shows poor financial management.  You need to either 1) pay the balance down and/or 2) ask for a limit increase to drop the utilization limit. You can pay the balance down by making more than the minimum monthly payment or paying twice a month.

Derogatory Marks: Sometimes sh!t (beyond your control) happens. You lose your job, you are hospitalized and acquire lofty bills, someone steals your credit information and doesn’t pay the accounts he/she opened. You might get a divorce.  Derogatory remarks (or poor marks) can appear on your credit history. The good thing is you can challenge them. Challenge the accuracy of information from the amount owed to the correct spelling of your name. Challenge the dates opened. Dispute any and everything that is not accurate. Creditors only have 30 days to contest your challenges and if they don’t contest it  by providing accurate information within in the time frame, it has to come off.

Hard Inquiries: These are simply the number of times a creditor or lender has pulled your credit. Every time you apply for something, your credit is pulled. Too many pulls can negatively affect your credit especially when you are being denied. Know your credit score before you apply and examine the likelihood of you being approved. Here is a fun fact. Pull your credit yourself before you go to buy a car. If the lender needs to see your report, you can fax it to them (or have the salesman do it for you).  If you leave it up to the dealership, they can pull you credit as many times as it they see fit with astronomical values in the double digits.

Think of your credit as a gateway to balling. The better it is, the harder you can ball.  You will be privileged to do things that others with sub prime rates cannot do. You can qualify for a batter home at a better interest rate. You have an avenue for financial cushion.  You can purchase with confidence. Remember ballers have financial longevity. Prime credit is a facet of that.

-Niko Rose