Credit Information: Credit Basics For Young People New
To Credit
1- You must pay your bills every month. Ninety nine percent of all bills
are monthly. If you pay double the amount every two months, creditors
will slap you with late fees and a poor credit score. Creditors don't
care how you get the money, they just want the minimum payment every month.
2- Every bill has a different due date. Some bills are at the beginning
of the month, some at the middle, and some at the end. Many creditors,
such as credit cards, expect to get the payment during a specifice time
frame. You can actually pay too early and it won't count for the current
month. You need to call your creditors and see what their expectations
are.
3- Start out small. Get one or two credit cards. Charge a low amount
to them and pay consistently for six months. If you don't feel responsible,
avoid them altogether.
4- Don't get credit from finance companies and department stores. It's
always better to get money from a bank or credit union. You can usually
get a higher rate and you don't have to worry about getting a low score
because some department stores use finance companies to make their credit
system work. Finance companies will lower your credit score.
5- Save your money. Ten percent of gross is a minimum. We don't live
in a perfect world. Bad things can happen to you. When you have savings,
you can meet the challenges life throws at you. Without savings, money
challenges are sometimes met with default. You need a margin of safety.
Three years of income is recommended, but start out by taking 10% out
of every check, or more. It is easier to do it automatically by electronic
deposit. In this way, you learn to live on what you should and self discipline
is much easier. Consider the fact that most people have almost 0 savings.
Everyone is broke. This fact alone shows you can save because all these
people are on different income levels. People that save will do so when
they have little. People who don't save can't do it when they have a lot.
6- If you are starting out with little money, buy used items with cash.
Most wealthy people did not get that way by trying to keep up with their
neighbors. If a millionaire loses everything, do you think they will immediately
try to get a new car loan and a new home loan? The answer is no. Most
millionaires will spend their money on wealth building and buy nice things
after wealth building starts paying off. Many people trap themselves because
they think a new car, new house, or new boat make them a high class person.
In fact, a high class person invests wisely and builds wealth through
self discipline, thrift, and hard work. In the book, The Millionaire
Next Door, which is a great book to read, they say a person of this
type has a Big Hat and No Cattle.
7- Work more than you do now. Most of us watch a lot of television, play
video games, and generally have free time. If you are starting out, cut
out your television time, find extra work to do and save money. It can
make a huge difference in your future.
8- Pay attention to interest. The primary difference between poor people
and wealthy people is that poor people pay interest and wealthy people
earn interest. Compound interest is one of the most powerful things in
the world. With compound interest you can take a small sum of money and
turn it into billions. It make take a long time, but it has far reaching
effects if emplyed correctly. Consider also that a majority of Americans
pay half their net income to interest. Imagine how much more money you
will have without debt.
9- People with good credit get good grades in school, work hard, and
are responsible. Try to live this kind of life. You will find that you
are happier being productive.
10- If possible, buy a home. It may seem impossible, but it really is
not. Home prices have steadily risen more than peoples incomes. The pain
will be less, if you buy earlier in life as oppossed to later. Do a self
check to determine if you are ready. Do you consistently save your money
and make basic payments on time with ease? This is a sign you may be ready.
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