What is Credit? 6 Letters With A Lot Of Weight
What is Credit?
Your credit can be the key to many doors of opportunity in your life or it could be the curse that holds you back. Though your credit holds a lot of weight and is tied to you in several ways, it does not determine who you are. Life happens but there is always a light at the end of the title.
Let’s dissect credit.
Credit is a broad term but here is my definition. Credit is generally defined as a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date and in most cases with interest. However, the credit does not mean do what you want to do and pay it back when you want to.
FIVE FACTORS THAT DETERMINE YOUR CREDIT:
- Payment History– 35% is paying your bills on time and I don’t mean the day after.
- Debt Level– which should be under 30% of the loan amount but since we are in the beginning stages let’s keep it under 20%.
- Length of credit is 15% of your credit. I know that student loan has been on there since 1998 but it does show that you have established credit.
- Inquires compose of 10% of your credit- Do you apply for a Lane Bryant card every time that you are in there? If so STOP! If you have not been working or establishing your credit you are wasting everybody’s time because 9 times out of ten you are still going to be declined.
- Mix of credit determines 10% of how your credit is looked at. The mixture is good such as installment loans, mortgages, etc. however, they don’t do you any justice if you abuse what you have been given.
You may be asking how old do I have to be to establish credit? You can add a minor as an authorized user at the age of 13 however, some companies may impose a minimum age.
Parents and guardians!!! Please don’t add that baby to your account if you don’t pay it on time and or you abuse it because you will be doing more harm than good.
Adults can be added as authorized users as well. However, if you are new to the credit game, (it is ok if you keep your money in a sock for years) I encourage self-lender as an easy and effective way to establish your integrity in the credit world.
Click here for the self-lender website.
HOW TO MAINTAIN YOUR CREDIT:
- Make sure to pay your bills on time and automated drafting is also a good tool to use.
- Remember, that every dollar is not worth spending. My daddy used to tell me don’t spend all of your money in one store because we are going somewhere else.
- Write down your credit vision and if it wavers due to life refocus and it will get better but if it wavers because of you, get it together and change your habits.
- Make sure that you stay on top of what is being added to your report (stalk it, lol).
- And finally, don’t allow your credit to work you but you work and grow it.