“You wanna know what’s more important than throwin’ away money at the strip club? Credit.”
No one ever talked to me about credit. I remember being 21 and having access to money that wasn’t mine. I put in for a bottle of Patron at La Marina, got myself a Burberry shirt and went to restaurant after restaurant in the city. I was reckless. Only when all of the money was spent did I get nervous. How was I going to pay it all back?
Hopefully you’re reading this and you have yet to open up your own credit card account? Or better yet, you know all the major keys and have been working towards building your credit up for awhile. If neither of those pertain to you and you went the big spender route know that you can come back from that. I decided to write a little bit about what credit is and how you can use credit for your advantage because fuck living rich and dying broke (I’m swooning over this new Jay-Z album).
What is credit?
Credit means having the ability to purchase something now with the promise to pay for it later. You are borrowing money today with things like: student loans, car loans, home loans, credit cards…etc. Credit is extended to you by a credit grantor who includes finance charges, to be paid off at a certain time.
Why is credit important?
Credit can determine whether or not you can borrow money in the future. If your credit score is low, interest rates can skyrocket and it becomes more expensive to borrow money.
When should you start establishing credit?
Technically, if your mother put the phone bill in your name when you were a kid then you’ve already got yourself establishing credit (Way to go Mom! LMFAO). Usually, you have to be 18 to take out a credit card or a loan. If you have an interest in building credit, understand money management and budgeting, and have self-control when it comes to spending excessively then you are on your way to building credit successfully. Your credit score has so much influence on your financial future so please don’t jump into something without knowing if you are completely ready.
Where should you establish your first line of credit?
- Secured credit cards are a great way to start because you’re putting your own money up and after a year of using the card responsibly you may be eligible to upgrade to an unsecured card.
- If you’re a student with no credit history there are credit cards designed to help you build credit.
- If you have some credit history, but not a lot Capital One is geared towards fair or average credit scores.
How can I use my credit wisely?
I struggle everyday with the urge to support my shoe addiction. Sarah Jessica Parker’s Windsor embellished satin pumps and Aurora James’ Brother Vellies ‘Dhara’ tufted Sandals are still in my wish list and I fight the urge to spend daily, but with a LOT of self control and the drive to one day be able to afford those luxuries without putting myself in a hole I know that my hard work will pay off.
Shoes shown below just in case I make a Go Fund Me account.
If you have a credit card, the rule of thumb is to NEVER spend above 30% of your line of credit. It is important to pay off your balance right away so that you don’t have a balance lingering. Personally, I use my credit card to buy my unlimited metro card for the month and whatever quick travel tickets, but I do NOT spend if I don’t have the money in my account to pay it off immediately. Which is why SJP and Aurora will have to wait.
If you have student loans and don’t have the means to pay it off when you leave school the WORST thing you can do is let the pay dates come and go. Call your loan service provider and see about deferment of your loans until you are able to pay. Keep in mind that interest will keep accruing, but at least it isn’t affecting your credit score.
It is important that you stay up to date with your credit. Credit Karma is a free personal finance company that gives you access to your credit score and reports, and makes recommendations based on your credit profile.
If you are looking for a more in-depth credit review you can check out Annual Credit Report, “The only source for your free credit reports authorized by federal law.” The website gives you access to all three credit report services and helps direct you to the necessary offices if you have questions or disputes with your credit score.
Please comment below other helpful tips one can use on their quest to financial freedom.