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Get smart about credit

October 17, 2012
Estherville Daily News

Today is Get Smart About Credit Day, a great day to take stock of our credit rating and see what we can do to make it better.

Some people put it ironically: You only have good credit when you don't need it.

Well, that's sort of true.

Good credit, quite honestly, is a person's greatest asset. Good credit qualifies a person for lower loan rates on home and car loans - and that can save you thousands over the years.

So how does one ensure establishing and keeping good credit?

Well, it's something you have to start early - probably before you even graduate from high school.

As soon as possible, parents should help their children on the way to good credit by showing them how to save and not spend. And they can do that by helping them establish a savings account at a local bank. Virtually all banks have youth savings accounts, and many with no monthly fees. By having a savings account, kids can see their money grow and realize the value of compound interest.

When they go to college and they're out on their own, kids can continue to work toward establishing good credit by going on a cash-only basis. Sure, there are some things a person just has to go into debt for, like college. But there are ways to offset college costs by applying for scholarships and taking advantage of summer work opportunities.

A lot of parents, of course, discourage their kids from having car loans while they're in college. Quite honestly, that probably isn't a bad idea. Keeping our debts to a minimum until a person is in the workforce is probably wise.

Once you're out on your own, of course, a car - and probably a car loan - is necessary. But as the adage goes, we should all live within our means. So keeping the car loan down as much as possible, not buying frills and paying cash as much as possible as we slowly build credit is a good way to go.

Avoiding overdrafts at the bank, paying utility bills on time, making all car and credit card payments on time - these are all things that can help build a person's credit.

Okay. So what if I haven't done all these things, some may ask. What do I do then.

Well the answer to that is to start fixing bad credit today. Yes, bad credit can be reversed. But to do that, a person needs to make all payments on time.

A year of no late payments will help. Two years will help even more. And in time, that credit can eventually be repaired and made as good as new.

Some things hurt credit more than others, of course. (A late mortgage payment is a killer). Late credit card payments will really ding your credit too.

But make those payments on time, then watch your credit shine.

It's as easy as that.



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