Hard Lessons My Mother Almost Taught Me
When my identity was stolen at 23, I was shocked, confused and lost. I grew up in a household where saving came secondary, but it was ok as long as you didn’t get a credit card. That is obviously not the healthiest financial philosophy. But the parallels between being careful with a credit card and the overall importance of a credit score never registered until I received a phone call from a creditor claiming I owed £1,000 on a loan I never opened. Fast forward through 6 months of proving who I was and finding out more about credit than a financial planner. It was a hard lesson at that age, but a great one. It forced me to get a healthier outlook on finances and taught me the simplest lesson on dealing with credit:
- Check your Credit.
It’s yours, it’s free and it matters. Don’t be afraid of what you will find. If you wait until you get the unexpected creditor phone call, no turning back. Each year, the government gives one free credit report to consumers (that’s you), but you have to go get it: https://www.annualcreditreport.com/cra/index.jsp . Also consider investing in a credit protection service. It is another bill, but the peace of mind is priceless. If you don’t want to shell out the cash every month, check your credit report on a bi-annual basis from services like freecreditreport.com which offers one free credit report and additional reports for a small fee.
- Don’t be afraid of credit cards…be afraid of willpower
Building credit is one of the best things to do. Credit cards with good interest rates and rewards programs can not only build your credit but you can earn discounts and rewards like airline miles. The key is to use your credit wisely and watch your willpower. It is very easy to use as an extension of your wallet for some cute shoes or great music, but understand the true purpose of credit, to prove your fiscal responsibility and purchasing power. Don’t spend more than you can pay back and use it for larger purchases. Used wisely the purchasing power of good credit can get you very far with very little.
- Make a budget and stick with it
That way you know when, were and how to most appropriately use your credit. It can be overwhelming to chart and track every little purchase, but it answers that age old question “where did it go”. Take the extra step beyond your check registry and start to track your purchases. Use online banking coupled with a budget spreadsheet (templates are extensive on the internet and through standard software) to start tracking and once you get into the groove, it becomes routine!