Chick be talking! Am I right?
For those of you that have followed this segment, you know this is me sharing my wisdom, hoping to enlighten someone who needs to hear what I have to say. Believe me, I have a lot to say. Not to mention, I know a lot of things, some of them important, and some of them are useless facts, but I come packed with years of knowledge to share.
This segment, “Chick Talk”, was started after a conversation I had with oldest daughter, when I jokingly said I should start a blog called “Chick Talk”. She cheered me on, as she often does when it comes to my writing (I adore her for that), so here we are, me sharing and hopefully you caring. So on with it then…
Topic: Living Financially Responsible
In my last excerpt, I talked about my backstory, and it is because of my upbringing that I feel especially knowledgeable about my topic today.
Having grown up in foster care, I had no real role models to look up to. None that were especially savvy when it came to finances, so needless to say, I made hella mistakes with my credit over the years. These mistakes would take me until recently to straighten out and get back on the right track.
Growing up in an urban society where your surroundings are usually filled with those that are struggling everyday to make ends meet, credit and credit scores bare little interest amongst the masses. People are living paycheck to paycheck looking for whatever the easiest hustle is to get by. It is these circumstances that cause people to use creative financing with little regard to what it may do to their credit score in the foreseeable future. It would take me years to figure this out, since I had no role models or no idea on how to fix the mess I had made.
What I am sharing with you today is the result of years of trial and error. Believe me, I got it wrong way more than I got it right until recently. The topic is living financially responsible and what that means for the average American out here trying to survive. It’s not easy being breezy when you’re broke.
The first thing you should know, if you don’t already know, is that your credit is your life. Creditors don’t care if you’re a good person or that you work in the soup kitchen twice a week. Creditors don’t know you from Adam or Eve and could care less about your plight in life, so the only thing they know about you is what your credit history tells them about you. Seeing that this is a one-sided story, it is in your best interest to ensure that your credit story is, well, creditable because it’s the only story creditors are interested in knowing.
Most Americans are living well beyond their means for various reasons, and some of them at no fault of their own, but it is their story. When you are stuck in a financial rut with little knowledge, experience or money to dig yourself out, it’s frustrating and dehumanizing. But I am here to testify that there is a way out and it will not take you years to fix your financial crisis. Following are suggestions I used this year to bring my credit score from the mid 600’s to over 730 in just 10 months, and depending on your situation, these tips may benefit you as well.
- Use your tax return to pay all your credit card balances down to zero. The money from your tax return is essentially free money (so to speak), and even though you may have been expecting it, you can treat it like a win-fall and do the right thing and get the creditor monkeys off your back.
- Pay all your credit card bills on time, even if you only have enough money to pay the minimum payment for a few months, but whenever possible, pay a little more than the monthly minimum on your credit cards. You want to show that you consistently pay your bills on time, and lets face it, credit cards are typically the only revolving accounts that slam your credit hard when you miss a payment or pay late.
- Ask your credit card company for a credit line increase once your balance is paid to zero. If your credit card company increases your credit line it will positively impact your credit score for a couple of reason. One, it shows that your creditors trust you with their money. Second, it lowers your credit to debt ratio, which makes you look like an acceptable credit risk.
- Keep your credit card balance at 25% of your credit limit or lower. If you’re able to keep your credit card balances at 25% or lower then creditors know that you’re responsible and will be more willing to extend you higher credit limits in the future. This will also increase your credit score by major points. Use a credit score monitor like Credit Karma to keep track of your financial health.
- Think of your credit cards like the cash in your checking account. When the money in your checking account is gone, then you’re broke. The trick is not to spend what you don’t have physically available. If you use your credit card, you need to make sure you have the money to pay it off when your billing statement comes out. Again, creditors love this because it makes you credit worthy and in the future when you need to increase your credit limit, they will gladly do so.
- Set-up an additional savings account that is specifically for paying off your credit card bill monthly. This not only ensures that your credit card balance is paid in full every month, but it prevents you from over spending, because like I said above, once the money in the checking account is gone, you’re broke. Not to mention, that most banking institutions don’t charge for an extra savings account.
- Pay your credit card balances in full every month to keep from paying exorbitant amounts in interest penalties. This is how credit card companies make their money, and they expect the average person to over extend themselves and have to make payments over several months to either get caught up or to pay the balance off. Don’t give them the satisfaction of getting free money that you broke your back to earn.
The long and short of it is, you have to pay your bills on time. You can’t over extend yourself financially. You have to be smarter than the average bear when it comes to your hard earned dollar. You can’t give free money to the credit card companies, because that’s what they expect and it’s what they look forward to. You have to have a plan or structure in place to protect your credit score.
For the last 10-months (and longer), I paid all my credit reported bills on time. My mortgage, my car note, my revolving credit cards, and personal loans. There were months when I could only pay the minimum payment, but they were paid on time. When I got my tax return, the first thing I did was to immediately used that money to pay all my credit card balances to zero (this is the magic number).
Once I had those zero balances, my credit score shot up 80 points. From mid 600 to over 730. My new found credit-worthy score allowed me to be able to apply for the much coveted Discover credit card and get approved on the spot.
In addition to getting the credit card of my dreams, I requested a credit line increase on one of my existing credit cards and got approved. This did two things; 1) it immediately boosted my credit score another 7 points, and 2) it gave me more clout showing my creditors that I can be trusted to be responsible with the money they are allowing me to borrow when I need it.
I followed the steps I outlined above and it worked. I no longer have huge credit balances over 25% of my credit limit, and I am now able to apply for loans not worried if I’ll get approved.
Having the additional savings account for my monthly credit card payments has stopped me from over spending and being forever indebted to my creditors. Every time I swipe my credit card, I immediately move that money from my checking account into that savings account so I’m ready when that billing statement comes out.
Just remember, to your potential creditors, your credit score is your life story, so protect it, cherish it, and nurture it, because it’s an uphill battle if you have to repair it in the future.
Author’s note: Thank you for stopping by and giving this a read. Comments are always welcomed.
Please continue to practice social distancing to stay safe and healthy. Be well. Be safe.
Peace and Blessings – CV Davis
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