The reality is simply this: though everyone has the right to apply for credit, I must say, that not everyone should apply for credit, because sadly, credit is NOT for everyone… at least, not until a person has a clear understanding of what credit is, what credit is for, accept personal responsibility, and develop strong financial discipline and strong money management skills.
So what is Credit?
- A formal definition is the ability of a person to borrow money or access goods or services from a merchant (seller) with the understanding that the person will pay the merchant at a later date.
OK… that’s cool.
However, to get a deeper understanding, CREDIT is just another word for TRUST.
Think about that word for a moment… TRUST.
If anyone has ever asked you the question: ‘How is your credit?’…, what they are really asking you is… ‘Can I TRUST you to pay me back?’
Credit and TRUST go hand-in-hand.
Credit is serious business and you MUST be brutally honest with yourself BEFORE you even think about filling out the credit application and definitely before signing the credit agreement.
With the way the credit industry works today, there is no point in trying to sugar-coat your credit score, because every company that extends credit has access to your credit report and your credit score and all information will be revealed, and the lender will make a decision on whether to approve or deny your credit request based on the information on your credit report and your credit score.
There was a time when you had the opportunity to sit in front of the Loan Officer, the person who had the authority to approve or deny your credit application, and if you had bad marks on your credit report you had the opportunity to make-your-case on what happened.
In today’s world, with the growth of Artificial Intelligence (Ai) decisions are made by computer algorithms and the ‘human element’ is not even involved, which is to say, empathy, in most cases, does not enter the credit decision process.
Just another reason for you to build an impeccable credit history.
So, when a merchant or a lender approves you for credit, it means that the ‘machine’ has identified elements of TRUST in your credit profile, which indicates that you most likely will repay the credit that you are seeking, as agreed, based on the information within your credit report and your credit score.
Sometimes, the person getting the loan, line of credit or credit card is so excited about getting approved that the person never stops to consider the ‘cost’ of the credit, the interest rate, the fees, the terms, and whether they can afford the payments into the future.
In their excitement, they sign the credit agreement, and sadly, shortly thereafter, a few months into the agreement, they lose their ability to make the payment due to some situation that is out of their control.
In my view, this is usually due to bad money management and lack of planning.
BEFORE signing a credit agreement a person needs to clearly assess their own personal financial situation as best they can and decide on whether they should accept the terms of the credit agreement.
There are several factors that should go into deciding whether to accept the terms of a particular line of credit and we will explore this further on this website.
What is Credit for?
Your Good Credit can open many doors of financial opportunity.
When establishing Credit you are establishing a record, a foundation of TRUST, that future employers, creditors, and lenders, will rely on when making decisions on approving you for employment and/or promotions, a mortgage, an auto loan, college acceptance, student loans, insurance coverage, certain state licenses, military service, and many other opportunities that require a high standard of TRUST.
You can even say that your Credit History is your Personal Financial Report Card, which people, or machines (Ai), who are charged with the authority to approve or decline your personal and/or business lines of credit, will use to make decisions about your creditworthiness, which could be critical to your financial status in the future.
Though there are limits to how long a negative item can appear on your credit report, this does not mean that you do not owe the money to the creditor or that you may not be affected in some negative way in the future.
Exercising Discipline
You know your own financial situation the best, therefore, the ultimate decision-maker on whether you should apply for, or to accept a particular line of credit, is YOU.
In my past line of work, I had to file eviction orders, execute auto repossessions, file judgements, complete wage garnishment orders, none of which was pleasant for me to do, but it was part of my job.
This has become personal for me, as I have met hundreds of thousands of people, most of them good people, who truly wanted to do the right thing, which is to pay what they owed, but because of some bad situation that took place in their life, it caused them to miss a few payments, and in their distress, caused them to make some bad credit decisions.
I can honestly say to you, that if some of these good people had seriously looked at their personal financial situations, at the time they had first applied for the credit, they might have made a different decision, including the decision to not accept the terms of the credit being offered at that time.
Personal Credit is serious business and protecting your credit must be a high priority as it may affect your future financial status, including potential unexpected opportunities that may come your way.
As you go through the pages of this website you will discover financial strategies and credit advice to help you to make better money decisions.
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