As I noted in ‘Credit is NOT for everyone’, it takes strong discipline to be successful when it comes to using credit.
So… to all of those ‘credit-hating teachers’ who would criticize or demonize credit in all of its forms, might I suggest that you consider teaching people the value of personal discipline and money management, which in my view, are much better lessons to learn.
I strongly believe that if a person desires to do business in America, then that person is going to need a GOOD CREDIT HISTORY as part of their resume, and the only way to build a GOOD CREDIT HISTORY… is with strong discipline, strong money management skills, and with time.
The longer a person waits to build a GOOD CREDIT HISTORY could mean trouble in their future when the time comes to buy a car, purchase a home, or get into a high paying career.
Sadly, there are Credit-Haters pretending to be ‘smart-people’, on radio, online, and elsewhere, that ‘teach’ people that credit is of no use, that credit makes you a slave to the lender, and that credit can only get people into trouble.
Well, if the person that is using the credit, possesses out of control spending habits, and has no idea how to manage credit, I would certainly agree with all of the above.
Credit-Hating ‘teachers’ have to believe that people do not have the financial mental capacity, are unable to develop the personal discipline, and are unable to learn the financial skills to manage money and utilize credit, because they treat their ‘students’ like uncontrollable babies.
Credit-Haters use ‘biblical teachings’ noting that credit is a form of borrowing, and if one borrows money on credit then this ‘act of borrowing’ essentially makes the borrower a slave to the lender.
This kind of ‘teaching’ is damaging, in my view, and is a financial injustice for responsible and disciplined people who have a desire to grow and secure financial independence.
Credit is a ‘tool’ that requires ‘discipline’, which can be taught to any person, who is willing to learn how to put credit into action, so that any person can take advantage of a plethora of financial opportunities, which can help to grow personal financial wealth very quickly.
Again, in my view, choosing to exist on CASH-ONLY, especially when you are young and broke, is foolish and could cause a person to lose out on a multitude of financial investment opportunities that have the potential to earn tremendous financial returns.
At the very least, having ZERO-CREDIT can dramatically slow down a person’s ability to achieve their financial goals.
Having ZERO-CREDIT offers a person NEAR-ZERO-OPPORTUNITY to access Other People’s Money (OPM) so that they may be able to invest in cash producing opportunities, while in the mean time, PARKING CASH in financial products that have the potential to earn high returns in the form of interest.
As I said at the beginning of my message… building a GOOD CREDIT HISTORY takes TIME, and the more time wasted living DEBT-FREE and on a CASH-ONLY-BASIS, the less prepared a person will be when a financial investment opportunity presents itself and there is ZERO CREDIT HISTORY to present to a lender to qualify for a LOW INTEREST LOAN.
In the business world today, a person’s ‘WORD’ needs to be backed up by a GOOD CREDIT HISTORY.
THERE IS DANGER IN NOT ESTABLISHING A GOOD CREDIT HISTORY
By choosing to NOT establish a strong personal credit history early on, you might find it quite difficult to improve your PERSONAL LIFE as well as ADVANCE YOUR PROFESSIONAL CAREER.
For example, let’s say that you want to buy a newer vehicle, (not NEW… just NEWER), WITHOUT A GOOD CREDIT HISTORY or ZERO CREDIT HISTORY, when applying for credit, you can expect to pay a higher interest rate, which would result in paying much more than what the vehicle is actually worth.
You might be thinking that ‘paying cash’ for a vehicle is ‘smart’.
Well… let’s say the price of the vehicle is $10,000 dollars, and you could finance that vehicle for a 2% percent interest rate or much less, (which is ONLY possible with an excellent credit history).
Why not get the loan at a 2% percent interest rate and leave your $10,000 dollars parked in an account that earns 8% percent interest or more?
- This would result in positive interest earnings of 6%
Now THAT’S money smart.
How about moving into a ‘BETTER’ neighborhood?
Well, WITHOUT A GOOD CREDIT HISTORY or ZERO CREDIT HISTORY, if you were to rent an apartment or rent a house, you may be required to pay the FIRST MONTHS RENT, LAST MONTHS RENT, and a SECURITY DEPOSIT EQUAL TO ONE MONTHS RENT!!!
THIS WOULD MEAN WRITING A CHECK FOR THE RENT (times) THREE BEFORE YOU GET THE KEYS!!!
With the average rent at $1700 per month in 2023, you would be writing a check for $5100!!!
With a GOOD CREDIT HISTORY, you would have the opportunity to invest that money into a high interest earning account.
I will also say this, if a landlord is willing to accept this type of arrangement because of your BAD CREDIT HISTORY or NO CREDIT HISTORY, then you might discover that the definition of a ‘BETTER’ neighborhood may not be what you had expected.
What if you wanted to BUY A HOUSE?
Well, let’s first assume that your lender were to qualify you WITHOUT A GOOD CREDIT HISTORY, or ZERO CREDIT HISTORY, your lender may require that you come up with a HIGHER DOWN PAYMENT, and you may also be required to purchase PRIVATE MORTGAGE INSURANCE (PMI) which in the long run ain’t cheap, and the house may not be anywhere near the house of your dreams, but rather, may turn out to be a nightmare.
Last, but not least, how about advancing in your career?
WITHOUT A GOOD CREDIT HISTORY or ZERO CREDIT HISTORY, you may lose hundreds of thousands of dollars per year in personal income.
What do I mean?
DID YOU KNOW that most jobs that pay a salary above $75,000.00 per year may require a background check which usually involves verification of a ‘GOOD’ CREDIT HISTORY?
ALSO… DID YOU KNOW that before you get PROMOTED FROM WITHIN A COMPANY, in most instances, you may need to agree and submit to a background check, which again, most likely, includes verification of your ‘GOOD’ CREDIT HISTORY?
So, there ya go, if you choose to live a CREDIT-FREE-LIFE and live on a CASH-ONLY-BASIS, then your ability to present a GOOD CREDIT HISTORY to advance your career, could be next to impossible.
YES INDEED!
If your credit report is not in good standing, or you do not have any credit at all, then you run the risk of losing out on many good financial opportunities!
Finally, I will say this…
Credit-Haters may believe that they are ‘teaching’ you something useful by promoting a CREDIT-FREE-LIFESTYLE, and there may be some value to not using credit at all, but ONLY IF:
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you already have hundreds of thousands of dollars in your personal savings account earning a high rate of interest
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you intend to start your own business and self-finance 100% percent of your start-up
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you have a rich uncle, or other family member, who is willing to take a chance and RISK their own money ON YOU
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you happen to inherit millions of dollars from a dead rich relative or dead rich friend
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you happen to win a million dollar state lottery
Short of any one of the above happening, building and establishing a GOOD PERSONAL CREDIT HISTORY can be a powerful and effective ‘tool’ for you to be prepared to take advantage of unexpected, and expected, profitable opportunities that could add big financial value to your personal life.
In closing, I will admit, that it is possible for a person who is not married, with no children, to achieve financial freedom by working two, three and even four jobs a day, and beg the boss for a raise, and cut out all needless spending (you know, all the fun in your life) while eating rice and beans and beans and rice everyday for two or three years while earning $50k+ per year, and so long as nothing goes wrong and you stick to the plan, and save, and save, and then save some more, you can be financially successful.
However, I also do believe that if a person begins to develop a strong personal discipline and strong money management skills and build a GOOD CREDIT HISTORY early in life, then that person may open the doors of financial opportunity and achieve a better quality of life much sooner without having to give up the gifts of life.
So there it is… I do believe that having a ‘good mix’ of both CASH and CREDIT to be ideal for anyone who has a desire to achieve financial security, financial independence, and financial freedom and that is my purpose in building this website.
Thank You for your time… Now Let’s Go To Work…