How to Build a Good Credit Score

Credit can be a booby trap. On one hand we are marketed to death about the benefits of having credit and at the same time we are advised about it’s ‘many pitfalls. Credit,despite it’s negatives, can be managed to work for you in the best way possible. Keep in mind that the banks will always have the upper hand and they will always be quick to add charges to accounts when they feel that there is an opportunity to do so – and don’t give them the chance to do it. Do you really believe it cost them that much handle a late payment. It probably costs them next to nothing. It is an exceptionally easy source of revenue for them so that are very quick to add the charges. Yoou can control the situation so make sure you are in the driving seat.

You can take control by making payment in a way that the bank will not recommend. The ‘monthly’ payment on your credit card will usually be set at a small percentage of the balance, and the bank will be happy for you to only ever pay that, because you will pay them much more than you boorowed. It maximizes the interest. They pick in fees much more this way and it makes their stock holders very happy. You can stop this and manage this in your favor by making more than the monthly payment.

When you take out a credit card, use it as you would use an ATM or debit card. Pay for groceries with it when you get your wages at the end of the month, and then instantly pay the balance off in full. For a while, live off credit and use the money that goes into these costs to make payments to your card. Your credit rating will soar. Your bank will offer you better terms. You�ll be in the driving seat.

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The Banks and Irresponsible Lending

The banks were a major culprit in the world monetary crisis because they were extremely irresponsible in excuting their lending practices. For several years it was “anything goes” when it came to lending because they did not have to keep the loans. They could easily package the loans and sell to the highest bidder. This was a great business model while it lasted. But because the under writing was so poor it soon collasped.

Be that as it may, on the other side they were equally irresponsible consumers of credit because it was so easy to get. The reaction among many is that credit should be given only to those that can show they don’t need it. That argument is kind of silly because what would be the point of having credit if you don’t need it. The point is that credit is needed but it should not by abused by the lenders or to those receiving the loans. Our credit system can work well if there is enforcement of practical rules that ensure the system is sustainable.

Part of the problem is that banks saw fit to speculate on the continuing boom in the global economy and felt that by lending to people who were looking to become upwardly socially mobile they could cash in on those people being successful. However, for some potential borrowers it became clear that banks were taking risks and lending to people who had little hope of comfortably repaying the debt. Knowing that some contingency has to exist for these eventualities, people took advantage of this profligacy to take out big loans and enjoy a short-lived period of financial windfall – knowing that even when the money ran out they would simply be back to living the life they led before. Banks seem to be learning the lesson – but look at what it took for that to happen.

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Living Debt Free Without Stress

There is a wide spread belief today that in order to live the average middle class lifestyle that you have to go into debt in order to make it happen.  This is actually a myth but because so many believe that the alterative is to live a boring life they accept the common understanding.

The truth is that it is very possible to live debt free if you follow some rules and keep in mind that you will have to find the best path eventually and learn to enjoy your life living in that fashion. Understanding that you can live a life without debt and having debt collectors writing and calling and just making your life miserable.

When you reflect on it the process is really very simple.  It will require you to make and stick to a budget.  It sounds dull but when you think of the alternative -  debt collectors stalking you all over creation – then it does not seem so dull.  You begin by writing down the things that need to get paid that are necessities, i.e.,  food, rent, mortgage, transportation, house keeping, electricity, telephone, and others.  What you have left over is your disposable income.

By doing this every month you will arrive at a point where you learn how much money you actually have.  If you do this you will eventually get a point where you can treat yourself and others.  When all of you debt is paid you will have more flexibility in what you spend your money on.  It is a better way to live.

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