Do I have your attention? Well, here’s the story…..
A couple of weeks ago I had the opportunity to teach a group of teenagers as part of a teen conference. I had two mornings, 3 hours each, to teach them about credit and budgeting – all the basics of money. I thought I had the tough topic until I found out the topic of their afternoon sessions – reproductive health, or in the typical language of teenagers, “sex”.
While I and a few others got a good chuckle out of the combination of topics, I really struggled with how the two could even remotely be tied together in the same event. Nonetheless, I did my part and prepped for the event. I was all ready to talk about budgets, goals, and the basics of credit history and scores.
That’s when it hit me – money and sex actually, legitimately have quite a bit in common. They are both primarily dictated by our own choices. More importantly, both carry heavy consequences when we make poor choices.
I didn’t sit through the reproductive health sessions, although I did ask what they covered. It sounds like they covered STD’s and protecting their health as well as preventing pregnancy. They even had a speaker who is HIV-positive. STD’s (curable or not) and children can both have some heavy, long-term consequences. Some of those consequences can even be money related. See where I’m headed with this?
I started my first session by having them think about some goals. While we talked briefly about short-term goals, I really spent time having them envision their lives seven years down the road. As we all listened to each other’s goals, I was really impressed by the dreams that some of these kids had. They talked about a degree, families, vehicles, traveling, buying a home, and even owning a business. As is the case for most of us, a majority of their goals involved money in some way.
At that point we transitioned into an introduction of credit reports. Seven years sounded like a long way off for a lot of those kids. And yet, make a financial mistake now and it will most likely just be coming off of your credit report seven years from now. Some financial issues are on a credit report as long as 10 years. As far away as ten years from now people will be evaluating your credit worthiness based on the decisions you make right now. Not quite as long-term as raising a child, but still a long time for most of us.
But that credit report only matters if you are applying for a home loan, right? WRONG!!! There is a long list of reasons people review your credit report. Loans, credit cards, even checking accounts, home leases, vehicle leases, insurance applications, job applications, professional licenses. All of these are reasons you may need to give someone permission to look at your credit report. How’s that for heavy consequences?
Fear not – This blog isn’t all doom and gloom. Consequences do not have to be negative. Just as is the case with reproductive health (sex), wise choices about money and credit can have longer term consequences that bring a great deal of joy and fulfillment to your life. While financial mistakes are listed on your credit report for seven to ten years, open accounts in good standing are left on your report indefinitely.
A healthy credit report and resulting higher credit score will make more credit available to you, give you lower rates on interest and insurance, and demonstrate your responsibility to potential employers. Where could you be in seven years with those kinds of consequences?
Here are some tips to help you keep your credit report bringing in positive consequences:
• Use some credit, but limit it. Having a healthy history of credit use is better than never using it.
• Use some credit, but pay it off every month. As far as credit cards and lines of credit, you should generally keep your credit usage under 30% of the total credit available to you. Better yet, pay it off completely and you won’t pay interest.
• Know the difference between ‘wants’ and ‘needs’. Wants are certainly fine to work for, but be sure you have the needs paid for first.
• Try to talk yourself out of a purchase. Before handing over payment (especially if using credit), consider whether this is really a healthy purchase for you.
• Know what others are saying. At www.annualcreditreport.com, you can get one free copy of your credit report per year from each of the three main credit bureaus. What is on those reports determines your credit score. Make sure they are accurate.
The choices are yours to make. Yes, in the end you can pretty much do what you want. Just be aware of the consequences. The wrong choices can lead to years of pain, struggle, and regret. Making the right choices, however, will lead to many more years of joy, fulfillment, and freedom. Am I talking about money or sex, you ask? The choices are yours so I’ll let you read into that what you will.
What I can speak specifically to is that when it comes to money and your credit report, you are not alone. The Center for Financial Resources is here to help. We can walk you through your credit report and help you understand what others are saying about your past. We can help you create an action plan to address issues in your report. We can also help you budget to work towards your goals. While it isn’t our immediate task, I like to think that we can help you experience all of those positive financial consequences you are dreaming of. You can find out about all of our services and information to contact us here.
Go on. Have a dream. It may take a while to get there, but you may as well start the journey now.
written by Breck Miller
images courtesy http://www.freedigitalphotos.net