Just as a doctor is a trusted resource for friends, family and party guests seeking to remedy an illness, as a banker, I am the go-to person for questions about all things financial at social gatherings. People tend to ask about credit, right after asking if the bank gives out free samples [of money].
This is not a surprising topic of conversation. After taking care of your health, managing your credit is one of the steps taken to enhance your quality of life. What are some of the payoffs?
- Banks and other institutions will be more willing to give you funds to buy a house, a car or other major purchases.
- You will get these funds at a lower cost or better interest rate
- You’ll get better: insurance rates, cell phone plans, and options for where you live and work.
Trading the couch and remote control for a pair of running sneakers takes discipline, and so does maintaining the health of your credit. Here are some basic steps to help you achieve financial wellness:
- Preventative Medicine
- Do you know how much money you have at your disposal before writing a check, using your debit card, or authorizing an automatic withdrawal? Your financial health can decline quickly if you try to pay expenses with money you don’t have. Overdraft fees, lender penalties, and possible loss of banking privileges can sideline you.
- Don’t use other peoples’ money to buy discretionary items like lattes, manicures, or facials. Use credit for major purchases, emergencies, or temporary cash shortages.
- Know Your Vitals
- Have you taken a look at whom you owe, what you owe them, and how much you’re paying them in interest and fees? Examine your free credit report using: www.annualcreditreport.com or call 877-322-8228.
- Know How to Read Your Chart
- Pop Quiz – How many of you know the exact formula used to calculate your credit rating?
- This is a trick question. The credit bureaus do not disclose the exact equation used, but the basic items include whether you’ve paid bills on time in the past, total dollar amount you currently owe, how old you were when you first applied for credit, whether you’ve maxed out all available credit, and how much credit you have that you’re not using.
- Develop a Treatment Plan
- Have you prepared a budget for expenses, savings, investments, and amusement?
- Make sure you’re getting the best deals when you take out a loan, or when you make deposits or investments. Shop around. Use resources like: www.bankrate.com. The more knowledge you have, the more you will be able to work with your financial institution to get the best products for your needs.
- Continuing Care
- Staying financially fit is a lifelong process. Just as crash diets don’t work, neither do programs that promise perfect credit overnight. To find good credit counseling agencies, use resources like www.nfcc.org or www.aiccca.org.