By Charlestien Harris

All month long I’ve been talking about financial love, and we all know that “Love Don’t Come Easy.” There is always chance of heartbreak. The final piece of my financial love advice touches on why building or rebuilding your credit profile is essential to minimizing those chances. 

Having good credit affects so many areas of your life. Just imagine you and your family finally save enough money for a down payment on a house. You find the perfect home only to be turned down at the bank because of your credit. Or maybe your dream is to own your own business. You found the perfect location, but it needs a little work, so you go to the bank for a small business loan only to be turned down. Now you’re “Dreaming with a Broken Heart.” 

Lastly, imagine that you’ve found that dream car you always wanted—your first car, to be exact. Unfortunately, you can’t afford it and your credit situation means financing is out of reach. Three strikes, you are out! At this point, you have “Lost that Lovin’ Feelin.” However, there is a chance for romance to be rekindled; it does not have to end in a tragic love story. 

With credit affecting so many areas of your life, consider the following tips to help rebuild your credit while mending that heartbreak at the same time.  

Tip #1- Review Your Credit Report

You need to know where you stand. The first step in that process is to obtain a copy of your credit report. You can get a copy from each major credit bureau: Equifax, Experian, and TransUnion as a consumer. The best way to get your credit report from all three major credit bureaus for free is through a site called www.annualcreditreport.com. The good news is that you can request it once a week for free; previously, it had only been once a year from each bureau. 

Check it for any incorrect information. If there are errors on your report, they could negatively affect your credit score. It is important to note that you have the right to dispute errors or incomplete information on your report.

Tip #2- Pay Your Bills on Time

Being late for a date or forgetting an important event in a relationship such as your anniversary or birthday can lead to serious love trouble. Your finances are no different.

Payment history represents 35% of your credit score, meaning your payment history is one of the main determining factors. Negative information, like missed or late payments, can affect your credit score for years. Making late payments can also trigger late fees that can add up fast! The longer you pay your bills on time, the better it is for your payment history. Consider setting up a budget, automatic payments, or reminder alerts to help you keep up with your bills. 

Tip #3- Try to keep most of your credit limit available

Quality versus quantity is another factor to consider. Credit utilization is a term used to describe the percentage of your credit limit you’re using. The amount you use has a powerful effect on your credit score — in fact, the only thing that matters more is paying on time. Most experts recommend going no higher than 30% of the limit on any card or account because lower is better for your score. This is important, since keeping your credit utilization below about 30% can show you’re managing your credit responsibly and not overspending. Check the credit utilization for all your credit accounts and focus on bringing down the highest ones to improve your score.

Tip #4- Consider a Secured Credit Card

The feeling of security is also important when a relationship is mending from an “Achy Breaky Heart.” A secured credit card is an excellent product for people who want to build credit from scratch. If your credit card accounts have been closed, you may need to start over with a secured credit card. These cards require a deposit upfront, which is typically used as your credit limit, but other than that, they work like any other credit card. 

Tip #5- Get a credit-builder CD or secured loan

A credit-builder CD has one purpose: to help improve your credit profile. Many banks and credit unions like Southern Bancorp offer these credit building products. They work by having you take out a small loan, but instead of you pocketing the money, it goes into a CD or Certificate of Deposit. Then, you make regular loan payments until you’ve paid off the original amount. At that time, the CD is turned over to you. The benefit is that your regular payments are reported to the credit bureau to show your credit worthiness, helping you build or repair your credit. Secured loans work similarly in that you’ll need to provide some sort of collateral for the loan, but in both cases, it’s about making your payments on time so that the credit bureaus will know you’re on the right track. 

Remember that rebuilding credit can take time as you build up your credit score –  just like building a better romantic relationship. Just how long it takes to rebuild credit depends on your circumstances. The good news is most things will not affect your score forever. The effects of negative factors can lessen over time. Being patient and forming good habits will eventually pay off in the long run! 

Remember, building better credit is possible with responsible financial behavior, and it is never too late to get started.  “What’s Love Got to do with it”-you might ask?  Financial Freedom can be achieved if you want to love your money again and have it love you back. For more information, contact me at Charlestien.harris@southernpartners.org or call me at 662-624-5776. Until next week—Stay financially fit!