8 minute read
Why Good Credit Makes Sense
The record of that history is contained in a person’s credit report, Todd explains. There are three major credit bureaus – Equifax, Experian and TransUnion – that produce these reports, and lenders use all three.
“Each bureau has a mathematical formula that boils that history down into a 3-digit score: the credit score,” he says.
But why does it even matter?
USES FOR GOOD CREDIT
The primary reason for a good credit history is that this history typically gives someone advance purchasing power for something like goods or services that they haven’t been able to save the money to buy outright, such as a house or a car.
Todd says other uses include acquiring goods or services that cannot be bought, such as renting an apartment or obtaining insurance.
“Yet another, often overlooked, reason for good credit is often to even get an offer of employment,” he adds. “Since a good credit history is often considered a measure of one’s character, there are employers who require (or are required by law) that their employees have a good credit history to be hired or to maintain employment.”
BENEFITS OF GOOD CREDIT
While it goes without saying that having good credit would be beneficial in many ways, just being able to buy something large, like a home or a car, makes a big difference in people’s lives.
A person is often able to get lower rates and more favorable terms with good credit, Todd says. This might include lower interest rates on a loan or credit card, or even better insurance offers.
CREDIT FACTORS: GOOD AND BAD
While having good credit is the goal in doing well in the financial world, sometimes good credit eludes us.
Some examples of what maynegativelyimpact a person’s credit score are: missed monthly payments, collections – even medical collections, and high credit card balances.
“Think of the credit score as an ‘I can handle my debt’ score,” Todd says.“If one can have the availability to instantly borrow but not take full advantage of that, it shows that one can handle debt well.”
Conversely, if one uses up all, or most, of that available credit, it sends up warning flags to other lenders that trouble may be on the horizon. As a rule of thumb, Todd recommends to never use up more than 20 percent of your available credit limit.
“If you go over 20 percent, you can expect to see your credit score go down,” he says.
On the flipside, two examples of what may positively affect a person’s credit are: consistent on-time payments and keeping credit card balances to less than 10 percent of the credit limit.
Ways to Improve Credit
Todd says to make sure everything is current, and
never, ever, miss a payment.
“Just remember that what’s done in the past is the past,” he continues. “Make sure it’s made right and go on from where you are. Credit is not necessarily pass/fail, rather think of
it as a grade that can improve over time.”
And reducing credit
card balances to less
than 10 percent of the card’s available balance often has a huge positive impact on improving a person’s credit history.
BEING FINANCIALLY SMART- A LIFE-LONG INVESTMENT
Throughout your time lifetime, different financial topics will hit harder and be more important than others. When you’re first staring off on your own, it’s important to learn how to develop a budget, earn a good credit score and build up a savings account. Later, you need to consider investing in insurance and might want to know more about taking out a vehicle loan or applying for a mortgage. As you marry and become a parent, life insurance and later, financing for college, may be top-of-mind. Investing for retirement and having a will and estate in place are important, too. Want to know who can help? Meet some local financial experts, here.
Riverfront Federal Credit Union
2609 Keiser Blvd. | Spring Township 800.451.3477 | riverfrontfcu.org
Riverfront Federal Credit Union started in 1948 as the credit union for the Reading Railroad. The institution has been working to improve the financial position of its members and to make a difference in its community ever since. Today, Riverfront is a member-owned, not-for-profit institution offering a full suite of financial products and services to all who live, work, worship or attend school in Berks County.
Financial Planning Advisors
Financial Planning is about confidence. We help clients, and their families develop, implement, and monitor wealth management strategies in pursuit of their financial goals and a more comfortable life. We work with clients to create comprehensive financial plans customized to their specific circumstances, plans that include portfolio management, tax-efficient strategies, advanced planning, retirement analysis and education planning.
Weik Capital Management
Weik Capital Management is an independent registered investment advisory firm based in Wyomissing offering customized investment management services to retirement plans, IRAs, trusts, foundations, endowment funds, corporations and individuals. Tom Weik, CIO, founded the firm in 1987 based on investment principles espoused by Warren Buffett and Benjamin Graham. The stock selection process emphasizes companies with sustainable business advantages, strong management and a superior return on capital.
Diamond Credit Union
1600 Medical Drive | Pottstown 610.326.5490| diamondcu.org
For Berks Countians looking for a truly local financial partner to help them achieve their dreams, Diamond Credit Union has provided full-service solutions for more than 70 years. Personal and business banking, home, auto and investment needs and more are met with the latest technology, backed by stunning branches staffed by caring friends and neighbors known for award-winning service they call "younity."
Troy Rider, Esquire & Partner Troy Rider, Esquire & Partner Troy Rider, Esquire & Partner Troy Rider, Esquire & Partner
50 N. Fifth Street, 2nd Floor Reading, PA 19601 50 N. Fifth Street, 2nd Floor Reading, PA 19601 50 N. Fifth Street, 2nd Floor Reading, PA 19601 50 N. Fifth Street, 2nd Floor Reading, PA 19601 trider@barley.com 610-898-7178 trider@barley.com 610-898-7178 trider@barley.com 610-898-7178 trider@barley.com 610-898-7178
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