Debt is a Killer

The majority of the United States population are conditioned to be pawns. Trained how to be consumers and not investors. Taught how to buy and not how to sell. Told to pay bills and that stock trading is too risky. Last I checked, bills are expenses that provide no income or equity gain, but stocks are the problem? There are approximately 140 million poor and working poor people in the U.S. This highlights the miseducation system and false narratives that damage the masses. Let’s further unpack this issue, and then delve into how to use personal credit tactics to gain ownership.

Low income households are frequently relegated to loan shark payday loan services when they face a financial crisis. This can cost 50 to 300% or more!

So called middle class households are usually a few paychecks away from being buried by bills and debt. This group tends to misunderstand their vulnerability in the economic ecosystem; meaning they spend their surplus on lifestyle comforts instead of heavily investing in assets that provide residual income. When they get laid off, furloughed, sick, injured, or face a global pandemic their income gets shallow and they float themselves on credit cards and personal loans. If this cycle extends more than 6 months the washout rate multiplies and foreclosures, evictions, and bankruptcies follow. Now let’s talk solutions.

This type of spending opens up the ability to generate and build wealth. These goals are night and day from swiping a Mastercard®️ for over inflated name brand apparel.

Owning a home with equity, rental properties, dividend paying stock, a business that turns a profit etc., provides a stronger economic position than the purely consuming employee.

Disclosure: This article contains affiliate links that provide a monetary benefit to Celurius.

Credit Building Process

The health and strength of your credit profile is more important, and deserves more attention, than the credit score. Improve the profile and the score will eventually reflect the positive factors. The following guidelines provide a general framework to enhance credit health:

1. Open 2-3 secured or unsecured credit cards.

2. Open one installment line that is not a mortgage.

3. Make sure your personal information is updated and accurate. Dispute errors.

4. Use the credit cards every month to buy groceries, fuel, and other recurring expenses. Keep utilization rate below 20 percent on each card. [formula: credit limit ✖️ .20 = max use (example: $5000 credit limit ✖️.20 = $1000 max use)].

5. Make ALL payments on time every month!

These simple steps are a good way to shape a healthy credit profile. The algorithm is heavily affected by utilization ratio, payment history, and age of accounts. Age of accounts can potentially be expedited by becoming an authorized user on another healthy account.

Using your credit accounts is important to show active management of revolving accounts. Don’t engage in any new spending. Just move some of your current budget expenses to your credit cards (example Netflix, phone bill, etc.).

Carry a small balance during the month so that activity is reported on your credit report. You can pay off the credit card at the end of the month or the end of your reporting cycle (read the terms for your cards).

Set up automatic payments to pay the minimum every month. You can always make one-time payments to pay down additional amounts, but the minimum will keep your payment history positive.

Fixing Negative Items

The first step to fixing bad credit is to complete the steps above and begin to establish positive credit history. You may need to begin this process with a secured credit card. Open one of these accounts and apply the credit building process for 3 to 6 months. Next, apply for an unsecured credit card rated for fair credit. If denied, get another secured credit card and repeat the step after another 3 to 6 months.

These steps will have a positive impact to your profile and eventually your score.

Don’t worry about paying or negotiating old collection accounts until you establish positive credit and consult with a coach or credit repair service. Use a credit monitoring service and examine all 3 credit bureau reports (Experian, TransUnion, Equifax).

Focus on the positive impacts first. Contact us to connect with a coach that can help you develop a credit strategy moving forward.

Savings and Opportunity

Our view is that personal credit should be used to gain ownership. Period. It can also save you from having to pay deposits on utility accounts, phone accounts, and other expenses. Good credit will also lower the interest paid on financed transactions such as automobiles, homes, personal loans, etc. In some cases it will improve employment opportunities or rental approvals. Any savings should be used to strengthen the cash position of your household budget.

As these benefits roll in we encourage folks to get educated on investment opportunities such as stocks, real estate, and business ventures in order to generate and expand passive income. The most important part of that process is getting educated. Risk management should be a principle that governs our approach to life. We should develop plans based on the principles of education, implementation, fortification, and execution.

Leave a comment with your questions or feedback. Check out our business credit article once you’re ready for the next step.

Bonus Link(s): Credit Repair Service – Credit Report Monitoring