Do you need to be a credit expert if you want to be financially successful? Yes. It is one of the qualities that you need to learn.
You see, we really cannot stop using credit completely. Because even if it has the potential to destroy everything you built in your life, there are benefits to it. For instance, you will save more money if you use debt to buy your own home. A student loan will allow you to pay for the education that will help you qualify for higher pay.
The truth is, debt is not the problem. The issue that needs to be dealt with is our ability to manage our finances – specifically our debts. If you become a credit expert, you do not have to worry about using debt. You will know how to use it properly. If it will affect your financial life, it will only be for the better.
Unfortunately, some consumers may have a long way to go to become experts at using credit. According to one survey, the participant had a lower comprehension of credit scores compared to the post-Great Recession period. Apparently, it was revealed in the report that the improved economy is the culprit. That and the fact that some people do not pay attention to their credit reports.
If you really want to become a credit expert, you need to exert some effort. It is not something that can happen overnight.
Tips to become a credit expert
Learning how to manage your credit is not impossible. It will not be easy. After all, you will probably be trying to correct the habits that you had been doing for a long time. It will require consistent monitoring and vigilance to correct these habits. But over time, you can change them. And while you are doing that, you can start getting used to new habits that will help you manage your credit better.
Here are some of the things that you can do to become a credit expert over your own finances.
Maintain a high credit score
According to reports, the average FICO score in 2019 reached its highest record of 703. Not only that, 7 out of 10 consumers said that they view their credit score as something that is very important to them. This is actually something that you should emulate. You need to give importance to your credit score because it can open a lot of financial opportunities for you. And if you are focus on getting a high credit score, all the other habits that will make you a credit expert will come naturally to you.
Scan your credit report regularly
One of the things that you need to do to maintain a high credit score is to scan your credit report on a regular basis. If you think this will cost you a lot, it won’t be. The law mandates the three major credit bureaus (Experian, TransUnion, Equifax) to provide one free copy a year to consumers. That means you get three free copies of your credit report. You can get one copy every 4 months so you can check your report. Make sure you scrutinize the transactions there. If there are errors or evidence of unauthorized transactions, report it immediately. You might have been a victim of identity theft.
Look at your credit score before opening a new credit account
We mentioned that it is hard to completely eliminate debt from your life. The key is to use it responsibly. One way to do this is to always look at your credit score before you open a new credit account. This is also true for loans that you want to borrow. Checking your credit score will help you make a decision. If you have a bad score, you might want to postpone opening the account until after you have improved your credit score.
Be credit savvy
There are people who are credit savvy, while there re those who are just addicted to using credit. When you are regularly monitoring your report and your score to ensure that there are no errors, then you are credit savvy. But if you are looking at it to see if you can borrow again, then you are just addicted to borrowing. Obviously, being the latter is not good and you need to change it. The urge to keep borrowing is not healthy for your finances and your future. So make sure you have the right reasons for wanting to look at your credit situation.
Benefits of being a credit expert
Without a doubt, there are so many benefits to get from being a credit expert. Here are some of the reasons why you need to strive to have this skill.
You know how to use credit
First of all, knowing how to use credit will allow you to use it without putting your financial situation in danger. There will be no need to face debt relief issues because your debt is completely under control. Since you are an expert about debt, you will always have a good reason before you will allow yourself to use credit.
You are updated of your current debt situation
Another good thing about being a credit expert is the fact that you have a complete understanding of your current credit situation. If you know that you have a lot of debt to pay off, you will be a little bit more cautious about how you spend your money. You will consciously remove yourself from anything that will tempt you to spend more. For instance, you will limit the time you spend going out with friends. Just invite them over and hang out at home. Or you can delay going on a vacation so you can save up for it first. If you know that you have a small amount of debt, then you know that you can take more risks.
You can make informed decisions about credit
In the last tip, we mentioned how having a small balance can make it okay to take risks. But make sure that these are calculated risks. When you are a credit expert, you are fully aware of your financial position. This means when you use credit, you will know when to stop. You will know if you can afford to pay the debt off even before you borrow it. Sometimes, you even know when you can completely pay it back. This is how a smart credit user would do it.