Credit: Cash Is NOT King (part 1)
It seems that the Gen Z and some Millennials are having a hard time with credit. It's not like the trouble that Gen X had/has with credit, it's totally different. With my mortgage lender background, I'm going to try to help people understand CREDIT. Good, Bad, or None-At-All.
It's hard to fault people for not wanting debt and not wanting credit cards. It takes a long time to save up for something like a car or computer or even a cell phone and that should be celebrated. BUT - and it's kind of a big but - in many cases, you actually need credit. Let's face it, there's only a few people that have the ability to pay for a house without a loan. I mean, I can't - but real estate has been one of the most lucrative things in my life! And I have made monthly payments on a home since 1998.
To get acceptable credit, you have to play the game.
I was adamant that my son start building credit as soon as he turned 18 and was old enough to get a credit card. I knew he would want a vehicle someday and I'm pretty sure he'll want a home too. He said to me over and over again that he didn't want debt. I said, "I know, but you're going to have to trust your old mom on this one". He didn't want to have to pay "extra" for the interest on a payment. I get it. I really do. (here comes that BUT again) So many things are based on your credit score that those few dollars in interest you pay on a credit card is nothing compared to the money you'll save on your auto insurance. Yes! Your vehicle insurance is based in part by your credit score! Same with the interest rates you'll pay on your home. Better score = Lower Interest Rate = Lower Payment.
Caveat: You have to USE your credit card. Just having one in your possession is not enough. You have to use it. Have you ever heard the saying "Everything in Moderation"? It basically means, don't get carried away. Don't binge and don't abstain but do take it easy on the bad stuff. The same goes for credit card usage. I promise!
With my son, I had him start off with just using it for his gas. He filled up his car 3-4 times a month and when his credit card would come, I encouraged him to only pay for half of it. He begrudgingly did so, I think. haha Maybe he didn't! He's stubborn like his mama... Anyway, that was the plan.
Several months later, he needed books for college that were over $600. He was in panic mode. I told him to use his credit card. He hated every minute of it. He had a job, he just hadn't quite learned to SAVE any money, yet. Guess what? He charged the books and then paid them off in 3 payments. Easy, peasy, building credit and learning financial responsibility. Yeah parents!
~ More Credit Building & Facts To Come In Future Articles ~