Good Credit: How to get it, Keep it, Increase it, or Restore it

Credit is more than how much money you can borrow and how many Visa and Master Card cards you've got in your wallet. Credit measures your character. It tells stores and businesses how reliable, trustworthy, and successful you are. Can they trust you to pay back what they've loaned you? Can they expect you'll make the payments? Not only are you making enough money, but can you be relied upon to keep your job? Good credit is priceless; yet, ironically, you can buy it. The more money you spend on credit, the more credit you can get. But it doesn't come cheap, quickly, or easily. Good credit comes with years of borrowing money from a variety of sources and punctually repaying that money, not missing payments or stiffing anyone. So let's talk about how to get, maintain, increase, or restore (if you've lost it) your good credit.

Why Have Credit? Do you want to buy anything that you don't have the money for right now? Then you need good credit. Want to start a business, take a great vacation, buy a car, a house, a boat? Then you most likely need good credit.

How Do You Get Good Credit? First you have to have credit. Start by opening a checking account, depositing money regularly, and writing checks to pay your bills. At the same time, open a savings account and make deposits, even if they're small amounts, on a regular basis. Then get some credit cards. MasterCard and Visa aren't hard to get, nor are gas cards and store cards. Buy everything you can using those cards. But be sure to not buy so much that you can't pay the balance off at the end of the month when the statements come in. I highly recommend that when you're starting to build your credit you not overspend and get into debt. That will be the death of your good credit and your financial health. Try to never fall into the trap so many people do of living off credit, charging their cards to the limit, and only paying the minimum balance each month. That will kill you. You need to develop self-discipline and only charge what you can pay for in a month or two at most. Unless, of course, you're financing a car or other big ticket item.

Set a Budget and Keep Control of Your Finances What I'm strongly suggesting is that you understand how much money you have coming in versus how much money you have going out. It's so easy to charge, charge, charge and end up finding yourself with 7, 8, or 9 credit card and store bills coming in each month. Before you know it, you're drowning in debt and can barely pay the minimum. What you're paying then is almost entirely interest and no principal, which means that everything you charged is costing you more and more money every month. For example, those 10 items of new clothes that were on sale and cost you only $350 are now costing you an extra $15-25 every single month until you pay them off. Not smart. So make a budget. Quicken is an excellent software program that can help you do so. Get control of all your expenses and see just how much money you're spending on everything. If you don't, you'll overspend sure as you're sitting here reading this right now. Overspending is inevitable unless you know exactly how much money you can afford to spend.

How to Keep Your Good Credit Once you get those cards, use them, and have a budget to guide you, you can build your credit and your credit score by making your payments on time. That's the #1 key: don't be late with any payments ever. Try, as I said, to pay off the balance every month. If you don't, try to stay within a reasonable budget and not slide into an impossible situation. And never ever cheat anybody out of payment. Don't skip out on the last month's rent when you move. Don't cheat a doctor or hospital. Even if they don't come after you with a collection agency, the landlord, doctor or hospital will report you to the credit bureau and your score will go down. The lower your score, the less credit you can get and the higher your interest rate will be. Basically, it comes down to paying your bills and paying them on time.

How to Restore Your Good Credit So you blew it, huh? You didn't do what I've talked about up to this point and you've lost your good credit. You overcharged and were late with payments. You stiffed the landlord or doctor. You had your car repossessed, your mortgage foreclosed, or you declared bankruptcy. Hey, it happens. I'm not sitting in judgment. In fact, I declared bankruptcy 7 years ago myself. So I've been there, done that, screwed up. I've learned the hard way the truth of what I'm sharing with you in this article. I'm no deadbeat and neither are you. I just lost control of my spending and didn't make as much money as I thought I would. Before I knew it, I had way more debt than I could ever dig myself out of. So I did a Chapter 7 and had no credit at all- zilch, zero, busted. I was down and out and had to start all over. I had no credit cards, a beat up old car, and was living with my two kids in a 2 bedroom rental apartment. Today I have a nice house with a big pool (financed with a low interest rate mortgage), 3 great cars (all of them financed at low interest rates), a $30,000 home equity line of credit to start up a business, several credit cards (all paid off), and more credit than I know what to do with. Literally, I get 5-10 of those junk mail offers in the mail every week for more credit. So how did I go from dead broke and bankrupt 7 years ago to pretty good shape and loaded with credit today? I worked really damn hard.

Hard Work is the Only Answer Sorry. Don't mean to get preachy here. But the only way to dig yourself out of debt, bad credit, bankruptcy or whatever other hole you've put yourself in is through hard work. You may be saying, "I didn't put myself in the hole. It wasn't my fault." That may be true, but it's not going to help you face up to the fact that most of what happens to us in life is mostly our own fault. So first you have to embrace the concept of self-responsibility. Take charge of your life. Then start working harder. Get a better job, a second job, an education. Spend more hours, moonlight, work weekends, increase your skills, network, and check opportunities. Get out of your comfort zone and spend every waking moment not thinking about football, gambling, drinking, entertainment or whatever else is consuming your time (and believe me, I speak from personal experience here too), and spend that valuable time of yours on finding the ways, means, skills, and determination to make more money. You know that's the only answer. It's a hard fact to face but a fact nonetheless: you need more money and only you can get it for yourself and your family. So, go to work on working harder, longer, and more efficiently.

It Takes Money to Make Money? Yes, to a certain degree. But most people start with nothing, build a small stake, and go from there. If you've ruined your credit and are down in the financial dumps, you've got to first make some more money- flat out increase your income- before you can rebuild your credit. Why? Because you're going to have to buy things on credit and then pay them off immediately. When I was on my last dime and bankrupt, here's what I did: I worked harder. See a pattern here in my thesis? I worked overtime at my main job and got a second job on top of that. When that first offer of a credit card came in the mail, I took it. It was for only a $200 credit line and it came with a $50 fee. I charged it to the limit every month and paid the whole thing off every month. They raised my credit limit to $300, then $500, then $800 within six months. Other offers came in and I took them all and did the same thing with those cards. Then I bought a car through GMAC. I found that they're the easiest to do business with after a recent bankruptcy. Then I bought a house. That was hard, but if I did it, you can too. I checked out over 10 banks and mortgage brokers before I found one who'd swing the loan without killing me on interest. The bottom line is this: you can restore your credit, but only if you're willing to work very hard, make more money, charge everything and pay it all off each month.