Credit is key to your financial freedom.
Debbie Bloyd is the principal at DLBmortgageservices.com where she provides mortgage and insurance service for her clients. In order to qualify for the best lender rate or insurance product, good credit is key.
Your credit score is the measuring stick for all potential creditors to determine your ability to pay back your obligations. Sadly, Debbie finds there are two types of borrowers. Those who are well educated about credit, with excellent credit, and those who are uneducated and have horrible credit.
Too many people do not understand the basics when it comes to personal finances. While it is true, you have to use credit to establish credit, you have to use it wisely. Maxing out all of your available credit cards negatively affects your credit rating. The algorithm used to determine your score will negatively reduce your score if you have no available credit. So, to maintain a good credit score, don’t max out your credit.
Additionally, many people suffer a trauma or event that they are unable to pay for. If this happens to you, ignoring it and hoping it will go away is not a solution. When you don’t pay your debt, your creditor will report to the credit agencies that you have not paid your account as agreed, and your credit score will suffer badly. If something happens to you, engage your creditors for a payment plan and make the payments as agreed. Or get help to rebuild your credit.
Building Your Credit
You have to use your credit in order to build it. Where can you get credit? Student loans, car loans, credit cards, and professionally managed apartments will all report to the credit bureaus. If you have too many open accounts, it will negatively affect your credit.
Remember, buying stuff to impress people you do not know is not the way to build your credit.
Making good decisions is key to building your credit and creating financial freedom. Debbie finds that many millennials make good income, but they are unwilling to make tough decisions that will provide long term financial freedom.
Instead of renting a less expensive property and saving money for a down payment, they would rather rent the expensive new apartment and live the good life now. Renting will not help them build equity.
If you can’t afford a down payment, you have to make a decision. You can either increase your income and lower your expenses. It is likely that it will be easier for you to lower your expenses right away. Over time your savings will add up and provide you the nest egg needed to start building your financial freedom.
If you want financial freedom, you have to make the tough decisions that will provide you the path to ownership. Leasing the newest most expensive car will not help you build your financial freedom. To build your financial freedom, you have to have ownership.
Home loan interest rates are the lowest they have been. There is not a better time to get in the ownership market. Current rates are for owner occupied properties are in the low 3% and non owner occupied are in the low 4’s.
A great way to get started is to buy a fixer upper. Buy low, improve the property and your sweat equity gives you the opportunity to grow wealth. Now you have options. If you want to move into a larger property, you can use your equity for the down payment on a larger home and end up with an affordable mortgage. Or if you want to add a rental property, you can borrow the equity from your primary home to buy a rental home.
This is the path to your financial freedom.
Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”
I think the BIGGEST RISK is that we’re going to be running out of money and we’re growing too old. So what I see happening to families, either with money or without money, is they’re outliving their money. People say, how much do you need to have to retire? And I said, more than you think. And they’re like, well, how much is enough? I don’t know. It depends on how you want to live.
And so I have most of my seniors either out living their money. And that’s a huge concern for them. And they don’t start worrying about that until it’s too late to do anything about it. You and I both know long term care policies. You can buy those at a young age. You can buy the middle aged. You can buy them when you’re 60. But after about 65, they become unaffordable.
People are thinking too late because we don’t know how old you are. Fifty five. I feel like I’m 35. I probably look like more like I’m 45. But I still mentally, I don’t feel old at all. And so I think a lot of people that are baby boomers much older than us are in their 70s and they don’t feel old at all.
But what happens is things are going to start going wrong with them and they’re not protected. They never thought they’d, number one, get to be this old or no to have anything happen to them. And they’re not prepared and wipes out entire families.
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