Have you ever been denied credit? Maybe even denied a job because of your credit? We have always been told that having a high credit score is important. One of the most obvious reasons for having a high credit score is purchasing a home, or applying for a loan. So, what does our credit score have to do with any of that? Basically, credit scores were created to help those issuing a line of credit to a consumer a way to assess the risk of giving a line of credit. They want to see if you are going repay your debts on time, and they can see that by viewing your past credit history.
- Request a Credit Report
First and foremost, obtain a copy of your credit report after you have been denied credit. In fact, by law, you are to be given a copy at no cost.
Recovering from a job loss can be incredibly draining; mentally, emotionally and of course financially. In last weeks post I spoke about losing a couple of jobs in a short period of time and the toll it took on me and my family. This past week a client who had been unemployed for several months found a new job. During his unemployment his family had accumulated a large amount of debt, maxing out two of three credit cards. He asked me for advice on what I had done or wish I had done to recover from losing my jobs. Here are the six things that I shared with him:
- Request Your Credit Report
You may ask why requesting your credit report is important. Sometimes we don’t have all of our accounts/debts on our budget. It is critical when you are in this stage to know exactly what you are up against. By requesting a copy of your credit report, you know where you stand credit-wise. Be sure to examine your report for any mistakes and negative information. If you find a mistake, you can dispute them yourself. Be sure to make a note of all the negative information so you know where you need to focus some of your time. The Fair Credit Reporting Act allows for you to get a copy of your credit report once a year from all three credit bureaus (Experian, Equifax and TransUnion). You can obtain your report by going to AnnualCreditReport.com or Credit Karma.
Losing a job can be very taxing on a person. If you were to tell me a couple years ago that I would have to deal with a job loss, I would have laughed. I loved my job and never even saw it coming. Losing one job is bad enough, but I lost two jobs in the span of just under 18 months.
Leading up to the first job loss, we had been doing really well at budgeting our money. We were ready to purchase a home, so we were really diligent. We purchased our home about 8 months prior and just had a baby before we got the bad news. We hadn’t even started building our savings back up. We had committed a huge crime in the financial world and even tapped into our emergency fund to help with the down payment. We didn’t have much saved up when I lost the job, so we did what the majority of people do in this situation. We used our credit cards. We quickly found ourselves in a huge amount of debt. I was drained mentally and emotionally from this situation. I felt worthless, and at the same time too proud to ask for help.
There really isn’t much that I regret in my life, but there is one big thing that does stick out in my mind and that is my financial choices in my early 20’s. During my high school years, I did fairly well managing the money that I was bringing in from working. But, in 1999, I left to serve a mission for my church in Russia for two years. Upon my return, it seemed that my desire to be smart and save money went right out the door. After getting a job, and started earning money again all I wanted to do was buy toys, go to movies and hang out with friends. The amount of money I was making at the time wasn’t a lot, but I was living at home and didn’t have to worry about rent, food or expenses with my car. I wanted to buy so many things, and so I did what I thought was the best idea, applied for a credit card. I quickly started to fall behind on making payments on time and racked up a number of late fees.
If there was a chance that I could go back and have a sit down with my 21-year-old self, I would. So, what would I tell myself? I would sit down and discuss finances. Some things I would be able to apply to my life right away, and some things that I would wait until later on in my life. Here are five financial choices I would tell myself to AVOID: