It's OK to be ignorant. It's not OK to be stay ignorant. You will not Succeed in life unless you are constantly examining what you know to see if you could know it better and learn things you don't know. The worst contributor to a persons lack of success is not knowing what they they don't know, and not caring to find out.
I deal with people every day who have no passion or drive of their own. I ask "What goals do you have for yourself?" or "What would you like to accomplish this year?" And they have no answer. It frustrates me to no end. How can you live with no passion or desire beyond your next meal and cold beer?
Then I ask myself? What goals do YOU have? It's at that point that I realize my hypocrisy. I have goals. I have things I want to accomplish. I have a list, well actually I have several disjointed lists in multiple places and I don't know where half of them are. I could cite all the things I want to do. But I'm not doing hardly any of them. I keep thinking that I'm going to use my days off to work on some of them, but the two days come and go and nothing happens.
Have Goals; Write Them Down
It's OK for your goals to change, to adapt, to conform, to morph, etc. But you should have some. It's OK to realize that certain goals were not God's plan or will for you. It's OK to realize that other goals require the help of other people to bring to pass. It's OK to start with one vision and have the vision become clearly, more defined, and even change tone or color as it develops. Having Goals is important. That's what seeing this photo today on Pinterest did for me.
The other thing it makes me realize is that I should have all of those goals written in one place. It's OK for me to keep separate logs or diaries for each goal as I expound on them. But there should be ONE place I have them all in writing and at least defined as Bullet Points or Highlights. I enjoy blogs. You can create your own blog, keep it private so only you can see it. Use www.blogger.com. They can be accessed anywhere in the world, maybe you would prefer a journal, a scrap book, or a poster wall. Maybe for you it could just be a small index card that has been laminated for travel.
Whatever and Wherever you post it, there should be a single repository of all your goals, dreams, and vision for your future. That future would include your immediate future (ie This Year) and your moderate future (Next Five Years) and your long term future (I don't know when but someday I'd like to....). They should be out there in an easy reached place, reviewed and seen daily, and talked about often. If you write it down and forget about it for 6 months, it was not effective. You should always be looking to the future with expectation and know what you are expecting.
What do I mean by Goals?
What is a goal? What do I mean by that? A goal can be anything you want to do, be, or accomplish. Do you have a dream to own a restaurant, be the best sales person at your company, produce/record your own music album, be a better Father or Mother, Own your own businesses and/or properties, etc. Write all of those things down. This is the first step in accomplishing what you see. Pray about them. Writing them down isn't dedicating that you are doing them, it's putting them out there for review, prayer and pondering. You may find that some of those goals are not in line with what God has called you to do/be. You may find that He wants you to do all of them, but in a specific order. That order may not be the way you had planned. Putting them out there allows an open dialogue between you, God, and those involved to start to take shape and form.
In her article "Nine Things Successful People Do Differently" Heidi Halvorson points out that the number one key to success is getting specific in your goals. She notes "I will loose 5 pounds" it more specific that "I will loose weight this year" So start to get specific for yourself. What do you want to see happen. What do you feel God has called you to do? Do you know what HOPE means in the Bible? It means to expect, trust, and rely on. If you have nothing you are expecting than your faith has nothing to work on or work with. You may have faith well enough, but it's useless. It's like having a power saw but no wood to measure and cut.
Hebrews 11:1 1NOW FAITH is the assurance (the confirmation, the title deed) of the things [we] hope for, being the proof of things [we] do not see and the conviction of their reality [faith perceiving as real fact what is not revealed to the senses].
Those specific goals should also have specific time frames and deadlines. The more immediate the goal is, the more specific the assisnged tasks should be. Give yourself assingments. "I'm going to write one blog post per week, I'm going to do it every Monday unless I get to it earlier." Another assignment could be, "I'm going to spend 2 hours writing on my book". The more specific it is the better it will be for you. In fact, as soon as I publish this post, I'm going to take a break and say hi to my family, then come back in here and set up a vision book for myself. Maybe I'll even let you see it when It's done?
Conclusion
You must have goals. You must write those goals down. They must be easily retrieved often reviewed, and they must be specific. But I will leave you with this additional thought. What impact will your goals have? Are your goals only for you and your family? What other people will be impacted by your goals. When you see your multi billion dollar business do you see buildings, structures, systems, and money... do the people working that business just feel like tools or pawns on your chessboard. Or are the people that you are providing jobs for the most important aspect? Christians do not use people to get things, we use things to love on people. So ponder the lives changed, and hearts healed, and finances restored of the people you are creating all of this for. Our motivation for accumulation, is distribution. Always remember that.
Partings Thoughts
Write down your
Dreams
Vision
Goals
Desires
Post them in a place that:
Easily seen
Easily retrieved
Often reviewed
Consider other people
What is God's opinion about this?
What are the others involved saying?
How will this affect other people?
Motive
Use things to love people, don't use people to get things.
Follow this story-line: "I'm a server in any restaurant in America. I just found out a local church conference has just gotten out of service. A party of 18 walks in to the restaurant. I'm informed they will be seated in my station. They are loud, happy, and smiling. I can't get them to sit stop talking long enough to address the group at one time, so I end up repeating myself over and over answering the same questions. Only half show up at first so I'm running around doing more work than if I had just been sat 9 tables of two. Oh, and don't forget the free bread, we'll need tons of that so that we can order light and save money. Most order waters, a few order tea or soda. Alcohol is a big portion of my average check, bigger check means bigger tip. Bummer. They proceed to order the cheapest things they can find, and split them with a friend. They have a million special requests and modified orders. I've done more work for this party of 18 than if I had just served 9 tables of two, but their total bill will be half of what the total of those 9 two person tables would have been. They want to split checks with people they are not sitting next to, some in completely different parts of the table. Some ask to split one item three ways (can't you just pay for it el cheapo?) I'm so busy trying to figure out who had what and who wants what that my other tables were suffering, so wanting them taken care of I let them go to another server who had time. There goes that money. I forgot to add gratuity to the table because half were still eating while the other half wanted checks, but if I start splitting checks now I won't be able to put in more items without a manager approval override and some still want desert. The party is over, they left me a grand total of 8% for the whole group. Oh look, two of them left me no money at all, but they left this handy Gospel Tract. That should help me pay my bills and feed my kids.I could have made more money serving four tables of 2, thanks a lot church people. And THAT is why I'll never go to church..."
Tip Your Server
I worked in the Full Service Restaurant Industry as a Busser, Host, and Server. I was a server for over 5 years. You know what stereo types permeate every restaurant I worked at in 2 states? It may or may not be true, but here is what most servers believe:
The worst tippers in the world are: Christians?!
You know what's REALLY sad? The Christian servers believe it too! Did you know that Sunday Afternoon is the MOST hated shift of all servers, even those who have NO religious affiliation and do not go to Church? They don't care about Sunday or not Sunday. It's the people they must serve they want to avoid. The story above is not only possible, it's typical. I've seen it over, and over, and over.
Principles Behind Tipping... It's not about you.
Every interaction you have in this life will draw someone to God or away from Him. As Christians we have freely received and freely give. We have been given the life of God. Abundant life! Jesus died to bring us that life. He also commissioned us go into all the world and preach the Gospel. As it has been said: "Preach often, if necessary, use words." Christians ought to never portray the attitude of one is there to be served. We are to serve, not to be served. Does that mean we get up and get in the servers way or that we never go out to eat? No, of course not. However we recognize the service provided to us and accept it with great humility and respect.
5 Therefore I thought it necessary to exhort the brethren to go to you ahead of time, and prepare your generous gift beforehand, which you had previously promised, that it may be ready as a matter of generosity and not as a grudging obligation. 6 But this I say: He who sows sparingly will also reap sparingly, and he who sows bountifully will also reap bountifully. 7 So let each one give as he purposes in his heart, not grudgingly or of necessity; for God loves a cheerful giver. 8 And God is able to make all grace abound toward you, that you, always having all sufficiency in all things, may have an abundance for every good work. 9 As it is written: "He has dispersed abroad, He has given to the poor; His righteousness endures forever." 10 Now may He who supplies seed to the sower, and bread for food, supply and multiply the seed you have sown and increase the fruits of your righteousness, 11 while you are enriched in everything for all liberality, which causes thanksgiving through us to God.
Over and over we are told in the New Testament that our lives are to be lived as servants of others, as humble before God, as love in action... We are to seek every opportunity to love others with our actions. In my time I've seen so many turned off to God by the actions of Christian diners. I've also seen some won to Christ through the abundant love and giving and kindness of a Christian who lived right before God.
What You Should Do
It is custom in the USA to leave 20% for a restaurant server. Leaving less than 20% indicates they did a bad job or that you are a cheapskate. The server will assume the latter in most cases. Leaving 10% is an insult. Leaving a penny indicates you meant to hurt them. Leaving nothing but a Gospel-tract is the most tacky thing you could do, but I've seen it often.
Is it OK to leave less for bad service? How would Grace himself respond? How did He respond to the woman caught in adultery? That would be between you and the Holy Spirit. Here is my take on that: You reap what you sow. Therefore, how do you want men to respond to you next time you have a shortfall in your performance? More importantly, if you are a real Christian there was something in or on you that gave the server knowledge of it. Maybe it was the Cross, prayer over the meal, something he/she over heard you say, but they know. Whatever you do for/to them they assume Jesus would. You are the only Jesus some people will ever meet?
Why stop at 20%? The stories that get passed around in restaurants are when the person gives the server more than 20%, much more. People have been known to give their server more in tip than the bill even was.I heard a story of a man who rang up a $23,000 bill at a 5 star restaurant, and proceeded to give out more than $26,000 in additional money to waitstaff. Unfortunately it's usually a business man, having drinks and cussing that leaves good tips and gets stories told about him/her. Just think, what if we could start a new rumor... "Did you hear what that Christian guy did at my table the other day..."
Conclusion
A true life personal story. One day, I was tired, working two jobs, 60 hours a week. I was feeling foggy and disoriented. The managers were seating me when I told them not to because I needed a mental break. I had a four table section but one was a bad seat, no one wants to sit there so it hadn't been sat most of the night. I didn't see them for a longer time than it should have been. Drinks were late getting to them and refills were long between. Food came out on time, but I don't remember why, something was wrong with it. They got by far the worst service I think I've given in my career, and by this time I'd already been serving 5 years I was NOT new. If I were them I'd want to leave nothing, complain to the manager, and maybe never come back. Worst of all, I smiled, did my best to catch up with them, but secretly resented them for being there at the table that no-one sits at, because if that table was empty I would be caught up, but instead I was falling further and further behind. Do you know what they did? They left me nearly 25% and wrote on the ticket: "My Jesus really love you, it's going to be OK." (or something like that). I nearly broke down and cried when I saw it. I felt horrible, not only for the service I gave, and their experience, but because of how I had felt about them. Their giving did more, by the work of the Holy Spirit, that night, than anything they ever could have said negative would have. It melted by hard heart, and I returned to work the next day on a mission to serve Jesus twice as hard for my customers the next day. I don't know that I'll ever see them this side of heaven, but I will take this time to say publicly... THANK YOU Table 81!
Questions to ask yourself:
Who do I live for? Me? Them? or Jesus?
What kind of wake do I leave behind me when I have visited someone's life?
What kind of Jesus do I represent? Who do people think my Jesus is after meeting me?
How will my actions, needs, requests today impact the servers life?
Then stop for a moment, the next time you are at a Full Service Restaurant. Look around.
Ask yourself what that person is doing?
How many tables are they serving?
Jesus said he came not to be served, but to serve. How you can YOU serve the server?
What look do they have on their face? Worried? Mad? Sad? Happy? Fake Happy?
Tips to be a good guest:
Be kind and attentive.
STOP talking EVERY TIME they come to your table and give them your full attention.
Please and Thank You go a long way
SMILE, are you glad you are saved?
Ask
Ask for special things at one time, don't make them run to your table 50 times.
Ask them what THEY need to make this go smoother for you and them?
"You tell US when YOU are ready or how this would be easiest for you?"
Especially important on big parties.
Don't ask for split checks! Really?!
If you absolutely must split checks, encourage your party to split as few ways as possible and leave bigger tips for all the extra work that entails.
I've had it take me an extra 30 minutes to split, process, and close out split checks for large parties. You want to make they do all that work, pay them extra for it. And make SURE your party does so. Take the leadership role and explain what being a witness means and that they had better leave 20+% or else!
Leave MORE than 20% How much more?
More if they did over and above
More if YOU cause them more work
More if you asked for special things, modified an order, or asked for split checks.
Split checks should really cause a 50% tip.
Large Parties should be extra. 2% per person over the standard 20%
Are you about to leave a tract or card? BUY that attention!
Most importantly: More if the Holy Spirit tells you to. He may have sent you in there for no other reason than to be a source of provision for that person. Maybe God sent you in there to pay their light bill, maybe even pay their car off, how about pay their house off? How's that for being a witness?
Don't leave Gospel Tracts.
They don't get read, they get made fun of and thrown out.
Do Leave a professional business card to a church, blog, and/or website that is well presented and will allow them to connect with you, your church, or a ministry you trust. (Make sure you buy their attention, if you are leaving a card/contact you'd better be tipping more than 20%)
Follow this story-line: "I'm a server in any restaurant in America. I just found out a local church conference has just gotten out of service. A party of 18 walks in to the restaurant. I'm informed they will be seated in my station. They are loud, happy, and smiling. I can't get them to sit stop talking long enough to address the group at one time, so I end up repeating myself over and over answering the same questions. Only half show up at first so I'm running around doing more work than if I had just been sat 9 tables of two. Oh, and don't forget the free bread, we'll need tons of that so that we can order light and save money. Most order waters, a few order tea or soda. Alcohol is a big portion of my average check, bigger check means bigger tip. Bummer. They proceed to order the cheapest things they can find, and split them with a friend. They have a million special requests and modified orders. I've done more work for this party of 18 than if I had just served 9 tables of two, but their total bill will be half of what the total of those 9 two person tables would have been. They want to split checks with people they are not sitting next to, some in completely different parts of the table. Some ask to split one item three ways (can't you just pay for it el cheapo?) I'm so busy trying to figure out who had what and who wants what that my other tables were suffering, so wanting them taken care of I let them go to another server who had time. There goes that money. I forgot to add gratuity to the table because half were still eating while the other half wanted checks, but if I start splitting checks now I won't be able to put in more items without a manager approval override and some still want desert. The party is over, they left me a grand total of 8% for the whole group. Oh look, two of them left me no money at all, but they left this handy Gospel Tract. That should help me pay my bills and feed my kids.I could have made more money serving four tables of 2, thanks a lot church people. And THAT is why I'll never go to church..."
Tip Your Server
I worked in the Full Service Restaurant Industry as a Busser, Host, and Server. I was a server for over 5 years. You know what stereo types permeate every restaurant I worked at in 2 states? It may or may not be true, but here is what most servers believe:
The worst tippers in the world are: Christians?!
You know what's REALLY sad? The Christian servers believe it too! Did you know that Sunday Afternoon is the MOST hated shift of all servers, even those who have NO religious affiliation and do not go to Church? They don't care about Sunday or not Sunday. It's the people they must serve they want to avoid. The story above is not only possible, it's typical. I've seen it over, and over, and over.
Principles Behind Tipping... It's not about you.
Every interaction you have in this life will draw someone to God or away from Him. As Christians we have freely received and freely give. We have been given the life of God. Abundant life! Jesus died to bring us that life. He also commissioned us go into all the world and preach the Gospel. As it has been said: "Preach often, if necessary, use words." Christians ought to never portray the attitude of one is there to be served. We are to serve, not to be served. Does that mean we get up and get in the servers way or that we never go out to eat? No, of course not. However we recognize the service provided to us and accept it with great humility and respect.
5 Therefore I thought it necessary to exhort the brethren to go to you ahead of time, and prepare your generous gift beforehand, which you had previously promised, that it may be ready as a matter of generosity and not as a grudging obligation. 6 But this I say: He who sows sparingly will also reap sparingly, and he who sows bountifully will also reap bountifully. 7 So let each one give as he purposes in his heart, not grudgingly or of necessity; for God loves a cheerful giver. 8 And God is able to make all grace abound toward you, that you, always having all sufficiency in all things, may have an abundance for every good work. 9 As it is written: "He has dispersed abroad, He has given to the poor; His righteousness endures forever." 10 Now may He who supplies seed to the sower, and bread for food, supply and multiply the seed you have sown and increase the fruits of your righteousness, 11 while you are enriched in everything for all liberality, which causes thanksgiving through us to God.
Over and over we are told in the New Testament that our lives are to be lived as servants of others, as humble before God, as love in action... We are to seek every opportunity to love others with our actions. In my time I've seen so many turned off to God by the actions of Christian diners. I've also seen some won to Christ through the abundant love and giving and kindness of a Christian who lived right before God.
What You Should Do
It is custom in the USA to leave 20% for a restaurant server. Leaving less than 20% indicates they did a bad job or that you are a cheapskate. The server will assume the latter in most cases. Leaving 10% is an insult. Leaving a penny indicates you meant to hurt them. Leaving nothing but a Gospel-tract is the most tacky thing you could do, but I've seen it often.
Is it OK to leave less for bad service? How would Grace himself respond? How did He respond to the woman caught in adultery? That would be between you and the Holy Spirit. Here is my take on that: You reap what you sow. Therefore, how do you want men to respond to you next time you have a shortfall in your performance? More importantly, if you are a real Christian there was something in or on you that gave the server knowledge of it. Maybe it was the Cross, prayer over the meal, something he/she over heard you say, but they know. Whatever you do for/to them they assume Jesus would. You are the only Jesus some people will ever meet?
Why stop at 20%? The stories that get passed around in restaurants are when the person gives the server more than 20%, much more. People have been known to give their server more in tip than the bill even was.I heard a story of a man who rang up a $23,000 bill at a 5 star restaurant, and proceeded to give out more than $26,000 in additional money to waitstaff. Unfortunately it's usually a business man, having drinks and cussing that leaves good tips and gets stories told about him/her. Just think, what if we could start a new rumor... "Did you hear what that Christian guy did at my table the other day..."
Conclusion
A true life personal story. One day, I was tired, working two jobs, 60 hours a week. I was feeling foggy and disoriented. The managers were seating me when I told them not to because I needed a mental break. I had a four table section but one was a bad seat, no one wants to sit there so it hadn't been sat most of the night. I didn't see them for a longer time than it should have been. Drinks were late getting to them and refills were long between. Food came out on time, but I don't remember why, something was wrong with it. They got by far the worst service I think I've given in my career, and by this time I'd already been serving 5 years I was NOT new. If I were them I'd want to leave nothing, complain to the manager, and maybe never come back. Worst of all, I smiled, did my best to catch up with them, but secretly resented them for being there at the table that no-one sits at, because if that table was empty I would be caught up, but instead I was falling further and further behind. Do you know what they did? They left me nearly 25% and wrote on the ticket: "My Jesus really love you, it's going to be OK." (or something like that). I nearly broke down and cried when I saw it. I felt horrible, not only for the service I gave, and their experience, but because of how I had felt about them. Their giving did more, by the work of the Holy Spirit, that night, than anything they ever could have said negative would have. It melted by hard heart, and I returned to work the next day on a mission to serve Jesus twice as hard for my customers the next day. I don't know that I'll ever see them this side of heaven, but I will take this time to say publicly... THANK YOU Table 81!
Questions to ask yourself:
Who do I live for? Me? Them? or Jesus?
What kind of wake do I leave behind me when I have visited someone's life?
What kind of Jesus do I represent? Who do people think my Jesus is after meeting me?
How will my actions, needs, requests today impact the servers life?
Then stop for a moment, the next time you are at a Full Service Restaurant. Look around.
Ask yourself what that person is doing?
How many tables are they serving?
Jesus said he came not to be served, but to serve. How you can YOU serve the server?
What look do they have on their face? Worried? Mad? Sad? Happy? Fake Happy?
Tips to be a good guest:
Be kind and attentive.
STOP talking EVERY TIME they come to your table and give them your full attention.
Please and Thank You go a long way
SMILE, are you glad you are saved?
Ask
Ask for special things at one time, don't make them run to your table 50 times.
Ask them what THEY need to make this go smoother for you and them?
"You tell US when YOU are ready or how this would be easiest for you?"
Especially important on big parties.
Don't ask for split checks! Really?!
If you absolutely must split checks, encourage your party to split as few ways as possible and leave bigger tips for all the extra work that entails.
I've had it take me an extra 30 minutes to split, process, and close out split checks for large parties. You want to make they do all that work, pay them extra for it. And make SURE your party does so. Take the leadership role and explain what being a witness means and that they had better leave 20+% or else!
Leave MORE than 20% How much more?
More if they did over and above
More if YOU cause them more work
More if you asked for special things, modified an order, or asked for split checks.
Split checks should really cause a 50% tip.
Large Parties should be extra. 2% per person over the standard 20%
Are you about to leave a tract or card? BUY that attention!
Most importantly: More if the Holy Spirit tells you to. He may have sent you in there for no other reason than to be a source of provision for that person. Maybe God sent you in there to pay their light bill, maybe even pay their car off, how about pay their house off? How's that for being a witness?
Don't leave Gospel Tracts.
They don't get read, they get made fun of and thrown out.
Do Leave a professional business card to a church, blog, and/or website that is well presented and will allow them to connect with you, your church, or a ministry you trust. (Make sure you buy their attention, if you are leaving a card/contact you'd better be tipping more than 20%)
So, I'm still hearing a lot of people say things that are not true, don't make sense, or are just plain bad advice. Credit building is not rocket science. Yes, the formulas and math behind them actually are akin to rocket science math. But some of the basic things the average person needs to know are actually quite simple.
If you want to build credit without paying interest or creating debt read on, or just skip to the bottom to the conclusion.
I wrote a post previously about FICO and Credit Decisions, now I want to bring in the focus a little to some basics. The very first things you should know is that THE company that creates your credit score is FICO (the Fair Isaac Corporation). It was started by Bill Fair and Earl Isaac. It is now THE leading credit scoring company on the planet. FICO is the most used credit scoring platform accounting for over 100 BILLION scores sold to date.
Fico.com Excerpt:Engineer Bill Fair and mathematician Earl Isaac found FICO — with an initial investment of $400 each — on the principle that data, used intelligently, can improve business decisions. (1956)
There are other credit scoring companies that exist. Some, like Vantage Score, are making major headway into the field. However, for the time being, FICO remains the most used score on the market. When you apply for a Credit Card and you get a decline/approval letter in the mail. The score shown will most likely be a FICO score.
So, where is the first place you should go to find out how to manage your credit score? Why not ASK the ones who create it!? They created a website just for you, the consumer. You can read all about the who, what, when, where, and why of your credit score. It's not exhaustive, but it is thorough.
It's important to monitor your credit on an on-going basis, not just once a year. Because not only could Identity Thieves destroy your credit in a matter of hours, but mistakes, errors and forgotten cell phone bills can too! If you are restoring your credit, and disputing items, or paying off old items, you want to SEE those items update on your credit. You do not want to wait a year after paying off an old bad debt just to find out that the company never bothered to report that you paid them off.
If you want to monitor your credit without paying for it, there is a new site has just come out that is GREAT and FREE! It is, http://www.creditkarma.com/. Ok, what's the catch, why is it free? Because it's the only site, first site at least, to be paid for not by your membership fee, but by ad clicks. The ad's are actually beneficial to you, and they give you a rating of how likely you are to get a product based on your score before you apply. HOW COOL IS THAT?! Downside? You only get one report, therefore one score. So if you want ALL three credit reporting agencies you still have to pay for that somewhere through an "Identity Theft Protection" service, such as http://www.lifelock.com.
What do YOU need to know about credit?
There are a lot of things that go into credit. Consult a credit adviser for YOUR particular situation. The advice I give here is for demonstration of the basics, do with it what you will.
Here are some basics. There are five components to a FICO score. The image seen here is adapted from FICO's website and gives a breakdown of the categories. FICO scores are based on complex mathematical formulas and as such are fluid. There is no such thing as A + B = C with credit.When you affect one thing it could change the dynamics of the others. Therefore no two people would have the EXACT same result because no two people have the EXACT same creditors and credit histories.
FICO Chart
Many people ask me: "If I apply for this __XYZ Credit Product__, how will that affect my score?" If anyone tells you an answer other than "That Depends" they are clearly ignorant. I've heard so called advisers tell people "Oh, it will go typically only go down a few points..." While that may be true much of the time it may not be. A person with no credit history of any kind, that obtains a credit card, may find that adding something to nothing will cause their credit score to go up. A person with substantial positive history that does one application may find their score totally unaffected. The only thing applying does for a credit score is that it shows up as an "Inquiry".
Does that mean that if I get declined it will hurt my credit? Maybe yes, Maybe no. Your credit reports do not know that you got declined. They only know that someone inquired on your behalf. It could have been declined, approved, or maybe you didn't like the rate so YOU declined THEM. All they know is that the bank inquired (asked about you). MANY inquiries can be bad, just a few not so bad. Not all inquiries are the same. There is NO SUCH THING as a hard pull/soft pull. Just those that count and those that don't count. See FICO for definition.
What doesn't count for me?
In short almost everything you've been told does. Cell Phones, Rent, Utilities all mean just about nothing to your FICO score. The only time those will show up is if they go to collections. So, by all means, pay them on time and don't let them go to collections. That will prevent credit issues. But your payments on those won't build your credit score with FICO.
Also, people are out there telling you to go buy a $300 TV on your credit card and make payments on it for 6-9 months to build credit. This advice is WRONG. Don't do it. And it's ultimately bad (at best not great) for your credit.
What does count for me?
Payments on Credit Products. Credit Cards, Department Store Cards, Loans, Auto Loans, Student Loans, Mortgages, etc...
Aren't Credit Cards Evil?
I'm going to give this advice to those who want to start from scratch or rebuild from scratch. This assumes you either have nothing on your reports in recent history, or you've paid off all old items, or your bankruptcy is finalized and you now want to start over. I give this same advice to anyone who wants to build from scratch. Much of this info will be good for the advanced credit builder to know too. This is MY PERSONAL opinion. It is based on years of experience and research and I believe it whole heartedly but it is just that, my opinion. Do your own research and verify what you need to before using it.
So, you want to build your credit. Get two credit cards. Not one, not three, two. I know what you are thinking, credit cards are what created my (or others I know) debt problems in the first place. Well, yes and no. Yes they can be a tool for debt. No they don't have to be a tool for debt. A hammer is a tool for breaking glass jars or building furniture. It's the hand of the holder that guides it. Credit Cards are a tool, nothing more. Your problem has been perspective.
The banking industry actually studies and classifies credit card users. There are two primary categories. There are debtors and transactors. When debtors see $100 in their checking and $100 available on a credit card they see $200 to spend. When transactors see $100 in their checking and $100 available on a credit card they see $100 to spend and multiple tools to use based on the need. They could use checks, ACH, debit cards, cash, or credit cards... but it's all about the same $100. Debtors view credit cards as borrowing tools. Transactors view credit cards as transaction tools. It's all about mindset.
FYI: the banks actually don't like debtors. People who put a large balance on their credit card and make payments on it forever are the banks LEAST favorite credit card user, but most common. Sure the banks makes interest off of you. But they loose more money from debtors than transactors through charged off/collections accounts by leaps and bounds. The interest you pay is making up for losses. Transactors actually make the bank more money. Stores pay banks every time you buy something. The banks make more money from that than they do from interest. If you make one purchase and pay on it for six months you aren't buying new things and therefore aren't making the bank money. You are also MORE likely to stop paying on it and go to collections. They would rather you buy things, pay it off, not pay any interest, and buy more things. THAT is the real money in credit cards for banks, and those people get lower rates and better rewards for being wise credit card users.
In fact, the credit card is a powerful tool for the debt free! Credit cards are the only credit product in common use that a debt free person can use to build credit with and never create any debt or pay any interest. In fact if you create debt or pay interest on a credit card; it's proof you are not using them right in the first place.
FICO and Credit Cards
Credit Cards actually help you in all categories of your credit score, but most especially the top three. I'm pasting this chart again, so that you can take a closer look.
FICO Chart
Payment History - 35%
Amounts Owed - 30%
Length of Credit History - 15%
Credit Cards have a direct, controllable, impact on 80% of your credit scoring categories. 90% if you factor in that limiting yourself to 2 credit cards and choosing other products to boost your score from time to time is the best way to go, and 100% if you factor in that old credit is better than new. Here's the way to work it. If you want to see how your credit compares against all the variety of catagories go sign up for a free Credit Karma membership and click on "Credit Report Card".
Payment history.
Payment history means one thing, and only one thing. How you made (or didn't make) payments on credit products. On your credit report, depending on how you get it they all "LOOK" different in format, there will be information regarding your payment history. The only thing that it shows is three things.
No Data/Not Available/No Activity: These all have a neutral effect on credit. If nothing was due and nothing was paid, this will be the result. It may look like an empty box, a "/" forward slash, or a "N/A".
Positive Payment History: This just means that something was due and something was paid. It will be indicated by: "OK" paid as agreed, or a check mark, or "CUR" for current". The more of these you have the better your credit is.
Negative information. If you are late by less than 30 days this will not effect your credit. However if you are late you may see: "30", "60", "90" days late, or "COL""CO" for collections, or "CHG""CH" for Charged Off. The more of these you have the lower your score will be.
The ONLY positive thing that comes from this is "CUR" or "OK" that means something was due, something was paid, all was well this month. You can get 12 of those a year. If you make two payments in one month you still only get ONE "OK" for the month. If you make a $25 payment on a $300 balance you get "OK". If you make a $1.50 payment on a $1.50 balance you get "OK". The MOST you can get in the way of positive information from one credit account is 12 "OK"'s per year.
MYTH: "Carrying some over to pay a little interest builds credit"
FACT: Paying your balance BEFORE your statement cuts shows nothing due, therefore you get an "N/A" on your statement, possibly. Waiting until your statement cuts, produces a "balance due". Paying it before the due date avoids interest AND shows "payment made" or in other works the "OK"/"CUR" that you wanted.
So, instead of carrying a balance on your card. Go out once a month and buy a $1.50 Dr Pepper or a $5 cheeseburger Wait until you get the statement and then PAY IT OFF IN FULL BEFORE THE DUE DATE.
Amounts Owed.
Amounts owed on credit cards is a tricky one. This may play out differently on true loans, but on "OPEN" or "REVOLVING" accounts (any and all accounts that you can use and then reuse again are considered open/revolving accounts), FICO actually wants to see you are using LESS not more. In general the FICO formula looks at the total amount you have in "Credit Limit" and the total amount you have "In Use" and comes up with a percentage.
If you have a $300 Credit Limit and you have a $250 balance on your card you are at: 83% Utilization. You have used 83% of your credit limit. If you followed the advise MANY are getting out there this is exactly what you did. You got a $300 card, bought $250 worth of stuff and made payment on it for months/years. This was exactly the wrong thing to do.
FICO says the LOWER your utilization score the better, except for 0%. They want to see SOME usage, but less is more. Someone with a 5% utilization will score better than someone with a 90% utilization. However someone with 0% utilization may appear to not be using the card and therefore not be able to demonstrate they CAN use one effectively. SO getting a card and putting it in your freezer may be a good way to stay out of debt, but not a great way to build credit.
Instead go out and buy that cheeseburger once a month and then pay it off. That will produce the payment history you need WITHOUT violating the utilization/usage requirements.
There are three easy ways to lower your credit utilization. The easiest way is to make credit card payments more than once a month so that your balance never gets too high. If you have more than one credit card, another good way to lower your utilization is to use multiple cards each month. This will result in various cards with low credit utilization rather than one with high utilization. Lastly, you can try to increase your available credit. If your income has increased, if you've maintained an amazing credit history, or if you have little debt, it doesn't hurt to ask for a credit limit increase. Just remember that this can sometimes result in a hard inquiry on your credit. If you lack excellent credit, try opening a secured credit card and adding to its security deposit over time.
Lenders like to see a big gap between the amount of credit you're using and your available credit limits. Getting your balances below 30% of the credit limit on each card can really help; getting balances below 10% is even better.
Forget the old 30% idea Start by throwing out the old notion about 30 percent usage being OK. FICO, the company that originated credit scoring and is still the largest provider of such scores, has long advised score-conscious consumers to be far more stingy about credit use. The company had told people to keep it to 10 percent or less, says Anthony Sprauve, spokesman for myFico.com, FICO's consumer website.
According to FICO surveys, credit scoring "high achievers -- those with a score north of 750 -- they're using an average of 7 percent of their available credit," Sprauve says. "I think 20 percent, for a lot of people, is more realistic. I would rather talk about that as a realistic goal that they can attain, rather than something that might feel like a stretch and out of reach."
Most credit experts, including the credit bureaus, will advise you to keep your credit utilization under 30% of the total limit. But here's a secret: Make sure you do it for each card. If you exceed that threshold on one card -- say you use 70% of that limit but only 10% on another card and nothing on a third card -- you're under 30% of the total limit, but you'll still get dinged for using so much of the limit on the first card. How much of your limit you use in any given month can turn the tide on your card. If, for example, you max out your American Express card every month but pay it in full, you can still get slammed for hitting your limit. The credit card companies don't report if you've paid off your card; only how much you spent.
Length of Credit History.
This is actually a very short thing to describe. The older your credit products are, the better. This is especially true with open/revolving accounts. The reason your score goes down, sometimes, when you go closing cards is because the AGES of your cards are being averaged. Having a 20 year old card and 18 year old card is better than having a 1 year and 3 year. If you MUST close a card and replace it with a new one go ahead. Try to stick to three at most at any one time.
There could be good reasons for doing this. Maybe the old card has no rewards, the company is lousy or even went out of business. You hate their customer service. It is what it is. So if you decide to get a new card, great. First, get the new card. Keep it for a year or two, then close the old one. Averaging a 15 year/10 year/2 year is different than averaging a 13 year/8 year/1 month card. So give the new one time to grow before closing the old one.
Bottom line, 20 years from now, try to have two cards that are between 15-20 years old.
Conclusion
So, after all that talking the advise is actually pretty simple. Get two cards. Go out once a month and buy something(s) for LESS than 10% of their credit limit, maybe even just a soda and/or cheeseburger. Then wait until you get your statement and pay it off in full before the due date.
If you are young and/or just starting out there is NO REASON, as far as your FICO score is concerned, to buy a bunch of stuff. Buy one thing, and pay it off every month for the rest of your life.
And that's how easy it is. Building credit, without debt or interest.
Other Options?
(Note: is this ALL it takes? No. The more history/experience you show with a variety of products the better. But if you want to keep things simple do it the way I show above.)
What if you want to go a step further? If credit cards are the only product to build credit with that can have no interest or debt, are there other low cost options?
Take out a loan, pay on it for 6-9 months and then pay if off.
I talked to a lady who had a ton of cash and liked to pay cash for cars, but wanted to keep up her credit. She went out and bought a car with a loan. Paid on it for 6 months and then paid it off, she did this every 2-3 years.
I've seen several people who had collateral (cash/car/house/etc) take out a loan, put the loan money into a savings, and set the loan to auto pay from the savings. Literally the loan money is just paying itself back. They may take out a 5 year loan, let it auto pay for 3-6 months and then add a little money to make up for interest and pay it off. JUST, to keep their credit going.
Rent vs Own
Things like this can do wonders. Are you renting? Why? You are paying someone else's Mortgage! Pray about it first, God may have plans to move you half way around the world tomorrow. So don't buy until you are where you know you are supposed to be. But, instead of buying someone else's house for them, buy your own. I heard one mortgage man say: Rent from the bank. We'll keep your house payments the same for the life of your contract, and in 30 years we'll give you the house for free!
They even have 15 year mortgage out there now. I know many people who bought homes with mortgage payments $100's per month less than they could afford in their budget, just so that they could afford to make regular extra payments and paid them off in ten years instead of 30. It can be done with planning. One chap I know paid his last house off in 10 years last month. Just bought a condo for $675 month on a 15 year note. He's renting it out for $1,300/month and putting all of that on the note. He'll have it paid off in 5 years, if he adds a few bonuses/tax returns to that also, could be faster.
Don't buy the biggest place you can afford. Buy a place for MUCH less than you can afford, pay what you can afford, plus occasional extras and you'll have it paid off in no time.
BTW:
Mortgages CAN be easier to qualify for than cars, depending on the person, history, state, and type of mortgage loan. ASK, you may be surprised. I was declined for a Credit Card months before I was approved, barely by the Grace of God, for my home. It CAN be done. If God has given you the go ahead, it REALLY CAN!
So, I'm still hearing a lot of people say things that are not true, don't make sense, or are just plain bad advice. Credit building is not rocket science. Yes, the formulas and math behind them actually are akin to rocket science math. But some of the basic things the average person needs to know are actually quite simple.
If you want to build credit without paying interest or creating debt read on, or just skip to the bottom to the conclusion.
I wrote a post previously about FICO and Credit Decisions, now I want to bring in the focus a little to some basics. The very first things you should know is that THE company that creates your credit score is FICO (the Fair Isaac Corporation). It was started by Bill Fair and Earl Isaac. It is now THE leading credit scoring company on the planet. FICO is the most used credit scoring platform accounting for over 100 BILLION scores sold to date.
Fico.com Excerpt:Engineer Bill Fair and mathematician Earl Isaac found FICO — with an initial investment of $400 each — on the principle that data, used intelligently, can improve business decisions. (1956)
There are other credit scoring companies that exist. Some, like Vantage Score, are making major headway into the field. However, for the time being, FICO remains the most used score on the market. When you apply for a Credit Card and you get a decline/approval letter in the mail. The score shown will most likely be a FICO score.
So, where is the first place you should go to find out how to manage your credit score? Why not ASK the ones who create it!? They created a website just for you, the consumer. You can read all about the who, what, when, where, and why of your credit score. It's not exhaustive, but it is thorough.
It's important to monitor your credit on an on-going basis, not just once a year. Because not only could Identity Thieves destroy your credit in a matter of hours, but mistakes, errors and forgotten cell phone bills can too! If you are restoring your credit, and disputing items, or paying off old items, you want to SEE those items update on your credit. You do not want to wait a year after paying off an old bad debt just to find out that the company never bothered to report that you paid them off.
If you want to monitor your credit without paying for it, there is a new site has just come out that is GREAT and FREE! It is, http://www.creditkarma.com/. Ok, what's the catch, why is it free? Because it's the only site, first site at least, to be paid for not by your membership fee, but by ad clicks. The ad's are actually beneficial to you, and they give you a rating of how likely you are to get a product based on your score before you apply. HOW COOL IS THAT?! Downside? You only get one report, therefore one score. So if you want ALL three credit reporting agencies you still have to pay for that somewhere through an "Identity Theft Protection" service, such as http://www.lifelock.com.
What do YOU need to know about credit?
There are a lot of things that go into credit. Consult a credit adviser for YOUR particular situation. The advice I give here is for demonstration of the basics, do with it what you will.
Here are some basics. There are five components to a FICO score. The image seen here is adapted from FICO's website and gives a breakdown of the categories. FICO scores are based on complex mathematical formulas and as such are fluid. There is no such thing as A + B = C with credit.When you affect one thing it could change the dynamics of the others. Therefore no two people would have the EXACT same result because no two people have the EXACT same creditors and credit histories.
FICO Chart
Many people ask me: "If I apply for this __XYZ Credit Product__, how will that affect my score?" If anyone tells you an answer other than "That Depends" they are clearly ignorant. I've heard so called advisers tell people "Oh, it will go typically only go down a few points..." While that may be true much of the time it may not be. A person with no credit history of any kind, that obtains a credit card, may find that adding something to nothing will cause their credit score to go up. A person with substantial positive history that does one application may find their score totally unaffected. The only thing applying does for a credit score is that it shows up as an "Inquiry".
Does that mean that if I get declined it will hurt my credit? Maybe yes, Maybe no. Your credit reports do not know that you got declined. They only know that someone inquired on your behalf. It could have been declined, approved, or maybe you didn't like the rate so YOU declined THEM. All they know is that the bank inquired (asked about you). MANY inquiries can be bad, just a few not so bad. Not all inquiries are the same. There is NO SUCH THING as a hard pull/soft pull. Just those that count and those that don't count. See FICO for definition.
What doesn't count for me?
In short almost everything you've been told does. Cell Phones, Rent, Utilities all mean just about nothing to your FICO score. The only time those will show up is if they go to collections. So, by all means, pay them on time and don't let them go to collections. That will prevent credit issues. But your payments on those won't build your credit score with FICO.
Also, people are out there telling you to go buy a $300 TV on your credit card and make payments on it for 6-9 months to build credit. This advice is WRONG. Don't do it. And it's ultimately bad (at best not great) for your credit.
What does count for me?
Payments on Credit Products. Credit Cards, Department Store Cards, Loans, Auto Loans, Student Loans, Mortgages, etc...
Aren't Credit Cards Evil?
I'm going to give this advice to those who want to start from scratch or rebuild from scratch. This assumes you either have nothing on your reports in recent history, or you've paid off all old items, or your bankruptcy is finalized and you now want to start over. I give this same advice to anyone who wants to build from scratch. Much of this info will be good for the advanced credit builder to know too. This is MY PERSONAL opinion. It is based on years of experience and research and I believe it whole heartedly but it is just that, my opinion. Do your own research and verify what you need to before using it.
So, you want to build your credit. Get two credit cards. Not one, not three, two. I know what you are thinking, credit cards are what created my (or others I know) debt problems in the first place. Well, yes and no. Yes they can be a tool for debt. No they don't have to be a tool for debt. A hammer is a tool for breaking glass jars or building furniture. It's the hand of the holder that guides it. Credit Cards are a tool, nothing more. Your problem has been perspective.
The banking industry actually studies and classifies credit card users. There are two primary categories. There are debtors and transactors. When debtors see $100 in their checking and $100 available on a credit card they see $200 to spend. When transactors see $100 in their checking and $100 available on a credit card they see $100 to spend and multiple tools to use based on the need. They could use checks, ACH, debit cards, cash, or credit cards... but it's all about the same $100. Debtors view credit cards as borrowing tools. Transactors view credit cards as transaction tools. It's all about mindset.
FYI: the banks actually don't like debtors. People who put a large balance on their credit card and make payments on it forever are the banks LEAST favorite credit card user, but most common. Sure the banks makes interest off of you. But they loose more money from debtors than transactors through charged off/collections accounts by leaps and bounds. The interest you pay is making up for losses. Transactors actually make the bank more money. Stores pay banks every time you buy something. The banks make more money from that than they do from interest. If you make one purchase and pay on it for six months you aren't buying new things and therefore aren't making the bank money. You are also MORE likely to stop paying on it and go to collections. They would rather you buy things, pay it off, not pay any interest, and buy more things. THAT is the real money in credit cards for banks, and those people get lower rates and better rewards for being wise credit card users.
In fact, the credit card is a powerful tool for the debt free! Credit cards are the only credit product in common use that a debt free person can use to build credit with and never create any debt or pay any interest. In fact if you create debt or pay interest on a credit card; it's proof you are not using them right in the first place.
FICO and Credit Cards
Credit Cards actually help you in all categories of your credit score, but most especially the top three. I'm pasting this chart again, so that you can take a closer look.
FICO Chart
Payment History - 35%
Amounts Owed - 30%
Length of Credit History - 15%
Credit Cards have a direct, controllable, impact on 80% of your credit scoring categories. 90% if you factor in that limiting yourself to 2 credit cards and choosing other products to boost your score from time to time is the best way to go, and 100% if you factor in that old credit is better than new. Here's the way to work it. If you want to see how your credit compares against all the variety of catagories go sign up for a free Credit Karma membership and click on "Credit Report Card".
Payment history.
Payment history means one thing, and only one thing. How you made (or didn't make) payments on credit products. On your credit report, depending on how you get it they all "LOOK" different in format, there will be information regarding your payment history. The only thing that it shows is three things.
No Data/Not Available/No Activity: These all have a neutral effect on credit. If nothing was due and nothing was paid, this will be the result. It may look like an empty box, a "/" forward slash, or a "N/A".
Positive Payment History: This just means that something was due and something was paid. It will be indicated by: "OK" paid as agreed, or a check mark, or "CUR" for current". The more of these you have the better your credit is.
Negative information. If you are late by less than 30 days this will not effect your credit. However if you are late you may see: "30", "60", "90" days late, or "COL""CO" for collections, or "CHG""CH" for Charged Off. The more of these you have the lower your score will be.
The ONLY positive thing that comes from this is "CUR" or "OK" that means something was due, something was paid, all was well this month. You can get 12 of those a year. If you make two payments in one month you still only get ONE "OK" for the month. If you make a $25 payment on a $300 balance you get "OK". If you make a $1.50 payment on a $1.50 balance you get "OK". The MOST you can get in the way of positive information from one credit account is 12 "OK"'s per year.
MYTH: "Carrying some over to pay a little interest builds credit"
FACT: Paying your balance BEFORE your statement cuts shows nothing due, therefore you get an "N/A" on your statement, possibly. Waiting until your statement cuts, produces a "balance due". Paying it before the due date avoids interest AND shows "payment made" or in other works the "OK"/"CUR" that you wanted.
So, instead of carrying a balance on your card. Go out once a month and buy a $1.50 Dr Pepper or a $5 cheeseburger Wait until you get the statement and then PAY IT OFF IN FULL BEFORE THE DUE DATE.
Amounts Owed.
Amounts owed on credit cards is a tricky one. This may play out differently on true loans, but on "OPEN" or "REVOLVING" accounts (any and all accounts that you can use and then reuse again are considered open/revolving accounts), FICO actually wants to see you are using LESS not more. In general the FICO formula looks at the total amount you have in "Credit Limit" and the total amount you have "In Use" and comes up with a percentage.
If you have a $300 Credit Limit and you have a $250 balance on your card you are at: 83% Utilization. You have used 83% of your credit limit. If you followed the advise MANY are getting out there this is exactly what you did. You got a $300 card, bought $250 worth of stuff and made payment on it for months/years. This was exactly the wrong thing to do.
FICO says the LOWER your utilization score the better, except for 0%. They want to see SOME usage, but less is more. Someone with a 5% utilization will score better than someone with a 90% utilization. However someone with 0% utilization may appear to not be using the card and therefore not be able to demonstrate they CAN use one effectively. SO getting a card and putting it in your freezer may be a good way to stay out of debt, but not a great way to build credit.
Instead go out and buy that cheeseburger once a month and then pay it off. That will produce the payment history you need WITHOUT violating the utilization/usage requirements.
There are three easy ways to lower your credit utilization. The easiest way is to make credit card payments more than once a month so that your balance never gets too high. If you have more than one credit card, another good way to lower your utilization is to use multiple cards each month. This will result in various cards with low credit utilization rather than one with high utilization. Lastly, you can try to increase your available credit. If your income has increased, if you've maintained an amazing credit history, or if you have little debt, it doesn't hurt to ask for a credit limit increase. Just remember that this can sometimes result in a hard inquiry on your credit. If you lack excellent credit, try opening a secured credit card and adding to its security deposit over time.
Lenders like to see a big gap between the amount of credit you're using and your available credit limits. Getting your balances below 30% of the credit limit on each card can really help; getting balances below 10% is even better.
Forget the old 30% idea Start by throwing out the old notion about 30 percent usage being OK. FICO, the company that originated credit scoring and is still the largest provider of such scores, has long advised score-conscious consumers to be far more stingy about credit use. The company had told people to keep it to 10 percent or less, says Anthony Sprauve, spokesman for myFico.com, FICO's consumer website.
According to FICO surveys, credit scoring "high achievers -- those with a score north of 750 -- they're using an average of 7 percent of their available credit," Sprauve says. "I think 20 percent, for a lot of people, is more realistic. I would rather talk about that as a realistic goal that they can attain, rather than something that might feel like a stretch and out of reach."
Most credit experts, including the credit bureaus, will advise you to keep your credit utilization under 30% of the total limit. But here's a secret: Make sure you do it for each card. If you exceed that threshold on one card -- say you use 70% of that limit but only 10% on another card and nothing on a third card -- you're under 30% of the total limit, but you'll still get dinged for using so much of the limit on the first card. How much of your limit you use in any given month can turn the tide on your card. If, for example, you max out your American Express card every month but pay it in full, you can still get slammed for hitting your limit. The credit card companies don't report if you've paid off your card; only how much you spent.
Length of Credit History.
This is actually a very short thing to describe. The older your credit products are, the better. This is especially true with open/revolving accounts. The reason your score goes down, sometimes, when you go closing cards is because the AGES of your cards are being averaged. Having a 20 year old card and 18 year old card is better than having a 1 year and 3 year. If you MUST close a card and replace it with a new one go ahead. Try to stick to three at most at any one time.
There could be good reasons for doing this. Maybe the old card has no rewards, the company is lousy or even went out of business. You hate their customer service. It is what it is. So if you decide to get a new card, great. First, get the new card. Keep it for a year or two, then close the old one. Averaging a 15 year/10 year/2 year is different than averaging a 13 year/8 year/1 month card. So give the new one time to grow before closing the old one.
Bottom line, 20 years from now, try to have two cards that are between 15-20 years old.
Conclusion
So, after all that talking the advise is actually pretty simple. Get two cards. Go out once a month and buy something(s) for LESS than 10% of their credit limit, maybe even just a soda and/or cheeseburger. Then wait until you get your statement and pay it off in full before the due date.
If you are young and/or just starting out there is NO REASON, as far as your FICO score is concerned, to buy a bunch of stuff. Buy one thing, and pay it off every month for the rest of your life.
And that's how easy it is. Building credit, without debt or interest.
Other Options?
(Note: is this ALL it takes? No. The more history/experience you show with a variety of products the better. But if you want to keep things simple do it the way I show above.)
What if you want to go a step further? If credit cards are the only product to build credit with that can have no interest or debt, are there other low cost options?
Take out a loan, pay on it for 6-9 months and then pay if off.
I talked to a lady who had a ton of cash and liked to pay cash for cars, but wanted to keep up her credit. She went out and bought a car with a loan. Paid on it for 6 months and then paid it off, she did this every 2-3 years.
I've seen several people who had collateral (cash/car/house/etc) take out a loan, put the loan money into a savings, and set the loan to auto pay from the savings. Literally the loan money is just paying itself back. They may take out a 5 year loan, let it auto pay for 3-6 months and then add a little money to make up for interest and pay it off. JUST, to keep their credit going.
Rent vs Own
Things like this can do wonders. Are you renting? Why? You are paying someone else's Mortgage! Pray about it first, God may have plans to move you half way around the world tomorrow. So don't buy until you are where you know you are supposed to be. But, instead of buying someone else's house for them, buy your own. I heard one mortgage man say: Rent from the bank. We'll keep your house payments the same for the life of your contract, and in 30 years we'll give you the house for free!
They even have 15 year mortgage out there now. I know many people who bought homes with mortgage payments $100's per month less than they could afford in their budget, just so that they could afford to make regular extra payments and paid them off in ten years instead of 30. It can be done with planning. One chap I know paid his last house off in 10 years last month. Just bought a condo for $675 month on a 15 year note. He's renting it out for $1,300/month and putting all of that on the note. He'll have it paid off in 5 years, if he adds a few bonuses/tax returns to that also, could be faster.
Don't buy the biggest place you can afford. Buy a place for MUCH less than you can afford, pay what you can afford, plus occasional extras and you'll have it paid off in no time.
BTW:
Mortgages CAN be easier to qualify for than cars, depending on the person, history, state, and type of mortgage loan. ASK, you may be surprised. I was declined for a Credit Card months before I was approved, barely by the Grace of God, for my home. It CAN be done. If God has given you the go ahead, it REALLY CAN!
"I've heard that you have to get a credit card to build credit, but so many people build up credit card debt and I'm afraid to do it... "
" I was told to get a credit card and put a $300 balance on it and make payments on it for 6 months to year... I'm very concerned because I've heard so much about credit cards causing harm..."
"I had a card when I was young and totally messed up my life with it... I don't want another one..."
"I don't want to use a credit card, I pay cash for everything..."
Answer:
I want to take a moment to talk about credit cards. The Good, The Bad, The Ugly, and The Not As Ugly As You Think Because You Aren't Thinking Of Them Right... Is that too long?
What you are about to read takes me 30 minutes to an hour to explain verbally with people sometimes, because they ask questions and I have to keep checking for understanding. It took me two hours to write. You can read it in less than 10 minutes.
**If you read nothing else, read the end: How does a credit card affect you?**
The Bad and Ugly
Credit Card Debt... is evil! It's a tool of the enemy to keep you subject to fear and bondage. Satan has designed this debtors system from the ground up. Every time you vote for a person, from either party, that wants more Government Spending, you are voting for more debt. Debt is BAD. The Borrower becomes a servant or slave to the lender. After years of working with people's finances I can assure you this is TRUE!
Is debt a sin? No. God said that he'd make you a lender and not a borrower. Well, you can't lend to people if it's a sin, because you'd be helping them sin and God doesn't empower you to help people sin. But it's not God's Highest will for any person to be in or stay in debt.
A young child get's out of high school and goes to college and gets a credit card. He sees an $800 limit. He's never even made $800 a month at his job yet, but he sees this as a path to get things he wants. "I can't afford that... wait, no problem, I'll put it on the credit card..." 10 years later he's still paying that card off... Sound bad? It was me! I know first hand, credit cards can be a powerful tool of slavery if used incorrectly.
However...
The Good
Money, Credit, Hammer, Nail. What does these four have in common? They are just tools. Neither good nor bad. A hammer can be a powerful tool to smash a vase! A hammer can be a powerful tool to build a home. It's just a tool. It's the heart and understanding of the one who uses it that determines it's effectiveness and direction. Passion, without direction, is pointless. So having the right heart, but not the knowledge and skill is still without any positive effect for you.
A credit card is a tool. What is that tool for? The bank divides credit card users into 2 categories. There are Debtors and Transactors.
Debtors
A debtor is a person who looks at their checking account and sees $500. Then this Debtor looks at their credit card and sees $1,000 available credit. In their lightning fast mind they see $500+$1,000=$1,500. Whoo Hoo! I can spend $1,500 right now! Momma needs a new pair of shoes... Daddy needs that new sports thingy he's been dreaming about... etc... This person can't pay off that card, so they now set in to the LONG task of making payments on that card. Hopefully they're smart enough to realize they must pay A LOT more than the minimum payment if they ever want to see that card paid off, and more than likely it will take them a year or two to pay it off... unfortunately the mindset that had them creating the debt, usually prevents them from seeing clearly how to get out of debt also.
Transactors
A Transactor sees that SAME $500 balance in checking and the SAME $1,000 available credit, but does some different math. They say I have $1,000 on the card and $500 in checking $1,000-$500,... So I have $500 to spend this month. In other words this person doesn't see this as extra money. This person sees that they have $500 and they could either spend that with their credit card, debit card, checks, cash, etc... but they still only have $500 to spend.
A transactor pays off their card, IN FULL EVERY MONTH. They carry no balance over, and pay no interest. They use the card as a tool.
Why use a credit card at all? Here are some reasons:
Protection
FRAUD: Your card is lost, someone uses it, you file a claim and the money is refunded. This takes 7-10 business days many times. It doesn't matter if the fraud was on a Credit Card, Debit Card, or Check... It's going to take a little while to refund. BUT on a credit card it's only tying up your "Available Credit" NOT your "Cash Balance" like fraud on a check or debit card would. Yes you'd get the money back either way, but the credit card makes that wait more comfortable.
Purchase Protections: There are things SOME credit cards offer that debit cards typically don't.
If you rent a car, the credit card may cover the insurance so you don't have to pay extra for that.
If you pay your monthly cell phone bill through the credit card the card may cover the insurance on the phone so you don't have to pay for that.
Certain items you purchase are guaranteed against loss or damage.
Rewards
GET PAID to spend your own money. With credit card rewards you can earn cash back, gift cards, and more for making purchases you were going to make anyway. This way your money is working for you more.
Debit Cards used to offer this, and at most banks they don't anymore. But even when they did the rewards were less than the credit cards rewards were.
Building Credit
You CANNOT build a GREAT credit score without a credit card. You can't. There are idiot bloggers out there saying "You don't need a credit card, just do XYZ..." Here's the thing. You can build SOME credit without a credit card.
You CAN build GOOD/DECENT credit without a credit card. You cannot build GREAT credit without a credit card... more on this in a moment.
Again, despite the bloggers who love to misinform you, paying rent, utilities, insurance, cell phone bills, etc... does NOTHING for your credit. All of that positive info you are building helps with certain public profiles, but it does not help your credit reports or scores at all.
NOT paying them may send you to collections which could ruin your credit, but the positive stuff doesn't help. You must pay on a "Credit Product" or "Trade Line" to build credit. These are Credit Cards, Loans, and Lines of Credit. That's pretty much it. Only these build credit.
FICO is the company that creates the credit score that most banks use to make credit decisions. They are THE credit score. There are others, but non as popular as FICO. At this time (10/08/2012) FICO doesn't look at your job, income, rent, phone bills, etc. They only look at Credit Products, because they only look at your "Credit Reports" which are reports about how you use your "Credit". There are three credit reporting agencies. Experian, TransUnion, and Equifax.
You can and SHOULD obtain a free credit report at least once a year, from EACH of the three credit reporting agencies. Each agency will have a different mix of items reported and therefore you have THREE credit scores by default. Go to www.annualcreditreport.com, or use a free/low cost trail offer of Identity Theft Protection. I prefer the latter because those companies usually tailor the reports to make them easier to read and understand. I also suggest having an on going service with one of these companies because you can keep tabs on your reports that way without affecting your score. Pulling your own score, through any monitors service has NO downside effect on your score.
Here are some reputable credit report/ID Theft Monitoring companies.
Don't know them but they are among the top listed providers
FICO sees your credit score like this:
Payment History (Making payments on credit products)
Amounts Owed on credit products
Length of Credit History ( how long credit products have been open)
New Credit (when was the last time you applied for new credit)(this is where those "Inquiries" or "Hard Hits" affect you.
Types of Credit used (They want to see experience with ALL credit types, including credit cards)
How does a credit card affect you?
Payment History
ANY time a credit product shows that something was due, and you paid at least what was due you get an "OK" stamp for that month. Whether you paid a $25 payment on a $300 card balance, or you had a balance of $1.50 and you paid the whole $1.50, either way you get an "OK" stamp for that month.
Therefore the idea of getting a balance on a credit card and making payments could have some merit... BUT...
"Usage" part of "Amounts Owed"
Usage kills the idea of putting a $300 balance on a $300 limit card and making payments on it.
Usage asks two questions. How much is available on the card? How much are they using?
$300 credit limit (Available Credit)
$300 balance on the card
=100% Usage
Grade F.
FICO actually wants you to use LESS than 30% of your credit limits, less than 10% would be best.
$300 credit limit
$1.50 Balance
= 0.5% Usage
Grade A
To figure out how much of your credit limit you can use and stay in good graces take the credit limit ($300) times 10% (0.10) [or 30% max (0.30)]. On a $300 credit limit you should not use more than $30-$90 during the whole month.
$300 credit limit
$30 balance ($90 balance)
=10% Usage (30% Usage)
Grade A
If you pay the balance in full you will not pay interest. But the card, and credit report, will STILL show your balance as of the statement date so don't use more than 30% tops!
Length of Credit History
The older your credit history and average age of all your credit accounts, the better.
Credit Cards (and some other credit lines) are the only products that stay open forever.
Loans (Mortgages, Student Loans, Auto Loans, Etc) all eventually get paid off, refinanced, or closed/sold). Every time you close a loan it is removed from the average age of your open accounts. Every time you get a new loan it reduces the average age of your accounts.
If you have 3 CC's. One is open 2 years and two are open 5 years. Your average age is 4 years. (2+5+5)/3=4.
Close one of the 5 year old cards (2+5)/2=3.5 and you now have an average age of 3.5 years.
Close the 2 year old card (5+5)/2= 5 and you now have an average age of 5 years.
FICO prefers that you have 1-3 credit cards and no more. Department store cards like dillards, kohls, target and walmart count as credit cards. You should have no more than 3. Closing them may hurt you because of the above math.
Because you don't want to open new cards or close old ones unless you have to, choose 2 great cards, keep them active, used regularly, and open forever. Never close a card unless you must or get a new one unless there is a significantly good reason to do so. If you already have 5 credit cards do more research before closing any.
TYPES of credit used
The more variety of good history you have the more secure your credit looks to be.
Some people with high credit scores are still declined for auto loans because they've had no "loan" experience. Adding a credit card or two can balance out your experience.
BOTTOM LINE, My Advice:
Get 1 or 2 credit cards (NOT 3). Make sure these are cards you can use everywhere (Visa, Master, Discover, Amex logos) NOT a department store card or jewelry store card. These should be cards you can use frequently for small amounts. Walmart/Target may be OK, IF you shop at walmart/target frequently already. Go out ONCE A MONTH and make a RIDICULOUSLY SMALL purchase. Go buy a $1.50 Dr Pepper, a $5 Cheeseburger, or $30 in gas. Put the card in the back of your wallet and don't touch it again. Wait for your statement, PAY IT IN FULL! This way you'll NEVER pay interest on a credit card, you'll NEVER get into credit card debt, and you'll STILL build credit. In fact, because of usage scoring, your credit will be BETTER than the one who put the $300 balance on his card and made min payments for a year.
Do this every month, from here on and into the future. DO NOT put big purchases on your card. DO NOT use more than 30% of your available credit during the course of the month. DO NOT use more than 2 cards (3 if you must, no more). DO NOT EVER carry a balance over (paying less than the total statement balance).
It's not that hard. If you don't have the discipline to make one purchase and pay it off you shouldn't be even talking about credit. You should be building a habit of saving and budgeting first. Until you have a savings started, it's a waste of time to start building your credit. Once you have developed the habit of saving and NOT touching that savings, and you are working some form of a budget, THEN build credit. Don't touch credit until you have that down first.
Live Long and Prosper! Selah... Darrell G. Wolfe
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The Total Money Makeover: A Proven Plan for Financial Fitness By Dave Ramsey
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