Recently I was doing my typical research and applying for a mortgage just to test out the process. I don’t use personal credit so my score is very low; in fact some lenders want to assign me a score. My wife’s is similar but for some unknown reason her score is significantly higher, even though we have the same buying habits, we don’t use credit. To make my point about the use of credit cards or personal credit and how people are encouraged to rely on it, the mortgage broker looked at my credit file and then my wife’s and suggested that my wife apply for the mortgage instead since her score was higher. I asked how that made sense since she had no employment income or any other source of income and since I earned all the money for our household. He actually could not answer me, except to say her score was higher.
So this is where we are, because you have good credit, you’re eligible for more debt. And because you want to maintain good credit, you at least make your monthly minimum payments timely. This of course leads to what, more credit. The cycle continues until one day the truth of compound interest punches you in the face. This is not a problem if the debt you incur is paying you. For example, if the thing you purchased with the debt is paying you enough money to pay the debt each month and leave you something extra. For most people, it’s the opposite. They are paying the debt with their labor, time, and with a limited source of income. The more debt they acquire in this example, the more income they need from an outside source. This has a ceiling as we all know.
It is so important to understand the difference between the personal liability you have with your personal credit file and the absence of liability you have with a properly organized business. Many of you have a great credit score, many of you actually pay money to receive regular reports of your score and in fact, many of you are actually proud of your credit score. Your credit score is attached to everything you own, your identity, even your self esteem. If you have a problem in one aspect of your life, it carries over to other aspects just because of the credit file. For example, your insurance rates might be higher because of a few late credit card payments last year. If you are late on a payment for example, something known as “universal default” allows all of your creditors to see the late payment and raise your interest rates. Because of your use and reliance on personal credit, you open the door for the entire world to learn about your financial situation. Your credit file is easily accessible to merchants, the government and even private investigators. If you have collection problems, those can result in the publishing of your financial situation in the public records. Your personal credit history is a leash; it is your ball and chain, it is your parents telling you how you should behave. You cannot walk away from your personal credit file; it will follow you for life.
If you are serious about acquiring wealth and improving the quality of life for your family and yourself, you must understand the benefits of not accepting personal liability for your efforts to invest and improve your financial situation. I am talking about the difference between personal credit and business credit. I am talking about the difference between high school and a college graduate program. I am talking about wise and intelligent planning and deliberate effort to increase your net worth and refusing to accept the personal liability for it. Why would you stand on train tracks with your eyes closed just because everyone else appears to be doing the same?
You would not of course and you might be surprised to discover that those who you think are standing on the train tracks may actually not. Why not join this exclusive membership of people who figured out these secrets for themselves?
It’s time to break the expensive and self-defeating habit of relying on your personal credit and graduate to a bigger world of financial statements, business credit and business thinking. It’s time to dump those ideas you just accepted at face value because someone put a credit card in your mailbox before you even understood what the abbreviation “FICO” stood for. It is time to move on to using tools that can truly serve your best interests in a way that sets you free from those who would benefit by retaining control over you.
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