Today, we’re going to take a moment to help you understand the importance of credit and the opportunities that you’re shutting yourself out of in the event that you don’t have a good credit history.
Real Estate and credit are not exclusive to each other. They are intertwined and the two together are going to help you grow and achieve that financial independence that you’re looking to get.
Why is credit so important? Because it allows you to get access to a good home. We all need a place to feel safe, to sleep and wake up the next day and just simply go on about our lives.
What are some of the things that landlords typically request from us in order to rent? They ask for your W2, they get references, and ultimately, it all goes down to doing a credit check.
Landlords need you to have good credit, which is usually in the range of 720 or above. That just gives you a sense of how important your credit is and it all starts with you. As you can see, the foundation of everything you do, just to get access to a nice home, starts with this first step: your credit.
The second thing your credit affects is insurance. Something as simple as getting a good rate in your car insurance can be impacted by your credit history. When you buy car insurance, the quotes that you get are based on your age and also based on your credit. If your credit is not the best out there, you’re going to get the highest rate in the market.
Credit: Interest Rates
The next item impacted by your credit is interest rates. What do you think is the difference between someone who can pay off their credit card debt really fast and someone who could take forever to pay it off? Interest rates! The higher your interest rates, the harder it is for you to pay off your debt.
If you don’t have a good credit, that means you’re going to qualify for the worst credit cards out there, the ones that are going to charge you the most interest. We’re talking about 24% and up. Some of them even go up to 27.99%.
You have to use your credit cards intelligently so you can build up a good credit rapport, a good credit score, a good credit history, so you can qualify for the best rates. Because that credit is what is going to help you continue to grow financially going forward.
If you have a really good credit you can move up the ladder as well. That means you will get access to better job opportunities. When you’re getting started, what big companies care about is that you don’t have a criminal record. They do the background check, they check on your references from your other employers just to see that you truly worked there a certain amount of time.
But as you move up the ladder, the candidate selection process won’t simply end with the interview process. At this point, a new factor comes into play: credit. Let’s say you go ahead and you apply for a job. You went through all the interview process, things went great, you got an offer, and all of sudden, you find out you didn’t get the job because you failed the background check.
I’ve seen instances of people not getting a job because their credit did not meet a company’s criteria of a good credit. You definitely do not want to let bad credit get in the way of you getting a good job. Remember, the better the job, the better the salary, and that translates to a better lifestyle.
Credit can help you achieve financial independence
Credit card is a form of debt. Remember there is good debt and there is bad debt. Bad debt is when you use the money of your credit card to spend it on things that don’t go up in value or that they’re not generating any cash flow, like champagne or Gucci shoes.
But if you’re using a credit card to fund a business, or if you’re using your credit card to buy real estate, now you have good debt, and you’re generating cash flow. You’re using other people’s money, the concept of OPM to invest in your business, because a credit card is other people’s money, it’s the bank’s money.
If you are ready to be an entrepreneur, you need to find a way to fund your business, and credit can help you make it happen.
To further ellaborate on the importance of credit for the future of your business, what do you think it’s needed when you want to expand your business? You need capital. You need money. If you have access to a strong credit, you can apply for SBA loans or any type of private funding available out there. But remember, your credit needs to be strong in order to be able to tap into those financing programs.
When your business is starting, you become the face of your business. And because of that, you need a strong credit to prove you are creditworthy as an individual and that you can conduct business responsibly and intelligently. That’s how you are given the opportunity to build business credit. It all starts with you.
Once you master this, your financial growth could have no limits, all you have to do is handle your money and your investments responsibly.
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