This is a post by our finance manager Drew Pellegrini. He wants you to know how important credit is, and how you can build it:
Working in a collection department, all the time I hear people say, “ I’m not worried about my credit” or “my credit is already bad, why bother paying on time?”
Nowadays, taking care to monitor and actively improve your credit is more important than ever. When trying to finance an item, banks and financial institutions will check credit and use that to determine the likelihood a customer will repay the loan. Then based on their findings (credit score) the bank will adjust interest rates, down payments, and approvals all based on a customers credit record. When they review a credit history that has many late pays and/or no pays, the bank will almost always increase the interest rate. An increased interest rate will drastically increase the amount of money it takes to repay a loan. This extra cost becomes extra payments at the end of the loan or an increase in the payment amount. Basically the worse the credit, the more expensive things are. Bad credit = Spend more.
No one knows what the future holds. Approval on a new car, a new home, an apartment, or a credit card will likely be effected by credit. The late payment today may not seem like much now, but when the time comes for the next purchase, it could really matter.
Establishing credit when first starting out is easier than you might think. Many larger credit card companies will not approve someone with zero credit, but typically department stores will still offer them. Banks will offer secure credit cards to these customers. Once approved, it is critical to not spend more than you can afford. Make small purchases and pay them off at the end of the statement period, every month! By doing this a person with no credit will quickly become a person with good credit, and will now have many more inexpensive financing options available.
It’s never too late to improve your credit. Bad credit can become good credit quite quickly. Many of my customers start with poor credit and cannot purchase the new vehicle that they may really want. But once they have established a good pay history with us (we report to all three major credit bureaus), many of my customers go on to trade their car into a new car dealership. I have so many customers that come to me, in their brand new car, and thank me for giving them the opportunity to change their credit history around.
Checking your credit is essential to understanding how you can improve it. Luckily the three major credit bureaus allow you to get your credit report for free once a year. The process is simple, typically just mailing a request to the bureaus. Check on their websites for all the information you need.
It all starts now. Think about what you want out of life, whether it be a new car, a new home or just a credit card with a decent rate to go shopping with, everything is effected by your credit. Pay on time and make smart decisions and anyone can move up!