There’s a lot of talk these days about credit scores and the need to get and keep good credit. I have noticed that many people are uncertain of how to obtain accurate credit ratings for themselves and how to repair or improve their credit ratings. There seems to be a lot of mystery involved with this. Here is some information I obtained from some of the lenders I work with that might help demystify this process.
When our children were young my wife would take them down to the local hardware store just before Christmas to help them shop for a little gift for each family member. This was a big event for the kids. With their mother's help they would each purchase some small item, wrap it when they returned home, and put it under the Christmas tree. For the kids this was high drama and they would get so excited because they had the chance to think and plan and then make what was for them a really big purchase. My son Doug was about 5 years old at the time that he bought me a little plastic tool about the size of a matchbook. It had a small razor blade that slid out so you could open parcels or cut string. He was so excited and would chatter on about his carefully wrapped gift, never telling me what it was, but he would always warn, "Be careful, Daddy." It was his way of telling me that I would have to be very careful when I opened it up. That was good advice.
I am not a financial guru but I have always thought it wise to be careful when borrowing money for important things like homes, automobiles and education. I also thought it was a good idea for lending institutions to lend money when people had a job, credit and some cash on hand for equity. Clearly borrowers and lenders strayed off this tried and true path over the last few years and decided to take a walk on the wild side. We are now paying the price for those decisions. Bad debt is a huge issue in today's world.
Debt carefully managed can help build wealth for the future. The cost of living in today's world requires a certain amount of debt. I believe there is good debt and bad debt. My personal opinion is that good debt falls into three categories – home loans, auto loans and education loans. Anything else should be very carefully examined to ensure the loan is wise. I have found few if any loans in the "other" category that are wise. Even good debt can fall into the unwise category very quickly if you buy too much home, purchase a vehicle too expensive for your budget, or pile up an excessive amount of student debt. I know many people who live in homes that comfortably fit their income, who don't drive the latest and greatest but still get around quite fine. I also know lots of people who have graduated university with very little debt. Some have even managed to graduate with no debt. And these are people who did not have someone else pay for their education.
When our clients are considering a home purchase we refer them to lenders who provide good information about loan options and programs that work best for them. We trust these lenders to provide counsel and advice that will help our clients make wise decisions. Since a home loan is most likely the largest debt you will ever incur in your life, you want to make sure you do your homework and choose a loan that best suits your circumstances. Anyway, the short version is; be very careful before you get into debt. If interest is going to be your companion 24/7, make sure you are in control. Remember Dougie's advice – Be careful!
Thanks for helping me better serve our Real Estate Community.
We hear a lot in the news these days about the housing crisis and what government and financial institutions are doing to handle these challenges. The nice thing about home ownership is that we get to live in our homes and as long as we are current in our mortgages these problems really have little impact on us. However if a homeowner begins to fall behind in their loan payments there are some steps that need to be taken quickly. I was thinking that if that happened to me or someone I knew, I would want to know what to do and how to reach out for help. With that in mind here are some steps that could be taken.