On October 8th, 2013, I published my first list of clues that you might be a financial zombie. I will be addressing each of those clues (11) individually plus any others posted during the month, with the goal of counteracting the financial infection.
Let’s admit it. There’s no reasoning with zombies. Likewise, we often have difficulty making heads or tails of the actions of Financial Zombies.
I’ve seen Financial Zombies apply for credit card after credit card in an effort to build credit, then be, um, what’s a good word… dumbfounded that their applications are denied because they don’t have good credit. I see the dismay in their faces, “How are we supposed to build credit if we have to have good credit first?”
To begin with, good credit is a means or a tool, not an end in and of itself, and zombies are not generally good with tools. All they see is the end. If a Financial Zombie has mistakenly taken credit to be a goal rather than a tool, it’s no wonder they’re befuddled.
The end or purpose of good credit is to qualify for the best possible loan rates for a home purchase (I would prefer we didn’t borrow for cars and other depreciating assets). With that as the purpose, we need to approach the building of credit with better planning (again, not a common zombie personality trait).
Here are a few ideas that can, if implemented, have a positive influence on our credit rating. These are generally in order of easiest and cheapest to more involved and those that include fees and interest.
- Ask our utility companies and cell phone company (if we’re on a contracted service plan) to report our history of on-time payments to the credit bureaus. They can do this as a service to us, so we should be polite and nice in our request.
- Particularly for young adults, consider asking a parent or relative with good credit to add you to their credit card account as an authorized user. For a good explanation of the impact of such an account on our credit, check out Experian’s blog post on the subject.
- When applying for a line of credit, consider beginning with a tire and brake store. Many have internal financing that is much easier to qualify for than major cards. I usually suggest that you save up your money for the tires or brake service ahead of time, open the account, then consider paying it off quickly (even with the first bill) if not immediately to avoid their high interest charges. Granted, you won’t have a long history of monthly payments, but having an open account in good standing with $0 balance is typically a positive step. Just be aware that some tire stores use national banks for their financing, which is the equivalent of applying for a major credit card.
- Another type of credit that is fairly easy to qualify for is store or retail credit. Retail stores (large department stores, clothing stores) and gas station cards that have their own financing (not a Visa, MasterCard, American Express or Discover) typically have lower requirements for their qualifications. However, they do also typically come with some pretty high interest rates.
- Look around for a secured credit card. Here’s a good explanation at Bankrate.com about secured cards. Just be aware of their fees, and get it in writing that they will actually report your credit usage to the major credit bureaus.
- Research a credit builder loan at a local credit union or bank. They come with fees, and typically you don’t get the money until AFTER you’ve paid off the loan (usually about 12 months), but they can help you build a history of on-time payments.
If you’ve been a Financial Zombie with your credit, consider giving these suggestions a try (though no more than 2 a year). You might even be able to bring your credit back from the undead!
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Have a great day!