Having good credit can be beneficial in many ways, and when used correctly it can be an important tool to help pay for college, a new vehicle, furniture or a home.
According to Cory Carmichael, 56th Force Support Squadron Airman and Family Readiness Center community readiness specialist, credit is what permits one to borrow money in order to make purchases with the promise of repayment at a later time, usually with interest.
While it may be essential to have credit, it is even more important to have good credit.
“Good credit will almost always help you get lower interest rates for loans and credit cards, as well as large purchases like a car or home,” Carmichael said. “Many insurance companies use credit based insurance scores to determine policy premiums.”
For Maria Johnson, Credit Union West senior member service officer, credit is not only a score, but it’s one’s financial report card.
“Your credit score provides a lender a snapshot of where you stand,” she said. “This helps them determine how much they are willing to lend and at what interest rate. Additionally, credit allows individuals to save money, enjoy peace of mind, have negotiating power, avoid costly deposits, enjoy instant loan approvals and reach retirement goals faster.”
As good credit provides many benefits, having bad credit can have the opposite effect, leaving one paying higher interest rates.
“Those who don’t keep their promise to pay the creditors on time are a higher risk to default and will end up paying more for the privilege of using credit,” Carmichael said.
Having a poor credit history can also affect other important aspects of a person’s life, said Johnson.
“If you currently have a poor credit history you may lose a great job offer or even your base security clearance,” she said. “You may have trouble renting an apartment, getting a cell phone, and you may be denied auto or homeowners insurance or be charged a higher insurance premium.”
For those who want to build or rebuild their credit, Johnson recommends taking out a credit builder loan (signature loan) or a personal assistance loan.
“A credit builder loan is a short-term installment loan. It’s for those with no credit history or trying to rebuild credit,” Johnson said. “There is also a personal assistance loan, which is an unsecured fixed-rate, open-end loan. Both of these loan options report directly to the credit bureau.”
Carmichael recommends simply paying bills on time.
“The secret to having a great credit score is no longer a secret,” Carmichael said. “Pay all bills on time, and never skip a payment. Keep credit card balances low, or pay them in full and never exceed established credit limits.”
For more information about credit or other financial needs, the Luke Air Force Base A&FRC has resources available.
“We have trained financial counselors, publications, guides, classes and other resources to answer all your financial questions,” Carmichael said. “The A&FRC also provides one-on-one appointments to pull and evaluate credit reports and scores. Everyone is encouraged to order their free credit report online at www.annualcreditreport.com. Take the steps now to improve your financial fitness.”