Fact: Having good credit will not only enhance your life but will allow you to live the life that you want.
Let’s stop and think about that for a moment. Having good credit will not only enhance your life, but allow you to live the life that you want. That’s a pretty bold statement to make, but it’s true. A poor credit score can hold you back in life in numerous ways.
Some time ago I was talking to a single mother of two, Sally, who went to church with my family. She had poor credit, and as a result, felt as if she was being excluded from what life had to offer her.
Now, Sally’s poor credit wasn’t entirely her fault. There were some factors out of her control that contributed to her low credit score, primarily the fact that the father of her children wasn’t in the picture, therefore she was lacking any financial help raising her two boys.
As a result of her poor credit score, Sally was unable to secure housing in her preferred neighbourhood. A neighbourhood where there was a good school that offered an abundance of after school programs, and where her boys could receive help from their teachers as and when they needed it.
With a poor credit score, this neighbourhood was out of Sally’s reach. Her boys were prevented from attending a better school, and the local grocery store was much further away from her home. The additional travel expenses required to reach the grocery store added to the cost of already expensive healthy produce. Working long hours, it was easier for Sally to simply buy fast food for her boys on the way home rather than make another trip to purchase expensive groceries to cook good, nutritious meals.
She came to me and asked, “Bill, what can I do?”.
I knew that much of Sally’s situation could have changed if she simply had a better credit score. But I didn’t give her a five point plan. I didn’t give her three keys to success. I simply presented her with one change to make. Just one.
Her current payment strategy was to spread her money across all her credit cards, trying to make a dent on each one by paying more than the minimum payment, then putting some of her monthly usage money in her bank account. I asked if, instead, she would put all her extra payments towards one credit card. That’s it. One change.
This is the concept of Maximum Use.
Maximum use is when, after you make your minimum payments on all your cards, you put any excess money on ONE credit card only and work on paying down the debt. That card now becomes your spending resource. By using one card that is accepted everywhere, you maximize your spending potential. The card issuer sees you using the card and paying it off regularly, and will eventually become more comfortable with you as a borrower. These positive repayment habits are reported to the credit agencies and are reflected in your credit score.
The key to this concept is you must pay off whatever you spent on the card as soon as your next pay cheque hits your account.
By placing every purchase on one card, you can easily review your spending patterns and habits to ensure you aren’t wasting money frivolously. In addition, I recommended Sally move away from credit cards as soon as possible and instead use a secured card, or charge card type products rather than credit cards to break the debt cycle she was stuck in.
Tip: Discipline yourself to carry a notepad, or have a spreadsheet, or use an app on your phone where you make a note of each and every purchase you make. Not only will it become a burden to spend money as you have to write it down, but you also see your expenditures right in front of you and it will make you question whether you really need to spend that money.
What I said to Sally was, there’s no magic when it comes to building your credit score. No quick fix. Just some good advice and some hard work. She has since become a member of our Score Mastercard community and is working diligently on building her credit score to give herself, and her boys, the life they deserve.
The concept of Maximum Use is covered in more detail in Rev. Dr. K Bill Dost’s book “Raise Yourself From Debt to Wealth: Eliminate Debt, Improve Wealth, Build Credit” available for purchase on Amazon.ca
