Governments are meant to lead by example, regardless of whether they intend to or not. Sometimes they give us examples of what not to do as well as examples of what to do. Wall Street executives also happen to be unwitting role models to people all over the world. Still, mistakes can be made at any level, especially when irresponsible spending and irresponsible lending are involved. If you want to keep your credit in tip-top shape, it is vital that you pay attention to these three credit lessons which have been learned by banks, home buyers, mortgage lenders, and our national government.
Lesson Number One
Credit is not a license for you to spend. Just because you have a ton of available credit does not mean that you should run right out and try to spend it all. Lenders are trying to sell loans, not necessarily to take your best interest at heart, which is something that many homebuyers have noticed in the past few years. You need to take personal responsibility for your level of spending; keeping records every month of every expense in order to see where your money is really going. You must be willing to take a good hard look at the items you want and how they compare to what you really need before you decide if you can afford to accept and to use the credit that is being offered to you by a credit card company or lender.
Lesson Number Two
Living beyond your means is a really bad idea. Many people criticize the subprime home buyers who were taken by the credit crunch and mortgage crisis. Our nation, unfortunately, has a culture of spend now and pay later, unfortunately, it is not always possible, let alone easy for many of these consumers to pay later for the things that they have already purchased. Situations like these rely heavily on foresight and honesty. It is important that you look ahead before you ever commit to making a purchase of big-ticket items on credit. Do you know what your financial situation is going to be like in five years or ten? Be brutally honest with yourself. It may seem easy to spend now and pay in the future, but it could hurt more than harm.
Lesson Number Three
If you ignore your credit, you will lose it. Your credit is your financial credibility, but if you batter your credit score by taking on too much debt, you will lose your ability to use credit when you actually need it. Credit can be tricky for you to manage, but it is absolutely worth it in the end. There is no billion-dollar bailout for the average American cardholder, so if you dig yourself into a hole of debt, you will not have many choices to rectify the situation.