Cindy Garrard Column


Good Credit Is Chic!

By Cindy Garrard

What could be more fabulous than the confidence that comes with having all your ducks in a row? When people think of confidence, they might not think of financial stability—well, they should.

I was having lunch with a successful friend. She’s beautiful, fun, self-made, and in love. She told me one of the reasons why this gentleman wants to marry her is because she does not care about his money—she has her own. How do you take care of yourself financially? You can budget and, just as important, you can manage your credit. Having great credit allows you to access the lower rates on car loans, mortgage loans, etc. This can save you a lot in interest payments throughout your life, which creates stability. What better way to care for yourself than to save yourself money?

I have been a mortgage banker for seventeen years, and a higher credit score makes all the difference in what your loan interest rate will cost you. Three major credit bureaus manage your credit score: Experian, Transunion, and Equifax. Credit scores range from 300 to 850. This is really a risk scale based on the likelihood of whether you will pay back the lender. These scores are used for almost all types of loans—credit cards, car loans, mortgages, business loans, and more. The “secret” to getting a better credit score, basically, is not to max out the credit limit to which you have access.

For example, if you have a credit card with a $25,000 credit limit, you should always try to stay within 60 percent of that balance. You should not keep a balance of more than about $15,000.

If you feel like you will get close to your credit limit often, you can request an increase in the limit or open another card to offset getting close to your balance. You must be careful, though, because having access to a bunch of different credit limits is really for those with the ability to manage their monies well.

Some people think it’s best to pay cash and not have any credit, but a lack of credit can also hurt your credit score. This might seem counterintuitive, but your credit score is based on your ability to manage credit. If you don’t have credit, how can you manage it?

The “secret” to getting a better credit score, basically, is not to max out the credit limit to which you have access.

One way to establish credit is to open a credit card. There are several options; you can choose ones with no fees, ones that earn you points or frequent flyer miles—the possibilities are pretty vast. What’s for certain is that it’s better to have credit than not to have credit, so long as it’s used wisely.

When my husband and I were dating, he mentioned his credit had been stolen when he was in college. It had been over five years since it happened, but I was unenthusiastic about getting serious with someone who had bad credit. I know how important credit scores are when it comes to borrowing monies. He applied for a loan so I could see his credit report and, surprisingly, his credit score was higher than mine. To this day, anytime we borrow money we always compare the scores, and his is always higher. He always says, “The king reigns.” (We find humor in this as we are both in the financial industry.)

Here is an example of how having good credit can save you thousands of dollars in the long run:

Say you’re applying for a mortgage loan of $500,000, and your credit score is 740. Your loan interest rate will likely be around 3.75 percent, making your payment $2,316 per month.

Now, if you’re applying for a mortgage loan of $500,000 with a credit score of 660, that interest rate will be higher, around 4.5 percent. This makes your monthly payment $2,533.

With a better credit score, you earn a savings of $217 per month.

Still not convinced that credit is important? Think of it this way: with those monthly savings, you could buy a high-end designer bag in just about two years. That, my friends, is motivation enough for me!

Take care of yourself and your money by working hard and being credit chic.

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Cindy Garrard works as a freelance journalist and is the vice president of residential lending at Hancock Whitney Bank in Santa Rosa Beach, Florida. She holds a bachelor’s degree in public relations and enjoys sharing her life stories and successes with others. Garrard lives in Sandestin, Florida, with her two daughters, her husband, and their dog, Bella Bear.

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