A sound credit score is critical to travel the path leading to financial security. That was the message business owner Charmaine Thomas revealed to the crowd attending Dr. Carolyn Carey’s Youth Financial Summit at Greater Shiloh Baptist Church.
What are the essential criteria of a credit score? Thomas said payment history, the amount owed, and new credit play a significant role in an individual’s credit score. Paying the statement balance of a credit card is a step toward financial independence.
Thomas, a former student of Carey’s in the Southampton County School Division, is the owner of Thomas Unlimited Services, One Step to Financial Freedom, a Covington, Georgia business serving clients throughout the U.S.
Thomas stressed the importance of having good credit and needed steps to repair low credit ratings.
A poor credit rating can be devastating to one attempting to make ends meet. Thomas said a low credit rating would lead to higher interest rates. More importantly, it negatively impacts one’s ability to purchase a home, find a place to rent, or even find a job. A severe credit mishap can take a person as many as 10 to 15 years to recover from and build a good credit score.
A foreclosure on one’s home not only brings one a severe loss in equity but it also negatively impacts a credit score for years. Tax liens and judgments against one failing to pay taxes or money owed can lead to property seizure. It can stay on a credit report for 15 years, even after the debt is paid.
Thomas has advice for those in a position that will not allow them to pay a full bill. The best step is to contact the creditor or creditors and explain the situation. They might be able to get on a more affordable payment plan. At worst, the creditors will let one know what they can and cannot allow.
If a creditor determines they will not recover the debt, they are likely to write it off as a loss. When that happens, a credit score takes an extremely negative hit. A later attempt to make a significant purchase will either be denied or come with a high-interest rate.
If you are currently suffering from the impact of a low credit score, steps to improve the standing are there in front of you.
The first step is to pay on time and be responsible. Credit scores become more and more forgiving as negative information ages. As long as the credit behavior remains positive, the credit score will increase. The steps on the path to financial freedom become more accessible as the credit score grows.