Kudos and Credit

This past weekend Seneca Falls brought back Canal Fest.  Kudos to those that organized the event!  So many vendors and things to do and see!  Nothing says America more than these small festivals where community members have a chance to bask in the sunlight, perhaps reminiscing or renewing acquaintances, and simply enjoying one’s town.  I confess that I often do a little complaining before going, as I, like many others, want a little downtime – maybe just hanging out near – but not in – the pool.  In the end though, I am thankful that I went.

Menzo Case
Menzo Case

On my way to camp out near our Headquarters to watch the Saturday night fireworks, a customer stopped me.  He mentioned that his mother was considering the purchase of the home next to his.  His concern was that she was not going to be approved for a mortgage because her credit is less than stellar.  I hear this concern expressed more often than I have in the past.  Many are finding it difficult these days to make ends meet.  Generally, credit scores are affected by the number of inquiries, past due and collection items and the actual credit obtained.

With respect to inquiries, I suggest fewer.  Before making the decision to request credit, have you developed a written budget?  Many do not.  In cases that I handle directly, I have several standard items that need to be provided.  One of them is a written budget.  My family has lived with a written budget for more years than I can remember.  Once a budget is developed, compare your actual spending to your budget.  It’ll probably be a surprise how much is being spent on nothing!  The stories I could tell about how family’s lives were changed simply by adopting a budget…Bottom line, consider talking to your bank about your budget.  If they won’t, I will.  It’s that important.

Canal Fest Boats
Boats lined up along the Canal downtown Seneca Falls. Photo credit: Haidee Oropallo

Past due and collection items are typically for less than $500 each and are past due medical, cell phone, cable and utility bills.  It’s surprising how fast these can add up!  In my discussions with customers, I suggest working out a payment plan for each item in arrears.  Be faithful on making all agreed upon payments – no matter how small the payment may be.  Any extra money found is paid against the smallest balance due first.  Then, when the smallest balance is paid in full, add that payment to the payment made on the next smallest item.  Repeat that cycle until all past due amounts are paid in full.  Because this process usually takes some time to complete, you’ll find that spending habits will change along the way.  Each time one of these past due items is cleared, your credit score should improve.

My wife and I bought a van sometime after 1993.  I was working for the bank in the town where I was born – a rare opportunity these days – applied for a loan with them, and was surprised to hear that my personal credit score was rather low.  The reason?  I had an incredible number of credit cards (about 40).  Hold on now – there’s a reason.  While I was at college and when I first started work, we were a bit thin on the money.  Plus, we didn’t have a written budget.  Needless to say, we dug into a debt hole that was difficult to overcome.  Then, we developed a written budget and began applying the repayment system I previously described.  But, I added a twist.  Credit cards offered free balance transfers with 0% interest for six to twelve months.  By the time the debt was repaid, we had all those cards with no balances.  I cut the cards up as we paid them, but I never closed them. I learned the hard way that excess credit can adversely affect credit.  The moral of the story – don’t get credit just because you can.  Use it judiciously and avoid it whenever you can!  Advice you will rarely hear from most of today’s bankers.

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