It is believed that we are undoubtedly living in the “Year of the Woman” – with more and more who are shattering glass ceilings across every industry imaginable. From C-suite positions to newly elected congress appointments and everything in between. However, no matter where you find yourself on the pendulum, we want to ensure that women everywhere are becoming credit educated and making the wisest decisions when it comes building credit and maintaining great credit without the overwhelm of stress. We recently caught up with Constance Carter, CEO of Catalyst Real State in Stockton, CA, the largest African American Owned real estate firm in Northern California. Constance shares some insightful credit and wealth investment education strategies:
MONITORING: One of the biggest factors that affect most Americans is errors on credit. The fact is, nearly half of all Americans do not monitor their credit. It’s even worse for African Americans as 66% of us do not monitor and 3/4th of us have subprime credit. The biggest reason for us not monitoring is FEAR! We’ve made mistakes in the past that we don’t want to face. Not understanding the statue of limitations of credit reporting and debt collection keeps people paralyzed and they do nothing. Identity theft and erroneous reporting is a huge factor of subprime credit as 1 in 5 Americans are plagued with errors that can easily be removed. Monitor your credit like you monitor your bank account. Dispute errors and you will see your scores rise.
EDUCATING: Black women being the most educated group in America unfortunately doesn’t translate when it comes to credit. On average, our credit score is 621 which considered subprime or in the poor/fair range. Therefore, educating yourself on credit is extremely important, so you can educate your family. Historically, one of the things we are often not taught in our homes is on finances and credit. Largely because our parents weren’t equipped with the education and information. Learn as much as you can about credit. It’s not as scary as you may think—in fact, it’s quite simple. Once you understand all about it, it can be addictive. There are several short books you can read. Keeping Score is a book that can be read in about an hour. It takes the intimidation out of credit and breaks it down in the simplest form. Some who have read the book have increased their score hundreds of points. But don’t keep the information to yourself, train your children, your husband, and your friends. When you educate your family, you change the trajectory of their lives.
STRATEGIZING: Use OPC (Other Peoples Credit) to build instantly. According to the Federal Reserve Report on the Economic Well-Being of U.S. Households 47% of African Americans were less likely to have access to credit cards and only 20.8% were confident that they would even be approved. If you fit in one of these categories, getting added on as an authorized user will jumpstart your score. It can potentially increase your score hundreds of points and is one of the quickest ways you can establish credit. Ask someone you trust (parent, spouse, or a friend) to be added on their credit card as an authorized user. This can also hurt your score so make sure the credit card has 3 things going for them 1) low balance 2) zero late payments 3) lengthy credit history of at least 2 years. Once you are added on as an authorized user, your approval odds become higher and you can begin applying for credit that will help your score. My daughter is 18 with an 815 credit score because I added her on my low balance, lengthy credit cards.
BALANCING: Don’t be afraid of credit cards! Credit cards have gotten people in a lot of trouble but they are necessary to achieve optimum credit results as credit cards are 30% of your credit score. No! Don’t cut them up. No! Don’t max them out! No! Don’t stop using them. In fact, use them lightly, keep the balance 30% no higher than 50%. Keep them active. Pay them down, not necessarily to zero as that may also drop your score. In other words, use them, but don’t abuse them.
SAVING: Having good credit can save you tens of thousands of dollars per year. The higher your credit score, the lower the interest rates on homes, cars, personal loans, and credit cards. It can be the difference of qualifying for a bigger home in a nicer neighborhood or a better car.
LEVERAGING: Building your credit can build your wealth. The secrets of the wealthy investor are that they use OPM (other people’s money) to make investments. They don’t use their own. It’s called leverage. In order to use leverage, you must have good credit. I don’t care if you have a million dollars in the bank, you do not want to use all your own capital when making investments. Using OPM will allow your capital to go much further.
INVESTING: You can diversify your portfolio. You can open yourself up to investment opportunities that you may not have had with subprime credit. The biggest difference between African American and many Caucasian households is that we are afraid to invest. That’s why our net worth is on the decline. If we can learn to begin to understand how to use our credit as leverage for investment opportunities; we will see a change in the wealth gap which will in turn affect the stability of our communities. Therefore, we won’t be so affected by issues like gentrification. Credit is not just about paying your bills on time, but it’s what you do with your credit that can create unlimited options for wealth building.