Understanding How Credit Works…The Road to Financial Freedom

understanding credit on kimberlyinese.com

This is going to be a super transparent post guys.  So I grew up in my household as an only child.  My mother was and still is one of those people that balances a checkbook!  Like back in the day I had the whole money-credit cards are bad-don’t spend it before you get it “talk.”  My mother is literally the Queen of financial management as far as I’m concerned, but as her super rebellious-free spirit-daughter I did NOT get that trait.

Like I’ve tried yall.  When I decided to leave undergrad after my first semester and work two retail jobs I was supposed to balance my checkbook.  Like all the time.  Like she really taught me all these financial lessons right.  Put some in savings, pay your tithe, pay yourself.  Like I purchased my first home at twenty-three with a two-year-old on my hip.  I thought I was big timing making $11.00 an hour, living the big life…

You can see where this train wreck is headed right?  The company I was working for was unstable, I lost my job and my house within six months.  So now, I’m 24, with a 3-year-old and a baby on the way with a foreclosure on my credit.  We’d been living off credit cards, blessings of others and prayer.  During my pregnancy with my daughter, I consolidated all my credit card debt (mostly to retail stores for furniture and clothes).  I worked part-time, honestly making enough to put gas in my little car and to splurge on baby stuff (cause clearly I was back at home with my parents).

So I found myself digging myself out of a financial money trap.  I was back to balancing my checkbook, doing everything I could to survive with this foreclosure on my credit report.  Shortly after my daughter’s first birthday I felt real grown and needed my own space.  I was back working full time, I’d just gotten a promotion to Store Manager of a local Hollywood Video (cue the grim music child).  I was making it!  Living my best life and I packed my cute little single mama self up and moved out (again).

Then Hollywood Closed.  But I went to Blockbuster.  And Blockbuster closed.  Then I went to Victoria’s Secret…..and was terminated.

Alright so some years have passed, I’m making 40k a year working at VS.  Two kids in a private school.  Living life on a level I’ve never lived it before man.  Like for real.  I’d finished undergrad at this point, with two kids and a full-time job.  I AM my own inspiration.  And during a loss prevention raid, 80 percent of my staff is fired and so am I.  What I did not know at this point was that the next  7 years of my life would lead to today’s blog post.

Over the course of the following twelve months I stayed in my apartment, the kids went back to public school and my mother (the financially smart one) floats us.  I discover I’m pretty good at baking and can make money selling desserts.  I take classes, start a business, get an LLC, then I went to culinary school.  One month into culinary school we were “evicted.”  Not really.  But did you know if you break your lease and pay them late at the same time they can report you to the credit bureau as an eviction?!?

Foreclosure, eviction, 2 kids, single-mom, on government assistance, without their own home.  So back home we go.  I finish school, I work my business full time, and then my daughter is diagnosed with Narcolepsy.  (Seriously).  After moving out again, getting married, pulling my kids from school to homeschool them and going full time as an entrepreneur, I very quickly learned all kinds of ways to SAVE money.

And now it’s time to grow money!

I took a free webinar from the Budgetnista recently and it blew my mind.  Here are a few key takeaways but nowhere near the full content:

Understanding Credit

10% are inquires: Store Cards are bad (remember earlier I discussed all my store accounts).  These inquires (approved or not) can reduce your score 8-30 pts.

10% are type of debt: You need a variety of debt (at least 3 kinds).  Student loans, mortage or rent, car loans, credit cards, etc.

15% is length of credit: Now this is big.  Remember earlier I consolidated all my credit?  I also closed all those accounts!  The length of your credit history is an AVERAGE of the number of years all of your accounts have been open.  The newer your credit, the lower the average.  For example: If I had a Sears card for 12 years, student loans for 5 and just got a car loan that is 12+5+1=18/2=9 years. 

Now, this is when I perked up and knew it was time to do some stuff differently:

30% is amount owed: How much of the balance are you using?  Credit tip: 30% is the max! That means if you have a $100.00 limit no more then $30.00 should be in use. #mindblowing

35% is your payment history: Now this works more like your GPA.  It’s looking at your overall payment history not just recent history.  

If you’re like me I was looking for ways to start applying a new financial plan!  I’ll describe it detail in the post It’s time to get serious about money.

For now, please go check out The Budgetnista!  She’s a rock star and well worth your time!

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