My parents engaged my sister in business, specifically, real estate, since we were about eight years old. I remember sitting in real estate meetings with my parents, real estate brokers, mortgage brokers, and bankers each time they purchased a house.
At that age, of course, I didn’t know all the stuff my parents and the brokers were talking about in the purchases of their houses; but, I did hear their catch-phrases repeatedly stated at every house purchase they made: location, location, location, don’t owe anyone — buy in cash — if you don’t have cash, don’t buy it (yes, my parents purchased most of their properties in cash until they learned about asset management and leverage — my parents were immigrants to America, and they always purchased their homes, cars, clothes, groceries, and everything in cash — my father, to the day of his death, never had a credit card, and he discouraged my mum, sister, and me from using credit cards), buy low and sell high, and take it or leave it.
As my parents got more financially sophisticated and as I got older, they learned about asset management, debt management, and leveraging their assets; hence, as I got to be a teenager, I continued to sit in on their meetings; but, now, being able to understand more, I began to learn more and ask questions that enhanced my business understandings in real estate and other business stuff my parents got involved with; and, at that time, my parents stressed the importance of using credit to our financial advantage, as a tool to leverage assets; hence, I learned about using credit cards to leverage my assets; and, the only three rules my parents taught me about credit cards are:
- don’t spend more than you can afford to pay off in a billing cycle (~30 days), in other words, pay your off your balance in full per each billing cycle,
- pay on time, and
- increase and protect your credit score.
One of the most important credit criteria is the credit score. If you’re gonna finance a vehicle, which I totally disagree with…I still purchase my vehicles in cash…a car loan is not a good thing, but I understand people do it, the dealership is gonna check your credit score.
If you’re gonna finance a house, the lender is gonna view your credit score…oh, and guess what? Now, employers, as part of their background check, includes your credit score. Why? Well, one of the logic employers use is if a candidate is in debt, and your credit score is below sea level, the concern is you might be prone to malfeasant behavior that might jeopardize their company and business.
Financial analysts have studied individuals that are in severe debt are generally more prone to engage in bribery, larceny, fraud, and other malfeasant behaviors in order to get money to pay off their severe debt.
So, if you have bad debt, like credit cards and car loans, focus on paying them off. Some credit card companies are providing interest-free credit transfers for 15 months — if you can leverage these types of deals, you should use them in order to stop the high interest you’re paying on your credit card debt for a set amount of time.
If you have good debt, like a house mortgage, then continue to pay on time, pay more per month, manage unnecessary spending in order to stay on top of your mortgage, and find better interest rates to refinance. Earlier this year, 2017, home interest rates were down to 3.75% or so.
My FICO, TransUnion, and Equifax credit score ranges from 821-827.
I don’t carry credit card debt nor car loans. The only thing I owe is my home mortgage with Wells Fargo and the City and County of San Francisco for property taxes.
/s/ Alfonso Faustino