Life with Good Credit

NO NONSENSE

Imagine a world where financial institutions compete to gain your business. Car loan, house loan, and even credit cards; so long as it has your signature, they want it. Having good credit means increasing your bargaining power.

By Elie Boutros

Have you ever received credit card offers advertising 0% APR for 12 months and 0% balance transfer offers? If you do, you have exceptional credit. The credit card companies are telling you, “Go spend whatever money you want for 12 months!” They don’t tell you to pay it all off by the 12^th month, because they are going to charge you an arm and a leg for it.

On the opposite end of the spectrum, let’s say you have bad credit. Unfortunately, you will get denied for anything you apply to. One way you can get approved is adding a cosigner to the loan: someone with good credit. A common situation that involves a cosigner is a parent cosigning their child’s first credit card or car loan. Sometimes, someone with questionable credit will get approved, but the bank will charge a ridiculously high interest rate.

having a high income
will not always
sway a bank’s decision

Another aspect that banks will consider is your income. However, having a high income will not always sway a bank’s decision. For example, I knew a gentleman with an annual income of $75,000 who still did not get approved for a $1,000 visa because of his horrible credit history. Although it weighs heavily in the decision making process for loan approvals, income is second to credit. In fact, if your credit is good enough the bank might not even verify your income. That means the bank is taking your word for it, and trusting that, with your proven track record, you will pay back this loan. This is the financial world teaching us an important life lesson; if you cannot pay your bills on time, you will never do so, regardless of your income.

Elie Boutros has a Bachelor’s in Economics from CSUCI. Most of his career has been in the banking industry. His all time goal would be to one day work in developmental economics on a global scale.