This month we’re celebrating dads and all they do for us. They taught us how to throw a ball, they fixed the chain on our bicycle, and they imparted their wisdom – often it was wisdom that they got from their dads.
However, times have changed and maybe the advice they once gave us about money and credit and debt is no longer 100% accurate. No disrespect intended (and we’ll ALWAYS assure dad that he was totally right) but in this article I want to update some classic money tips from Dad for the modern era.
Tip #1: Your reputation matters. Get to know the bank manager before you get a mortgage.
This might have worked 50 years ago, but it won’t now. Today, most financial institutions rely on credit scores to assess your creditworthiness. Dad would still be proud, though, if you kept a nice, respectable reputation anyway.
Tip #2: Don’t owe anyone anything.
There was a time when you could save up your money and pay cash for a house or car, but today it’s almost necessary for anyone living in America to get a loan of some kind at some point in their life. Besides, having a couple of credit accounts (on which you make your payments in full and on time) is a great way to help you achieve a healthier credit score. Sorry, Dad; owing someone can actually be a good thing.
Tip #3: Pay cash for everything.
Paying cash for everything was Dad’s advice to ensure that we didn’t get a credit card and then fund a wild, high-roller trip to Vegas with 10 of our closest friends. But the careful use of credit cards can help your credit score by demonstrating your responsible use of credit and building a good credit history.
Dad was partly right – you shouldn’t buy anything you can’t afford. But that is very different from paying cash for everything. Smart credit users make purchases on their credit knowing that they have the money available to pay it off. And even if you could afford that trip to Vegas, Dad would probably not approve.
Tip #4: Get a college education, then get a good job.
For the most part, this is pretty good advice. But it’s no longer complete. In Dad’s day, a college education pretty much guaranteed a “good job” upon graduation and you stuck at that job until you retired. Today, a college education is just the beginning. And with record-high unemployment, you need a lot more to get and keep that job.
A good credit history is one of the ways you can get an edge, since some employers are pulling credit reports to help them evaluate job candidates. Keeping an eye on your credit can help you keep on top of things. You can pull your credit report from each of the three major credit reporting agencies once a year for free through AnnualCreditReport.com, and you can monitor your credit score once a month for free using Credit.com’s Credit Report Card.
This month, we think of our dads and all that they’ve done for us. And dads do a lot, but we need to update their advice for the modern age.
Happy Fathers Day, Dad!