Your credit history plays more of a role than you may realize in determining how quickly you reach Financial Freedom. If nothing else, great credit can save you hundreds of thousands of dollars in interest payments over your lifetime. Think how much faster you’ll power up your Freedom Generator if that extra money is lining your pockets instead of your creditors’.
With Australia on the verge of introducing U.S.-style credit ratings, the trend toward using credit to determine your future is only increasing. Here are five mistakes you may be making with your credit that are secretly undermining your Financial Freedom:
1. You Don’t Value Good Credit
Maintaining a lifestyle built on debt is fundamentally incompatible with achieving a life of Financial Freedom. However, if you’ve recently committed to living a debt-free life in pursuit of your Freedom, you may think your poor credit choices from the past will stay hidden there.
But good credit isn’t just something you need if you want to apply for more credit. Here are a few reasons you should clean up your past mistakes and make responsible decisions around whatever credit you are currently using:
- Bad credit can mean higher insurance premiums. An increasing number of auto, home and renters insurance companies require substantial surcharges for policyholders with poor credit.
- You might pay more for housing. You know a lousy credit score gives you less favorable lending terms with a traditional mortgage. But you can still run into trouble if you’re looking to rent while saving to pay cash for a house. Credit checks are a routine component of the rental application process, and bad credit can prevent you from landing your cozy dream apartment.
- A history of mishandling personal finances can stall your job search. While no employer can see your actual credit score, some businesses worry that a high-level manager with a history of bad financial decisions is at higher risk for committing fraud, mishandling customer funds or making irresponsible financial choices at the office. So if a history of mismanaging your personal money shows up on your credit report, you may have a more difficult time securing that great job or moving ahead in your career.
Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.