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Everything I Need to Know About Credit, I Learned from My Motorcycle

You can learn a lot from being on two wheels. I’m not talking about “born-to-be-wild.” This is the mechanics of staying upright. Maneuvering to good credit, like riding a bike of any sort, comes with habits you can learn in order to own the road.

Look where you want to go, not where you’re going. Any biker can tell you not to look at the handlebars. Look ahead and the body will guide the bike naturally. Likewise, don’t lose sight of where you want to be with credit wellness. Make goals –be it higher credit score, lower monthly payments, or saving for the future. Access a free credit report from www.annualcreditreport.com which will map out the road ahead.  While this secure website doesn’t give a credit score, many financial institutions offer to provide the score as a courtesy, and apps exist that will do the same.

A good credit score is generally 680-700 and above. A lower score doesn’t mean the end of the road; it can paint the starting line even if it means a delay in achieving goals.

Don’t be afraid to get your hands dirty. Credit scores determine the rate lenders offer and whether a loan is extended at all. Scores make a big impact on car payments and auto insurance rates, with companies charging more for lower scores. Credit scores can even play a role in getting a job now that some companies use them as part of the hiring process.

It doesn’t take a mechanic to fix credit. If you see a creditor has reported incorrect information, send a dispute letter to the credit bureau and to the company who initially made the error. Request the error be removed and include supporting documentation. If the dispute results in a change to your score, the credit bureau must give you a free copy to review.

There is no quick fix to improving credit. It takes time and effort.  As always, keep an eye out for financial scams and never share your Social Security number with anyone other than a legitimate lender or financial institution.

Be aware of others in traffic. The three big credit bureaus are certainly aware of you.  Equifax, TransUnion, and Experian are collecting data on each payment made or missed, where you live, and whether you’ve filed for bankruptcy or been sued. They keep tabs on every credit inquiry. The more times you apply for new credit, the lower the score can go. Keeping balances under 50% of credit limit should be a given. To improve scores more quickly, pay down balances and maintain them at under 30% of the limit.  Making the minimum payment each month is important but will not improve a credit score.

Credit card offers can be too good to be true. Research a card before applying, as maybe the annual fee outweighs the potential rewards.

Don’t slow down on the curves. Gravity demands that you maintain speed so the bike doesn’t come out from under you. Borrowing rates are at historic lows right now, resulting in lower monthly payments. Don’t be afraid to look into the many first-time homebuyer programs the area offers. It’s also a good time to consider refinancing a home or vehicle. Lower monthly payments can shorten the trip to financial well-being.

If slower speeds are needed financially, what matters most are good payment history and lower outstanding debt. Start by paying off the smallest debt first, as a paid-in-full account will raise scores. Settle collections unless they are old and may soon cycle off the report. Don’t close old accounts — they show a history of creditworthiness even with a zero balance.

Safety above all else. Remember that any loan you co-sign is just like you took the loan out yourself. Any and all missed payments will go on your credit report and will be included in any debt-to-income calculation for a loan application.

Finally, enjoy the ride. The road can get bumpy but with a good grip, you can embrace the challenge with an understanding of credit fundamentals. For credit and payment calculators, go to EagleBankCorp.com/mortgages. And for more detailed credit information, go to https://myhome.freddiemac.com/resources/creditsmart.html.

Maceo Clark NMLS# is a Senior Mortgage Banker at EagleBank NMLS# 440513, one of the largest community banks in the DC area. As a community lender, Maceo offers expert knowledge of Affordable Housing and First-Time Home Buyer resources, as well as refinance services. Contact him at MClark@EagleBankCorp.com or 301-850-2655.

EagleBank Residential Lending is not a credit counseling or financial advisement firm. This information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation or eligibility to secure a home loan. EagleBank is an Equal Housing Lender.

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