Get Your Money

Never borrowing money might look slightly extreme so let's look at it carefully. In the big wide world, there are many things you "can" do. All it takes is the wish and the will to make any one of them happen. So, when we have the money, we can spend it however we want to get whatever we want. If we don't have the cash in hand, we can always borrow to spend some more. For many, saving has not been an option. With property values rising year-on-year, there has been a growing positive housing equity to tap into to keep on spending. Except that was yesterday.

Today, it's official. The US is in recession and this "thing" called the credit crunch is biting us. It's a scary time. So what does it all mean? Well, like all situations, there's good news and bad news. The good news is there's still money out there to borrow. If you use a site like this, you will find there's still money looking for borrowers. The bad news is loan companies are only lending to the people with the best credit scores. Even the top-rated borrower is thought a risk for a more substantial cash loan unless there's collateral. Worse, if the companies offer loans to people with lower scores, they are asking for cash deposits on the property or goods, and charging higher rates of interest. This puts a lot more pressure on people to manage their credit scores and ensure they remain as high as possible. Now back to the question: even though you can borrow, should you?

There's a simple rule about keeping your credit score high. Use the credit available or watch your score fall. The way the score is calculated will penalize you if you don't use your credit cards and take out loans. So you have no choice. You should borrow. Running money through your cards for routine household bills is good. But don't use your cards for big ticket items unless you have no choice. Always try for a separate loan where the interest rates are usually lower. Then think carefully about what you're buying. For example, the biggest purchase most people make is a vehicle, but it's the item that's going to lose its value the fastest. Buy a new car and it will lose two-thirds of its value in the first four years.

So never buy a new car unless you can afford the loss. More importantly, don't be tempted by car loans offered through the dealerships. Even the zero-percent deals are expensive when you look at the profit margin built into the retail price of the car itself. Unless you're made of money, stick with used cars with two or three years depreciation already paid by the first owners. Then, make sure you get a free-standing auto loan. You want to be a cash buyer in the dealership. That way, you get the best discount on the price. Using your credit wisely during a recession is the way to keep your credit score high.