Page 15 - Winning The Credit Game Bundle (CK Patrick)

THE CREDIT TRAP 3

thing costs more when you have to agree to high-interest loans instead
of paying with cash or a good line of credit.
And this is the trap of credit cards: they want to lend you money,
because they want to charge you interest and late fees. But the credit
trap is one you can use to your advantage.
Credit card companies and credit bureaus must perform a delicate
dance to stay in business. They must convince people to borrow
money from them so that they can make money on interest and late
fees. But they must also ensure that most people pay that money back,
so that they don’t take a huge net loss.
This is where our complicated credit system comes in. The financial
system wants you to borrow money. But it only wants you to borrow
what you can pay back soon. It rewards you for behaving this way:
when you borrow money and then pay it back almost immediately,
your credit score goes up. And the higher your credit score, the less
interest you are charged on loans and the more money you can be
allowed to borrow.
Properly used, credit can be a beautiful thing. An excellent credit
score can open doors to home ownership, business loans, car owner-
ship, and other ways to leverage huge amounts of cash you may never
be able to earn otherwise at low interest rates. In this way, you can
build wealth. You can obtain wealth through loans to invest in prop-
erty, business, and education, allowing you to make more money than
you ever could have using your own savings and your 9-5 job alone.
This is among the secrets that the wealthy know. It often isn’t neces-
sary to save huge quantities of money in order to acquire wealth.
Instead, if you have a truly solid business plan, it is often possible to
borrow large sums of money, and turn that money into a much larger
sum than you originally borrowed through your sound investment.
But that’s only possible if you have a good credit score, and the
access to good lines of credit that brings. If you don’t have that, you can
instead find yourself actively punished in areas ranging from housing
to employment for failing to demonstrate that you can borrow money
and then pay it back.
In my early 20s, it seemed like I was doomed. I had all kinds of