Page 21 - Winning The Credit Game Bundle (CK Patrick)

HOW CAN I BENEFIT FROM CREDIT? 9

full $99,000 more for the same property than you would have paid if
you’d had a lower interest rate!
This is how the rich get richer and those of us who aren’t rich, all
too often, get poorer.
But the good news is, you don’t need to be rich to have an excellent
credit score and get excellent interest rates. Anyone can do it. You just
need to know how.
Just like any competitive sport, having a great credit track record is
a learned skill. How good you get at the game is determined by the
amount of time, effort, and strategy you put into winning.
In this chapter we’ll investigate the underlying logic of credit scores
—how banks and creditors decide how much money to lend you, how
they decide what interest rates to charge, and why they think any of
that is a good idea. This underlying logic will help us understand the
specific steps we need to take to get into the same credit tier as the
ultra-wealthy.

WHY LEND MONEY AT ALL?

At this point you might be asking yourself, “Why would banks and
creditors lend money at all? What’s in it for them?” After all, we’re
rarely thrilled when a friend or family member comes and asks us to
lend them cash.
The answer to that question is the most powerful force in the
universe: interest.
Suppose you’re a bank or creditor. You lend a lot of money to a lot
of different people. And all of those people end up paying you back
more than you leant them, because you charge interest. What looks like
just a few percent interest on that $300,000 mortgage means you get
paid $99,000 more than you leant out over time. And you may be
making such loans to hundreds of thousands or even millions of
people if you’re a big lender.
Essentially, the more money you lend, the more money you make,
usually. This is why banks are such powerful financial players.
But this puts you in something of a competition with borrowers.