Money is such a weird phenomenon in America. We obsess over it. We hoard it. We base our worth over how much we have and we yet, we really don’t know how to BUILD wealth without punching a clock. Black people especially have been unable to build and sustain wealth in America based on several factors: systematic racism, redlining in the housing market, and lack of generational wealth. And let’s just be honest: you can’t build wealth if you don’t have any money.
I was determined to forgo the struggles of family members before me. I remember applying for an apartment and I couldn’t use my mom as a guarantor because of credit. I was lucky enough to have a family friend go out on a limb for me and cosign my apartment but it was at that moment I knew I had to get my finances together so I could have options going forward. In order to have options, I had to start by establishing credit or a record of my spending habits. I opened a secured credit card with a $200 limit back in late March/early April because as someone with no credit it was the only way I could start building credit. In four months, I’ve been able to go from absolutely no credit history to the high 600’s. Below I will list four tools that helped me get to this point.
Credit is meant to show potential lenders or landlords how you spend money. If you’re using 100% of your credit, you look like you don’t have money elsewhere to pull from so I only use 30% of my credit limit. In order to maintain this discipline, I only put recurring monthly charges on my card: gym membership, Squarespace, and Spotify. This way, my services remain up and in good standing an, I can pay it as one large bill at the beginning of the month. All these services are also less than 30% of my $200 credit limit. A win-win situation.
They Want Their Money ON TIME
Credit is basically one big test and whether you pass or fail is of your own volition. They look at everything! One of the major factors is do you pay back your 30% on time. I pay early. I actually enjoy paying my credit card bill early because I know I’m setting myself up for a promising financial future. Once my I get the notification on my phone that my bill is due I either pay a portion or I pay it in full depending on the funds I have in my bank account. I always pay down to zero BUT I get my bill at least 3 weeks before it is due so I can pay it down gradually over the three weeks if I so choose.
Leave It on the Playground (Or at Home)
I no longer bring my credit card out the house. I leave it at home. It got too tempting to think about my credit as free money and that is a big no-no. I do not leave it in a drawer with the freelance checks that I deposit at the end of the month and I only use it for emergency Ubers but it has to be an EMERGENCY!
Building credit is a process and series of traps that one must recognize and maneuver. For example, my credit would be higher if I had TWO cards but based on my lack of credit history, I wouldn’t be eligible for another credit card. Building credit is like financial gaslighting. It makes no sense and just when you think you’ve gotten the hang of it, the rules change. Be patient with yourself. If you’re new on this journey, things can change in the matter of a week a month. A credit report is important in terms of how lenders see you but in the grand scheme of life, your worth isn’t defined by a 3-digit number. Be patient.