Why It’s Important to Have Good Credit


tums.jpgA few days ago I opened a new checking account for a very nice lady that came in asking about our free checking accounts. As I was talking with her about her lending needs, she asked me about “the loans that let you make flexible payments”, AKA home equity lines of credit. I was telling her about how they work; the minimum payment is interest only, so if you only pay the minimum payment you won’t get anywhere, but if you pay the amount you pay now on your mortgage, everything above the minimum payment goes towards principal. She thought it was a great idea, she’d be paying less than she pays for her mortgage payment each month, and it would free up some money for her and she’d be not as strapped for cash each month. I put an application in for her.


I was a little taken aback, until I looked at her credit report. Her credit score? 494. That is the lowest credit score I’ve ever seen! I took a look and realized why it was so low. She had been 60 days late on her mortgage 3 times, and 90 days late 9 times. I was shocked. When I called her to let her know the decision, she acted surprised. I asked her if she had been late on any of her payments lately. She told me she’d been late a few times. A few times?? How can you be 90 days late 9 times?

This example is a perfect example of one of the sub prime loans and why it is a good idea to not get into a mortgage payment you can’t afford, and also why it’s important to make your payments on time. Because of her being late so many times, her credit score is trashed. I feel sorry for her, but on the other hand I don’t. She is the one that got herself into the situation, and she’ll have to get herself out.

Do you feel sorry for people like this who have overextended themselves?

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