CREDIT: “TAMING THE MONSTER”
Raise your hand if you know of or have ever heard about someone putting utilities or debt in their child’s or another relative’s name because their credit was bad. Ok. Now raise your hand if you have heard about minors with bad credit because of their parents doing such a practice. I know that this is an African American website and people of other races who are reading this are probably thinking this quick survey is joke.
Credit has long been the butt of jokes within the African American community. Comedians and sitcoms have made numerous jokes about African Americans having notoriously bad credit. Unfortunately, it’s is not a laughing matter when you can’t get a loan, approved for an apartment, utilities, and certain jobs because of substandard credit.
On August 15, 2012 ,the front page article of the Times Picayune had a very eye-opening article entitled “Asset Poverty is a big problem in New Orleans” (click here to read). A study released, by the Greater New Orleans Foundation (GNOF) and Ford Foundation, concluded that a stunning 37 percent of New Orleans households would not be capable sustaining themselves for longer than 3 months if their main source of income were to be disrupted. Asset poverty is an inability of a household to access wealth resources sufficient enough to provide basic needs (food, shelter, clothing, and utilities) for a period of three months. What type of disruptions could interrupt income? In the most extreme case, another Hurricane Katrina, but most commonly things like loss of a job or a disability. Luckily, asset poverty is something that can be turned around with discipline. I’ll be covering ways to go from asset poor to asset wealthy in subsequent articles. Today, however, we’re going to address a huge problem that the study released by the GNOF and Ford Foundation revealed. The study found that 71 percent of New Orleanians have sub-prime credit scores, which not only make borrowing more expensive but make it more difficult for find jobs or housing, since it’s increasingly common for employers and landlords to look at credit scores. Ok, let’s pause and let that number sink in, 71 PERCENT?!
We’ve all seen the commercials that start with the “bad” credit scores terrorizing their owners like out of control pets and end with the “good” credit scores being all well-mannered with happy owners. Let me preface this article by saying that I DO NOT fix credit in my practice. My practice is designing financial plans that build wealth while reducing taxes over my clients lifetime, protect their assets, and eventually set up generational wealth. However, using credit wisely can assist in building wealth and thus having a working knowledge of credit comes with the territory. A question I often get asked by clients is “Is it too late for me to turn my credit around and fix my credit while building wealth?”, “How do I go about rebuilding my credit and how long will it take?” These questions always make me remember my grandparents, who I lived with the first half of my life while my mother was in the military, and how they accomplished moderate success in accumulating assets.
My grandfather had to quit his formal education to help his family by working when he was in the fifth grade. I saw pictures and heard stories about my grandfather as a young man in the 1920s. He had fair skin, a slim yet strong build, fine hair, and grey eyes. He and his brothers were known for, putting it nicely, having a good time. A lot of folks thought those Williams men were a lost cause. They spent his fair amount of money on the vices of the day until my grandfather met my grandmother, a tough woman who had managed to finish high school, and married her. My grandfather had to labor in jobs at mills and as a janitor since he could barely read, write, or count. However, this man with little education managed to buy land in two different counties, build a house, and provide for a rather large family. He brought in the income and my grandmother played the part of bookkeeper. I recall asking him how did they achieve, what folks in the black community at that time would deem as success, what he achieved when he had been at a disadvantage all of his life? He said “I had to change how I lived and I stuck with it so that yall could have better than me.”
So the answer to my clients’ and prospective clients’ aforementioned questions about rebuilding credit are: “You have to change how you handle your finances.” And ask yourself “Are you willing to change your lifestyle and be disciplined enough to stick to it?” If so, Part 2 of this article could provide you with helpful information.
If you that feel you are really really serious about taking action and beginning this transformation; while simultaneously starting a wealth building plan. Please contact my office at (504) 310-0345 and set your appointment today!
K. Orian Williams, J.D.
Financial Services Professional
Fleur de Lis Financial an agency of MassMutual
Follow on Twitter @KDotFinancials