The Hungover Caddy: A Personal Finance Story (Chap. 10)

Authors’ note:

 Explaining personal finance can be pretty dull. That’s a problem, if you need to learn accounting or finance.

On a plane from St. Louis to Seattle, I decided to try and fix the problem. What if I could wrap some personal finance concepts inside of a quirky (funny?) short story? My goal here is to present some information, and then add another step in the story. So, when you get to the end, you’ve been reminded of an personal finance concept- but you’ve received the information in a light-hearted way.

This blog post explains the factors that impact your credit rating, and how you can take steps to correct your credit information.

Anyway, that’s the goal here. The stories are written in chapter order, so that there is a logical flow for the reader. Enjoy!

Dan noticed the logo on a golf shirt as he walked out the door of Panera: Old Hickory Stick. A young guy in his late teens was walking in, looking bleary-eyed.

“Hey- I used to caddy at Old Hickory Stick. Do you play golf there?”

“No- I’m a caddy”, said the teenager, forcing a weak smile. “On my way to caddy this morning.”

Dan laughed. “I remember those days. I’d be hungover and the caddy master would call the house. My mom would wake me up, and I’d ride my bike up to the club. Sweat off my hangover on the course.”

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“Yeah- that’s the deal.”, the teenager chuckled. “Have a good day!”

As Dan got in the car, his brother Kevin called- so he told him about the golf caddy. “Man- I just remember carrying two golf bags in the heat- brutal.”, Kevin said. “So, you had a question about your credit score.”

“Yeah- so Cindy and I want to look at buying a bigger place in a year or two, and I just want to make sure that I’m making smart decisions on credit.” Dan shifted in his chair. “You guys just went through the process- so explain it to me.”

Kevin thought for a minute. “Well, my first thought is to take a look at MyFICO.com, because that site explains how your credit score is computed. FICO sets the guidelines for calculating a FICO score, and your score is generated by information from credit reporting agencies. So, you need to know what is typically reported. Open that email link I sent you.”

The article link was titled “Factors That Impact You Credit Rating”, and several factors were listed:

  • Avoid late payments
  • Limit your use of credit: Only use one credit card
  • Don’t apply for credit too often

Dan read the list after pulling into a parking spot. “Huh- I would not have thought about the number of times I apply for credit.”

“Exactly- and that’s why many people damage their credit rating without even realizing it.” Kevin shook his head. “Potential lenders think that you’re in financial trouble if you apply for credit too often. Before you apply for credit, ask the company if your application will be reported to credit agencies.”

Dan glanced through the “credit myths” listed in the article:

  • Medical debt: Keep in mind that medical debt will also impact your FICO score- just as other forms of debt.

 

  • Level of indebtedness: You don’t need to have a large amount of debt to build credit- just a reasonable amount of debt. The goal is to demonstrate a history of paying on time.

 

  • Requirement to report credit activity: Currently, there is not law requiring banks, credit card companies or other lenders to report activity to credit reporting agencies. What is required is that the data they report is accurate. If you have positive credit data (such as paying off a debt), you can request that your lender report the activity to the credit agencies.

“Huh- that’s weird. So it’s possible that I can have a positive change in my credit- like paying off a credit card- but the credit card company may not get the info to the credit agency?”

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Kevin chuckled. “Yeah, that’s possible. And that’s why you can check with each credit bureau. If you paid off the card and it’s not reported, you can ask the credit card firm to get that information out- they’re required to do it.”

Dan muttered something under his breath.

Kevin sensed Dan’s attitude. “Hey, I get that this is frustrating- and creates more work on your part to maintain a good credit rating. But there’s a payoff. For one thing, if you carry less debt, you won’t get eaten alive by compounding interest on a bunch of credit card debt. I’ll send you a blog post that explains it.”

He went on: “There are apps that can help you with your finances and save time. Remember when we took the girls to the beach this year? We tracked all the spending on Paytween. The app tracked what everyone spent, and it made paying back each other really easy. Don’t sweat it- technology can help.”

Dan shifted the car into gear. “Yeah, you’re right- that time investment will be worth it.” He smiled. “Just glad I don’t have to carry two bags in the heat. He’ll probably end up kicking some balls back into the fairway.”

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

 

Image:
Oliver Gunning, www.yourgolftravel.com

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