I recently wrote a piece for Associated Content about establishing and maintaining a personal line of credit for the credit-less consumer. In these modern days being credit-less may seem like something of a pipe-dream, but more and more of us are settling our debts, working our tails off, and making the concerted effort not to have that credit monkey on our back, that credit cloud over our head, and any other allusion you can think of. However when you’re talking about setting up a real personal line of credit, one thing it’s important not to do is to blur the lines. For a personal line of credit to effectively work you need to be comfortable enough to be totally off the credit merry-go-round as well as have a regular enough income so that the personal line of credit can be a totally separate enterprise in your financial life.
Personal Line of Credit: Don’t Blur Lines: What It Is: As I wrote about for Associated Content, the personal line of credit is something you should establish only after “…you’ve gotten all your variable credit obligations paid off, closed, and verified by the credit issuer.” That’s not nothing and could take some time. It’s also a good idea to verify that your credit lines have been closed down, satisfactory with a zero balance with the credit reporting companies; Experian, TransUnion, and Equifax. Once you’ve done that you may be ready for a personal line of credit. This is described as “a separate account, preferably at a separate bank from the one you bank with” where the individual sets their own credit limits by “contribut(ing) money towards that account every week.”
Personal Line of Credit: Don’t Blur Lines: Why: Folks may ask why they’d even need to establish a personal line of credit; especially if they don’t have any credit cards. I’d argue that a personal line of credit is something that you can use to minimize the future effects of credit on your life. If we have no debt and we’re working, we often can’t keep our spending under wraps. Maybe we go out to an expensive dinner every weekend, maybe we go to the casinos in our down time from work. If we don’t have credit cards and we are just spending money from our personal accounts, then the lines are fast to blur. If the lines blur then we’re likely to get ourselves in financial trouble…which can lead to us needing to get back into the credit markets. If we have our personal line of credit then we know how much we have to spend and that’s it. There is no tampering with your regular income/expenses and there is that outlet for you to be able to live something resembling a normal life.
Personal Line of Credit: Don’t Blur Lines: Live Your Life: People can get obsessed with their credit-less status the same as people can get obsessed with spending the credit they did have. For this reason it’s important to maintain some perspective. For some people the credit discussion is like sobriety or smoking; you can’t have a little bit or you’ll be right back on the horse. Credit is a snowballing issue so you should be mindful of that. at the same time you’ve got to live your life and part of that is getting things you don’t need. For this reason a personal line of credit can be the answer; “when you’ve got something unnecessary that you’d like to splurge on that’s not in your budget,” your personal line of credit will be there for you. Once you’re able to treat the personal line of credit as its own enterprise will it be able to be fully effective for your life.