Old Credit Dogs - New Credit Tricks Pt 1 by Chad Goehring

No doubt we are in an age where personal credit in America has taken some serious hits. Many people walked on the credit edge while economic times were flourishing. Now, those same people find themselves bleeding from that edge.
What is likely to be an issue for many is the need to fix a financial problem before they even consider fixing the credit problem. Even more, many have gotten themselves into trouble because they once took their credit for granted. There was not real need to have excellent credit when mediocre credit was serviceable. Well, times have changed and the sooner we change our thinking on what it means to have good credit, the better off we will be.
My purpose here is the share some of the old credit thinking (old dogs) that no longer service our needs and bring in some new credit thinking (new tricks) that will be required to avoid serious struggle going forward.
Old Dog 1 Leverage is King: Although leverage is still a powerful concept in the world of personal investment and business, at least for the next several years this will be a difficult dog to make hunt. In case your wondering what I mean by leverage, I'm referring to the idea to borrowing money though the banking or investment lending machine to fulfill your business or investment needs.
Again, the concept is still powerful because it spreads risk and makes use of a favorite investment concept called OPM (Other People's Money). The problem with this old dog is not in its concept, rather in its practical reality. You cannot rely on OPM when the OP are not willing to part with their money to boost you forward.
New Trick 1 Cash is King: Now surely this is not a new concept but its recent return has literally shocked many into wondering where this dirty little breed came from. Once upon a time in a kennel far away, cash ruled and you needed it to make it. Well, welcome home cash, we can hear you barking. Investors, businesses and consumers alike would do well in this time to start stock piling as much cash as possible.
Ironically, if one is able to do such a think, it will actually make them credit worthy and they will be able to take advantage of OPM. Lending institutions will line up to loan you money when you have your own skin or (for the purpose of the analogy) fur, in the game. Obviously, is going to a longer period of time to serve your success but it will be well worth it, regardless of the state of the economy. Start saving!
Old Dog 2 The ATM House: This old dog may have been put down for good. Gone are the days of artificially rising values and the infamous "cash out transaction." Let's face it, there were points in our recent history when the cash out mortgage kept this economy rolling along.
Need a boat, cash out the house. Want to take a cruise, cash out the house. If only the house just had a PIN code pad on the wall next to the refrigerator. Well, it almost did the way Americans were living high on the hog from this old credit dog. Those days are over and it's likely they will NEVER return. Rest in peace - no time for a eulogy.
New Trick 2 Home Sweet Home: There was once a day when a house was a home and a long term investment, those days are back and likely back for good. The new trick now is to use a home for the primary purpose of shelter.
The best way to cash in on real estate these days is to buy up some lesser properties and hold them for a while or do the ever popular buy it cheap and flip it fast. Still, trick 1 is important in this equation as you're likely going to need cash to pull it off. Even those with excellent personal credit cannot bank on leveraging their real estate adventures with other people's money, especially a bank's money.
With the ever changing economic landscape, some new (perhaps they are not so new) ways of looking at money, investing, credit and business must become best in show if the average American is going to make it to retirement without calling for their own government bailout. I'll explore two more dogs and tricks in part 2 of this article.
About the Author
Chad Goehring is a credit expert, business coach & a dynamic public speaker. He regularly writes and speaks on topics such as identity theft, personal credit and sales/marketing.
Chad is also the CEO of CPR Credit Services (http://www.needcpr.com), Shoreview Minnesota. You can find him at: http://www.needcpr.com/blog