It has been over two years now that I have been virtually debt free with no long term debt on my personal balance sheet. However, given changing market conditions, the best approach for a home was to enter housing market once again as leasing one no longer made financial sense. After a long and stressful process, we purchased a home and have moved in. Like others, we have a list of things we need to do to really make it are own.
This process has meant that I have now become a borrower once again. It accelerated quickly as inflation and pricing in the market we live in has meant a much higher Cost of Living than most others live by. While I am not concerned of the financial implications of the changes, it definitely looks challenging if seen from an unbiased perspective on paper. However, I have always been successful on balancing the financing very effectively to achieve all my goals over time with the exception of some timing issues (ironically, all in Real Estate).
A month into these changes, I received an update from my identity and credit monitoring service with an unexpected notice; my credit score was impacted severely from all the changes given the new borrowing assumed. It dropped me a whole category which was amazing to see as I expected a drop for obvious reasons. However, going from excellent to good from these parameters was a surprise and drew some concern from my side.
Since I anticipated the directional changes happening in my finances, I have approached my financial condition with a more conservative side in this new phase. I have started to build a cash reserve fund for many of my obligations in addition to taking advantage of my prior credit to get great financing for items that we have needed for the new home. I am getting no interest for short term periods with these new accounts while having the cash available.
Given my approach, I can probably attest that the traditional system of credit as we know it is broken. I think many institutions are realizing this as we have seen the growth of non traditional lenders relying on multiple sources of data rather than traditional ones to provide credit. The “pay as you go” industry has seen an enormous amount of growth recently and I think it will continue. However, it will also depend on how the experience ultimately ends with their returns. This may be just a temporary impact for me but it will be up to me to perform as I fully expect to do.
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