IS CREDIT YOUR SERVANT OR MASTER?

The cornerstone of discerning whether credit is your servant or master is based on your Dollar Theology.  Dollar Theology reminds believers that they are accountable to the Lord for the resources that He entrusts to them. The principle of stewardship is woven throughout the New Testament. As you read the following passages, consider how they impact your Dollar Theology.

• Matthew 24:45-51 and Luke 12:41-48 describe the Parable of the Faithful Steward and remind you that every person possesses natural abilities, wealth, and possessions in trust from God. Eventually, He will require an account of how each was used.
• Luke 16:1-13 reports the Parable of the Unjust Servant. This passage, especially Luke 16:9, is an illustration to show that even the wicked sons of this world are shrewd enough to provide for themselves against coming evil. Believers ought to be more shrewd because they are concerned with eternal matters, not just earthly ones.
• Luke 12:13-32 admonishes believers to “lay up treasures in heaven.”

Regardless of your season of life, if someone analyzed your checkbook register or your monthly credit card statements, what conclusions would be drawn about your Dollar Theology?  How do your spending habits reflect your Dollar Theology?  The Financial Principles that follow may assist you in responding to these questions:

• You cannot be financially bound and spiritually free (Matt. 6:19-24).
• Give to the Lord’s work (1 Cor. 16:2; 2 Cor. 9:6-8).
• Learn to save money in every season of life (Prov. 13:11).
• Learn to spend less than you earn (Prov. 21:20).
• Don’t borrow for pleasure items (Eccles. 5:10).
• Control your credit cards and pay before interest accrues (Prov. 22:7).
• Have adequate life insurance to protect your loved ones (1 Tim. 5:8).
• Be self-insured for life insurance by the time you retire (Prov. 13:16).
• Have a retirement plan in progress by age 40; but if you are late, start now (Prov. 13:16).
• Own your own home debt-free by the time you retire (Prov. 13:16).
• Have a workable budget. The key elements to workability are discipline and control (Prov. 24:3-4).
• Understand that Tax Laws apply to you—pay your taxes (Matt. 22:15-22).
• Have an estate plan that includes a will and/or living trust.
• Remember that there is a difference between debt and obligations.
• Have cash in an emergency fund.

Critical to the successful implementation of these principles is the application of Malachi 3:10. This verse is a reminder to “bring the full tithe into the storehouse.”

Practically speaking, you cannot afford not to tithe—this I know from personal experience! Regrettably, tithing was not a part of my family’s financial goals. My conviction is that the numerous financial calamities that befell my family were related, in part, to the absence of giving to the Lord a portion of our monthly resources.

Conversely, my spiritual growth aligned with the procurement of my first professional position. I noticed that as I consistently wrote my tithing check first each pay period, my financial resources multiplied. Practically speaking the check writing order should not make any difference. However, to this day I intentionally practice the order; and as long as I am also a careful steward of the remaining resources, I never have too much month at the end of the money!

Credit is basically a promise to pay in the future for what can be bought or purchased today. It can be a servant or a master depending on how it is used. Regrettably, the twenty-first-century consumer often makes credit a master rather than a servant by failing to pay the credit card balance at the conclusion of each billing cycle.

Searching the Scriptures to determine whether credit is a servant or master is a valuable exercise. Exodus 22:25, Psalm 37:21, Matthew 5:42 and Luke 6:34 are some of many verses that permit and control the borrowing of money. Despite the freedom to use credit allowed by Scripture, many Christians cite Romans 13:8 as evidence they should not borrow money or use credit. However, Paul’s point in the first portion of Romans 13:8 is that all of our financial obligations must be paid when they are due.  Rather than ruling out the possibility of using credit, Christians are to:

• Practice self-control (Gal. 5:23).
• Examine their motives for using credit to make sure it is not because they are coveting what someone else has (Ex. 20:17).
• Make sure that their purchases do not reflect a lack of contentment (Phil. 4:11; Heb. 13:5).

When these principles are practiced, credit functions as a servant in the life of a believer. As you view credit as a servant, consider the facts about how to establish and maintain good credit shared by Kelsey in her Korner.

KELSEY’S KORNER

My husband and I are hoping to purchase a home within the next few years, and we have been diligently saving for a down payment. Unfortunately, our heads were so hunkered down focusing on saving that we overlooked a monumental factor: we need a credit history before we can get a mortgage! To avoid debt, we had not owned credit cards or borrowed money.  This may sound responsible but meant that we had NO credit history—no numerical way for banks to discern if we were trustworthy with money. So why is credit so important, and how do we get it?  Here is an overview of some of the most important details my husband and I have discovered.

What is credit?

• Basically, credit is making a purchase and paying it back later. Each person’s individual “credit trustworthiness” is assigned a numerical value.
• There are two main types of credit borrowing: revolving and installment. Revolving credit accrues debt each pay period that is then paid off, like with credit cards. Installment credit is a set amount that is borrowed and paid off over time (along with the interest it accrues), like with mortgages or student loans.
• Surprisingly, most bills, like rent and electric bills, aren’t reported to credit bureaus—just the money you borrowed on credit.

Why do we need it?

• According to Fair Isaac Corporation (FICO), our credit scores are used in about 10 billion decisions worldwide each year.
• A good credit score can save you thousands on interest, lower insurance premiums, wave deposit requirements, and can be the determining factor for loan approvals. Employers, landlords, and others can also access your credit score and make decisions based on it (such as if they will hire you!).

How do we get it?

• There are 5 factors that determine your credit score:
  •  35% payment history. Your score is largely affected by late and/or missing payments.
  • 30% amount owed vs. credit limit. Try to never borrow more than 30% of your credit limit—ideally 10%. So if your credit limit is $1,000, try to spend less than $300 each month. This tells lenders you aren’t desperate for money and therefore not a concern.  
  •  15% credit history length.  The longer your responsible borrowing history, the better.
  •  10% credit diversity. Aim to have a good mix of revolving and installment credit.
  •  10% new credit. Continue slowly adding more sources of credit.

How is it measured?

• There are three main credit bureaus: Experian, Equifax, and TransUnion. Each bureau keeps a tab on you and creates a separate (yet very similar) credit report based on the 5 factors listed above. You can request one free report from each bureau per year. 
• Your FICO credit score is based off these three credit reports and can be checked for free without affecting your credit anytime on sites such as CreditKarma.com.
• Your FICO score can range from 300-850. Scores of 780 and above are considered very good, while scores of 600 and below are considered fair to very poor.

Tips and tricks

• Remember, you can get one free credit report from each bureau per year. To benefit the most, scatter the reports by requesting 1 every 4 months from annualcredit.com. Check the reports for mistakes! According to Forbes, one in 20 people has significant credit report errors that cause a 25 point credit drop! If an error is found, file a report with the bureau. FTC has a sample letter you can use when developing your report.
• Ever heard of hard vs. soft credit checks? Hard checks, which occur when applying for credit, such as mortgages or credit cards, cause minor damage to your credit score that usually resolves after 3 months. Soft checks, done by electric companies, etc., don’t affect your credit score.
• Do you have old credit cards you no longer use? Don’t get rid of them! Remember, 15% of your credit score rests on credit history, and 10% on credit diversity. Plan to buy lunch once a month with old cards just to keep them active.
• Purchasing a home? Work on your credit score. If it’s below 600, you may be denied a mortgage. Scores of 660-680 may bring approval, but with large fees and down payments. Scores of 700-720 will get a good deal, and scores above 750 will get the best deals on interest on the market.
• To avoid increasing your debt and paying interest, always pay your credit cards off each month and try to avoid purchasing items with loans, unless you can do so without accumulating interest. Mortgages are the exception to this rule.

Proper stewardship of your credit can save you thousands of dollars, while improper stewardship can quickly create an insurmountable debt. Before borrowing money, pray, seek counsel, and never borrow unless you know you can pay it back, for “It is better that you should not vow than that you should vow and not pay” (Eccl. 5:5).

THE EVERYDAY HOMEMAKER’S MONTHLY MEDITATION THOUGHT

Jesus has said, “The thief comes only to steal and kill and destroy.  I came that they might have life and have it more abundantly” (John 10:10).

Therefore, I may boldly say, “Jesus’ promise to me of an abundant life gives me reason for constant hope.”

Blessings on your day as you focus on making your house a home!