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Understanding Credit

Credit can be confusing, slow going and hard to get right. Having good credit can save you tens of thousands of dollars over your lifetime and give you access to opportunities for a better financial future. We want to help you with this and shed some light out how this machine works. On this episode, we talk about understanding credit, types of credit and using credit to your advantage.

Remember, With Great Credit Comes Great Responsibility!

Resources & Links From The Episode

COVID-19 Update

How you can protect your credit score during the coronavirus pandemic.

via Bankrate.com

Bankrate.com was kind enough to send us over this great resource to help you manage your credit (credit stress) during these uncurrent times. The article has great information about the latest updates and special provisions while we navigate through Covid-19.

  • Free weekly credit reports
    On April 20, 2020, the three major credit bureaus (Equifax, Experian, and TransUnion) made a joint decision to offer Americans free weekly credit reports for the next year to help those facing financial hardship due to the effects of the pandemic.
  • Credit score risks
    Two of the most influential factors that make up your FICO Score are payment history (35 percent) and amounts owed (30 percent).
  • Issuers help with financial hardship
    Reaching out to your credit card issuer should be your first response if you’re having difficulty making payments due to coronavirus.

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Credit Reports/Monitoring

 

Credit Karma - Free Credit Scores

As a member, you can see your accounts, your last reported balances and what's affecting your credit scores.

creditkarma.com

 

Annual Credit Report

AnnualCreditReport.com is the official site to get your free annual credit reports. This right is guaranteed by Federal law. You can verify this is the official site by visiting the CFPB's website.

annualcreditreport.com

Credit Agencies 

Check with your credit card company and see if they have free reports, scores, and monitoring as part of having an account with them. Some companies like Discover and Capital One offer this service to cardholders.

Shopping For Credit

 

NerdWallet

NerdWallet's helpful tools, expert info, and tailored insights make it easy.

Quickly compare tons of options to find your best, Credit Cards, Savings Account, Online Broker, Mortgage, Personal Loan.

nerdwallet.com

 

Types Of Credit

 

To have a high credit score you will need all 3 types of credit

  • Type 1 = Mortgage(s)
    • Given a loan, with real estate as collateral, interest is amortized over a long period of time, usually over 30 years.
  • Type 2 = Revolving lines
    • Credit cards
    • Unsecured lines of credit
    • Secured lines by a deposit account
  • Type 3 = Installment loans
    • Car loan
    • Student loans

Length of time your accounts are open

  • Longer the better
  • SHOULD I PAY OFF my car or my house

Percentage of the balances on your loans

  • Keep below 33% or ⅓
    • Pay down your balances
    • OR…. increase your credit limits

Other factors to consider 

  • Inquiries or applying for credit cards and loans lower your score temporarily

If you are trying to increase your credit score, make sure you have all three types of loans, make sure they have been open for a really long time (in good standing), and make sure that the available credit to you is ⅔ unused or greater. (33% used)

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