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Synopsis: If you’re just starting out in life, learn from the mistakes of your parents when it comes to easy access of credit. If you’re already drowning in debt, it’s time to take the bull by the horns and wrestle it down into submission. Watch part 3 Building a Good Credit History from the series It’s Your Money, It’s Your Life with syndicated financial columnist and talk show host Steve Savant.
Content: Building a good credit history means developing good credit habits:
• Get a credit card and use it responsibly
• Make purchases every billing period, and pay them off in full and on time
• Apply gradually for additional credit
You can keep up to date on what the credit reporting agencies know about you by checking your credit report three times a year—once at each of the three major bureaus. It’s free. All you have to do is log on to www.annualcreditreport.com and follow the instructions. You’ll also find out how to correct errors or add explanations.
The three major national credit bureaus—Equifax, Experian, and Trans Union—collect two types of information about you. The first is how you use credit, from how much you owe on car loans, mortgages, and credit cards to the timeliness of your monthly payments. There’s an incredible amount of data that falls into this category— about two billion items a month, which breaks down to an average of 11 items per credit user.
Did you ever wonder why it takes a retail store or an online credit card company just a minute or two to approve your application for credit? Did you know that you may be quoted one interest rate on a car loan while the next person to apply is offered a higher—or lower— rate? These kinds of things happen because credit decisions often come down to the credit score, or FICO® score, you’re assigned by the credit bureau your potential creditor contacts. When you get a FICO credit score, you’re going for a high number. The top 20% of reports that are evaluated get scores over 780, while the lowest 20% get scores under 620.
At least half of all college graduates have a student loan to repay. For most, it’s probably the first big, long-term debt they’ve had. So if the lingering cost of your education is causing you a little bit of panic, you’re not alone. But you do need to insert you student loans into your budget and design a repayment plan. It may be difficult to secure a car loan, not to mention a mortgage without reducing your student debt first.
Contributions from the book It’s Your Financial Life in this press release are used with permission from Light Bulb Press.
