Teach Your Children about Credit

 It is very easy to mess up your credit .  Get a loan and then miss payments or make them late.  The goal of the banks developing credit scores is to help them predict the likelihood of a customer missing a payment on the loan in the next year.  Simple Cure for Missed Payment There is a simple cure for a one missed payment that will often work.  I helped a friend, she had not bothered to make the payment on her auto tire loan.  Her bill was only $40 per month and she just decided not to make it one month.  It killed her credit score.   I had her make all of her payments on time for six months.  She wanted to pay it off but I told her she was better off to not pay it off and just make the normal payments plus one on time.   After six months of making her payments on time I had her call her lender from the tire store.  I had her very nicely ask the customer service agent for help.  She said it was an accident that she m...

I have helped several friends with their credit scores.  It is really easy to get started and build a good credit score.  It is also really easy to Mess Up your Credit.  A friend who I helped with her credit recommended I write a book.  How to Mess up your Credit It is really simple to mess up your credit.  Get a credit card or loan and Miss One Payment by 30 days or more.    Why I should Not have written this Blog A good friend has sworn to never help anyone with their credit again.  He helped a friend (we will call him Johnny A.) who made about $25k per year.  This was several years ago.  Johnny had zero credit experience and no history and had been working for a couple of years. He was doing fine, driving his parents hand me down car with his own apartment and a little bit of money to spend.    My friend helped Johnny A. build his credit. In a couple of months Johnny had a 780 credit score and a couple of credit cards. ...

  Your payment history, credit utilization ratio, length of credit history and types of credit used are all ingredients into your credit score.  The actual FICO formulas used to create your credit scores are technically a secret owned by Fair Issac Corp.  The formulas have been reverse engineered so that you can get a very good estimate of what your score will be.  Several companies use the Vantage 3.0 scoring model which will give you a good idea what your FICO score . Payment History – 35% As you might expect, the repayment of past debt is a major factor in the calculation of credit scores. ... Amounts Owed – 30%.  This is how much is owed vs how much you have available.  For instance if you have two credit cards with a total balance owed of $5,000 and a total credit available of $9,000 you would be using 56% of your available credit. Length of Credit History – 15% Your average age of the credit sources.  If you have two cards and one you have had fo...