Teach Your Children about Credit

A perfect FICO or Vantage 300 Credit Score is an 850.  The lowest score is a 300. An 800 plus credit score is excellent and what most people aspire to.  To earn an 800 plus credit score you must have at least three different credit sources, no missed payments in the last 7 years, Less than a 10% credit utilization, and an average credit history of at least 6 years.       800 Plus Credit Score Requirements The requirements for an 800+ score are rarely stated but here's what I have found: You must have at least three sources of credit. An example  might be  two credit cards and a car loan. Three to five credit cards may get you there. If you add in a Personal line of credit, that will help. You cannot have any missed payments in your credit history in the last 7 years. This is pretty much an absolute. Missed Payments will kill your credit score, especially when you are first starting to build your credit history. You cannot have any Coll...

Closing old credit cards will improve your credit score. FALSE.  Closing an old credit card can actually hurt your credit score by shortening your credit history and increasing your credit utilization ratio. If it doesn't cost you anything to keep the card and it is older than a year or so it is probably a benefit to keep the card. Only people with high incomes can have good credit scores. FALSE.  Your income is not factored into your credit score. Your credit score is determined by your credit history, payment behavior, and other factors. There are many people that earn a lot of money with bad credit and there are a lot of people that don't make much money with great credit. If you always make the payment on time on the money you borrowed you will have great credit eventually. Using a credit counseling service will hurt your credit score. Yes and No. Using a credit counseling service alone won't hurt your credit score. However, if you enroll in a debt management plan, i...

Life is More Expensive with Bad Credit A friend with Bad Credit went to get Power hooked up for her just rented apartment, she had to put down a $200 deposit. With good credit she would not have to make a deposit. Her car insurance is significantly more expensive because she has bad credit. When she bought her car, she had to put a larger down payment and her loan interest was higher. She applied for an apartment with a property management company. They chose someone else for the apartment that had good credit. She applied for a new job she really wanted, they checked her credit and hired someone else. Laurie's Folly A friend of mine, Laurie, makes good money but she spends more than she makes. She had an argument with her landlord. She had a really nice apartment. Anyway after the argument the landlord refused to renew the lease. The landlord said I don't want to deal with you. The town we live in has a shortage of rental property. It is hard to find a good value in a rental...

OOPS Y ou Missed a Payment. Should you close the account?  No, No No. If you close the account the late payment continue to show on your account for seven years. My First reaction to a missed payment  When I did not know better that is what I would have closed the account.  The problem is your late payments will stay on your credit history for seven years on your account if you close the account.  You will not be able to get the late payment removed if you no longer have an account with the card you were late.   My Recently Missed Payment I had a Credit Card with Lowes that I missed a payment. I forgot I had charged something on it.  I owed them around $100.  I discovered it when it showed up as a 30 day late payment on my credit report in Credit Karma.    Before the missed payment my credit score was 780.  The missed payment lowered me to 725.  I did not panic.  I paid the bill as soon as I realized I missed the paymen...

  I was never taught how to deal with Customer Service.  Many people do not realize how much they can help you if you're nice to them and hurt you if you're not. Ask if They Can Help You I am always extremely nice and courteous to customer service over the phone. They have a very tough job because so many people yell at them and treat them horribly.  So many customers, especially of banks or credit cards, make a mistake but won't accept responsibility for their mistake. Many customers want to blame the bank for the missed payment.  My dog ate my statement so I didn’t pay my bill. Being Nice and Asking if they can help you will often get you what you want. I have gotten missed payments removed, zero percent credit offers extended, and over limit fees eliminated by being nice. Always Be Nice to Customer Service My rule of thumb is always be extremely nice to customer service. They're just doing their job and it is a tough one. They can certainly help if you are nice...

  For most people their first mortgage will be on their first house. Home mortgages are usually written for between 15 and 30 years. They will have a variable or locked in interest rate.  Here are the different types of Home Mortgages: Conventional loan – Best for borrowers with a good credit score Jumbo loan – Best for borrowers with excellent credit looking to buy an expensive home Government-insured loan –  for borrowers who have lower credit scores and minimal cash for a down payment. Fixed-rate mortgage – Best long term loan. Adjustable-rate mortgage – I would never recommend an adjustable rate loan for a long term home loan.  If interest rates go up your house payment will go up.  Many adjustable rate loans went up significantly in the 2009 housing crunch.  This caused several borrowers to lose their houses. Why are Home Mortgages Important? Mortgage Insurance Mortgage insurance is a type of insurance that protects the lender in case the borrower defa...

  Managing credit card use will make the difference between ending up in the credit trap??? or building a great credit score.  For most people a credit card is their first credit. It is important to get in the habit right from the start of paying off your credit card every month. Credit Card Payment Due Date Your credit card will always have the same Payment Due Date unless you request to change it. So if your first statement has a payment due date of June 11 then your next payment will be due on July 11th and the next on August 11th. I cannot say it too many times. Pay off your credit cards completely every month . The interest they charge is huge. It is hard for most people to pay off significant credit card debt. Your bill will show you that you can just make a minimum payment and postpone paying off your card until later. The consequences of paying just the minimum can be devastating. The best thing is not to get into credit card debt in the first place. Payment Remin...

  A credit report is like a report card for your credit history, and credit bureaus are the companies that collect and maintain this information.   There are three credit  bureaus. Experian Equifax and TransUnion. What is a credit report?  It's a detailed summary of your credit history, including your credit accounts, payment history, and outstanding balances.  I use Credit Karma to get my Free Credit Reports.  It is really easy to sign up.  They present the sections of my credit score clearly.   I get into my Credit Karma account about once a week.  It is easy quick and it will tell me if anything has changed.  I take a quick look at all of my account balances and check if any new accounts were opened -- If I did not open a new loan account and one shows up would mean someone has hacked my identity.  We will talk more about Identity theft in Chapter 9. My Changing Credit Score I have watched my score change with changes i...

Two Rules on Borrowing Money  I have a personal mantra about credit.  There are two reasons to borrow money.  One is to make money, the other is to buy a house.  Any other borrowing of money is living beyond your means and will lower your standard of living. I have never made a car payment.  I saved up for my first car and paid cash for it.  I have done that ever since my first car and like I am near the end of my seventh decade. Credit Cards Paid in Full Every Month I use Credit Cards to buy everything I purchase most months.  I have autopay setup to automatically pay my cards completely every month.  I use my credit cards to earn points.  As a new Credit Card user I would recommend only spending a little on your card every month and paying it off completely every month.  It is very important that you develop the habit of paying off your credit cards in full every month. Buying your gas every month and paying your card off every month i...

Building Good credit is easy but it takes time and a little bit of work. First, you'll need to establish credit. In time you will want to develop at least three different credit sources.  Here are some steps you can take if you cannot get a credit card with no credit: Get a secured credit card  Become an authorized user on someone else's credit card Take out a small loan or line of credit Get a Credit Builder loan What is a Secured Credit Card? A secured credit card is a type of credit card that requires a deposit to be made in order to open the account. The deposit acts as collateral for the card, which means that the credit card company will take the deposit if you don't make your payments. Secured credit cards help you build your credit score by demonstrating that you can repay your debts on time. When you apply for a secured credit card, you will need to provide the credit card company with a deposit.  The amount of the deposit will be the credit limit on your credit ...