Learn Credit 101

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There are 5 factors that makes up your credit score.

1. Payment History: 35%
2. Utilization: 30%
3. Length of Credit History: 15%
4. New Credit: 10%
5. Types of Credit: 10%

PAYMENT HISTORY

Payment history makes up about 35 percent of your credit score.  Payment history is if you make payments on time for your accounts. This factor has the biggest impact on your credit score.

Your payment history will also show late payments, collections and charge offs, as well as public records like bankruptcies, judgments or liens. Certain things can remain on your credit report for up to seven years or more.

CREDIT UTILIZATION

The goal is to keep your lines of credit such as your credit cards under 30% of each credit card's limit. It is actually better to keep your utilization under 15%. Meaning only use that amount of the card and do the minimum payment, OR use what you can afford, and pay your card down to under 20% on the credit card due date. You can pay your credit card off, but only pay it off to 0% AFTER the credit card closing date. 

LENGTH OF CREDIT HISTORY

The length of your credit history it determined by how long you've had lines of credit. The longer you've established credit, the better you look to lenders and creditors.

NEW CREDIT

New credit applications affect 10% of your credit score. Your score will take a small decrease (drop) in points for new credit applications. New credit is also known as credit inquiries. You can raise a red flag to creditors when you have too many inquiries in a 12month to 2 yr period. Be wise about your credit applications before you complete them because once you do, your score decreases (on average by 5-10 pts per inquiry) and the inquiries stay on your credit for 2 yrs before they fall off. 

TYPES OF CREDIT

The rule of thumb for having a high score is your credit mix on your credit profile. You should have both revolving credit (credit cards) and installment accounts (loans i.e. car loan, mortgage, personal loans etc.). A lender will analyze your credit profile and base the amount they will lend you off of how well you maintained different lines of credit. 

HARD INQUIRY

A hard inquiry is request that another party such as a creditor or lender pulled at your request. A potential lender is needs to see your credit file strength to see if you will be more of a liability than an asset to them loaning you a line of credit or loan. Negative items or markings indicate to creditors that you may not be a responsible loan holder. 

SOFT INQUIRY

A soft inquiry is a check into your credit report that does not affect your score. Soft inquiries do not show on your report. Soft inquiries occur when you or and individual pull your own report or a company checks your credit report. 

There are a few factors that really hurts your score that so many people don't know about. Negative information can stay on your report for 7-10 years, so you would want to take good care of your accounts the best way you can. 

Here are some key factors that negatively impacts your credit score:

• Completing too many credit applications in a short time
• Failing to have credit diversity
• Co-signing for credit applications for others 
• Missing payments (the biggest factor)
• Debt charge-off and collections
• Repossessions
• Filing for bankruptcy

Learn the difference between secured credit cards and unsecured credit cards. 

SECURED CREDIT CARDS

These cards are used to build credit. These types of cards are recommended for people with a small credit file. With secured cards, you have to use your own money as a "down payment". The creditors want to see how well you handle your own money before they give you an increase or a line of credit. 

Ex: If the creditor offers a card with several different amounts to choose from ($99, $299, $500) you would have to put that amount down on the card for it to open. After doing well with the amounts for a certain amount of months, the credit company or bank will give you an increase. 

UNSECURED CREDIT CARDS

These cards do not require you to put any money down. Once your credit score looks good enough (usually over a 700) you usually do not need to get any more secured credit cards. Also, having a good tier secured card with a bank is best. If you have a secured card in good standing for up to a year, it will open and become an unsecured card. 

Credit scores usually range from 300 to 850 based on the FICO® Score. The higher your credit score is, the better. A good credit score (700 or above) may make it possible to buy your dream home or open a business, while a bad score can present challenges.  You also have to take note at what your credit file actually looks like. Having negative items in your credit profile also presents challenges to obtain the credit lines and loans that you want. 

So remember, even if you have a decent score, any lender can still deny you a line of credit based off of what is inside of your credit file. Do not just think because you have a score of over 740, that your credit is perfect, because it is not if you still have negative impactful items inside of your credit file. 

So many people spred the misinformation as bankruptcy being the easy way out of owing an abundance of debt. Even though filing for bankruptcy can help take away some of your debt, it is still the biggest negative mark you can have on your credit file.

Imagine you filing for bankruptcy and it stays on your credit report for 7-10 years; lenders and creditors would look at you as a huge liability. It would be hard for a lender or creditor to trust you with a loan if they feel like you have a tough time paying your debt back to any other bank or company. 

To avoid filing for bankruptcy, you can do the following:

• Make date adjustments for payments
• Snowball your debt
• Make payments arrangements 
• Ask the creditors for late payment forgiveness
• Don't let your accounts close due to non-payment

Are you ready to purchase a home? Are you ready to finally start breaking your generational curses? 

Buying a home is more than a place to put your family. It can be passed down to your children and their children. It can be used as leverage in so many ways. Homes hold equity to can put money into your pocket when you are ready to sell. Homes can double and triple in value which increases your amount of equity. 

The minimum credit score needed to purchase a home ranges from 580 to 640 depending on the type of mortgage loan you are awarded. Even though these low scores are still accepted, you should still wait until you have a better score to buy a home. The higher the score, the lower your interest rate will be and the lower your monthly payments will be.

NEVER RUSH INTO HOME BUYING! It is a huge responsibility!

Want to purchase a new car?

Are the car dealerships telling you that you have to put down thousands of dollars just to get put in a car?

Have you gotten died several times?

Of course you are getting denied because you have questionable or no credit! 

The higher the score, the lower your interest rate will be. When you have great credit YOU can negotiate your interest rate to be as low as 0-1%. You should be able to walk out of a car dealership with a brand new car, no money down, a little to no interest rate, and an affordable car payment. You will also more than likely owe more than what the car is worth if the car is totaled or when you are ready to re-sell it. 

Have you heard about student loan debt forgiveness? I am sure you probably have and you were anticipating on getting your loans forgiven. 

Well did you know that per the Debt Collection Improvement Act of 1996 states that the government can't take any more than 15% of your social security payments, nor can it leave you with less than $750 in monthly benefits. 

Around 114,000 borrowers aged 50+ had their social security payments garnished in 2015.

Imagine only receiving $750 a month in income-- that is only $9,000 a year to live off of because you didn't want to pay back your student loans.

When you fail to make a student loan payment for 270 days, your loan is considered to be in default. If you get too overwhelmed and cannot afford it, you should look into entering a debt rehabilitation program with the Department of Education. 

Older Americans on permanent disability may be eligible for a FULL discharge of their student loans. 

Here are 20 companies that do pay off student loans: https://studentloanhero.com/featured/companies-that-pay-off-student-loans/