GMR 145: Protecting and Improving Your Credit Score
There have been many negative impacts caused by the COVID-19 pandemic. One that hasn’t been talked about much is the increased use of credit and the negative impact on credit scores. Many Americans have had to use more credit to get by in the past 6 months, and the result is lower credit scores. In this episode of GMR, we’re going over some of the basics of credit scores and what you can do to protect and/or improve yours.
Show Notes
Protecting and Improving Your Credit Score
Bankrate.com Survey Results
According to survey findings, one-third of U.S. credit cardholders have made at least one credit misstep since the beginning of the coronavirus outbreak in March of 2020. For example:
17 percent of U.S. adults racked up additional debt
12 percent paid a bill late
8 percent carried a balance on their credit card with the goal of improving their credit score
6 percent did not pay a bill at all
3 percent canceled a credit card with the goal of improving their credit score
⅓ of people were behind on a mortgage or rent payment, but with forbearance that won’t affect their credit score under the CARES Act… but when the CARES Act runs out (6-12 months), it will start to add up if they haven’t negotiated something with their bank.
Major Credit Reporting Companies (Bureaus)
Experian
Equifax
Transunion
VantageScore - created by the 3 bureaus to compete with FICO - shares the information from all three to get a more accurate credit score.
Where to find your report/score?
See your actual reports from each credit bureau once a year: www.annualcreditreport.com
Credit score:www.creditkarma.com
Understanding Credit: Visit - www.myfico.com/credit-education/improve-your-credit-score/
Credit Score ranges between 350-850
Credit score rankings:
350-620 - Bad
620-660 - Fair
660-720 - Good
720-850 - Excellent
How a credit score is weighted:
35% - Payment History
30% - Amount Owed
15% - Length of Credit History
10% - New Credit
10% - Credit Mix - Types of credit
How to improve your score
On-time payment - the largest portion of your score - 35%
Paying more than the minimum payment
30% or more of available credit used will significantly impact your score
Any credit use will impact your score
Excellent vs Good score - 30% or more = good or fair
Derogatory marks are good to avoid — they can stay on your report for 7-10 years.
Length of credit
Less than 2 will not give you a good score
5-6 midrange - improves your score
7+ good to excellent
Credit Inquiries
Hard
credit applications (car, home mortgage, credit card)
Can stay on your report up to 2 yrs
Soft
Insurance, Phone, Utilities
Background checks
Checking your credit without your permission
Doesn’t damage your score
Multiple hard inquiries in a short time are negative
Credit Mix
Auto, Furniture, Mortgage, Credit Cards, Multiple Cards
The more they see you handle debt, the more comfortable they are
Additional Resource We Recommend
Building and improving your credit takes time. Unfortunately, there is no quick fix if you find yourself with a bad score.
Words of encouragement about the credit score
It’s not your identity
If you have a bad credit score, relax, it’s not the end
You can rebuild your credit and credit score over time