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?

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

  1. On-time payment - the largest portion of your score - 35%

  2. Paying more than the minimum payment

  3. 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

  4. Derogatory marks are good to avoid — they can stay on your report for 7-10 years.

  5. Length of credit

    • Less than 2 will not give you a good score

    • 5-6 midrange - improves your score

    • 7+ good to excellent

  6. Credit Inquiries 

    1. Hard

      • credit applications (car, home mortgage, credit card)

      • Can stay on your report up to 2 yrs

    2. Soft

      • Insurance, Phone, Utilities

      • Background checks 

      • Checking your credit without your permission

      • Doesn’t damage your score

    3. Multiple hard inquiries in a short time are negative

  7. Credit Mix

    1. Auto, Furniture, Mortgage, Credit Cards, Multiple Cards

    2. The more they see you handle debt, the more comfortable they are

Building and improving your credit takes time. Unfortunately, there is no quick fix if you find yourself with a bad score. 

Here’s another great article to improve your credit 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

Resources


Great Article on Credit Score - https://www.finimpact.com/credit-scores/
Debt tools and other free resources - https://leosabo.com/resources
David’s website - www.stewardshippastors.com

Credit ScoreLeo SaboBudgeting, Spending, Borrowing, Debt, Credit ScoreComment