Credit 101: All the tips and tricks everyone should know about credit
Updated: Jun 4, 2019
By Camille Stimach, Financial Coach and Budget Specialist, Peridot Consulting Inc.
4 GOLDEN RULES OF BEING FINANCIALLY FREE
Eliminate ALL bad debt (does not include home, car and student loans).
ALL bills must be paid on time each month, no late payments ever.
You MUST be contributing to a retirement plan or have it in place already.
You MUST have 3-6 months of cash reserves of what you need each month.
CREDIT 101
What is a credit score? What is a good score? What goes into my score?
FICO, Beacon, and Credit score all mean the same thing, different credit bureaus use different names but it all is the name for your score. You always want to be above a 720 credit score.
The only things that affect your credit scores are loans (any money that is given to you up front whether it be a mortgage loan, car loan or a credit card).
If you pay your light bill and rent each month on time that has nothing to do with your credit report and does not affect your score. Should you NOT pay your utility bills on time (phone, light, cable) and they turn you over to a collection agency then it most certainly will affect your credit score and not in a good way.
About those Credit Reports
You should be checking your FULL credit reports (not just the score) once a year.
You can get a free report once a year from each of the bureaus; TransUnion, Equifax, Experian, by calling 1-877-322-8228. This is run by the bureaus and is therefore the most accurate. You can pull the report online but it is nice to have a file with hard copy.
You should be checking your report to make sure everything on there is yours.
CREDIT CARDS 101
Credit Cards with Annual Fees
Please do not get credit cards that have annual fees unless you are getting rewards out the wazoo which make that annual fee worth it.
Check your cards each year to verify what rewards you are getting, what the rate is, and see if your card can be upgraded; if there is a better deal. Some people are using cards that are so old they don’t realize they can upgrade for better rewards.
Junk Cards
Unless you plan on using a store card (what I call junk cards) regularly (i.e. Dillards, Lowes, Belk, etc) please do not sign up for those credit cards when they offer you 10-20% off your purchase at the cash register. DO NOT DO THAT!!!! Why? What happens when you start stacking up on store cards just for a one time discount you end up with a lot of cards you don’t use and the credit bureaus look on that as a lot of unused credit and that is not always good.
Too High vs. Too Low Credit Card Balances
For the best credit scores always make sure your credit card balance does not exceed 40% of the credit card limit. Example: Limit on card is $5000.00, don’t let balance go over $2000.00. The closer your balance gets to the actual limit of the card, the more your credit score starts to dip.
You do not have to leave a balance on your credit card to help your credit score, that is a BIG FAT MYTH. Pay your balance in full every month if you can.
Pay In Full
Remember if you do not have money put aside to pay your credit card off in full each month, you should not be using your credit card, UNLESS it is a real emergency.
DO NOT just start closing credit cards. The bureaus track your longest running credit history. If you have had a credit card for 15 years and you close it then you have just closed one of your longest running lines of credit. Consult with financial coach before you start closing out credit cards.
Cash Advance?
Do not do cash advances unless it is a real emergency. The interest rate on that is usually 26% or higher. REAL emergency, people, almost like life or death.
STOLEN IDENTITY
First off NEVER NEVER NEVER carry your social security card in your wallet or purse. We are in the days of technology now, this is no longer the 70’s where we had to carry it. If someone gets hold of your wallet they would have your license with all the information needed and your SS card and they can start opening up credit accounts.
If your wallet or purse is stolen:
Call your bank immediately and freeze all your cards (you can also do that on some mobile bank apps).
File a police report just for paper trail purposes.
If you had your SS card on you, call your local SS office and tell them to make note that your SS card has been compromised.
Alert the credit bureaus, online, that your credit might be compromised.
Some really helpful sites for stolen identity are:
https://www.creditsesame.com/blog/credit/steps-take-immediately-victim-identity-theft/
https://www.identitytheft.gov/know-your-rights
https://www.usa.gov/identity-theft
Please don’t leave checks just lying around the house if you have people coming in and out of your home.
Make sure you have copies of your license, debit/credit cards, SS card somewhere safe in your home in case these items were ever stolen or compromised.
This is one of the BIGGEST scams of all time. If someone from a bank or credit card company ever sends you a text or email saying they need to update your information, DO NOT DO IT!!!!!!!!!! These are phishing scams and having worked in the banking industry, I will tell you we have everything on file we need to know about you. If you have to update any information the bank will wait for you to come in and alert us. Banks and financial institutions in general don’t initiate calls to customers trying to find out sensitive financial information.
FYI’s
Please review your bank statements, your bills and credit card statements each month for any items you don’t recognize. You would be amazed how many bogus charges are on people’s statements.
Credit Workshop
If you wish to learn more about Credit and ways to repair bad credit, attend my workshop, "Credit 101: Your Financial Foundation to Success" on August 15th or November 7th. Click here for details and to register (it's Free).
>Camille