Healthy Credit 101 — Transcript

Full transcript

1. 0:02hi everyone my name is Annie yamakawa
2. 0:05and I'm a financial solution specialist
3. 0:07at adviye credit union I'll be the
4. 0:10narrator for this lesson on healthy
5. 0:12credit 101 and just to give you a little
6. 0:15bit more background information about
7. 0:16myself I graduated high school in 2009 I
8. 0:19took a class my senior year called
9. 0:23consumers math which I really thought
10. 0:25would be more of a blow off class
11. 0:26because I had to pick a math class but I
12. 0:29didn't want to take calculus that year
13. 0:31and it actually turned out to be
14. 0:33probably one of the most useful classes
15. 0:35I've ever taken it taught me a lot about
16. 0:38responsible money management how to
17. 0:40avoid mistakes with money management how
18. 0:43to build good credit and just made me a
19. 0:45lot more financially literate overall a
20. 0:48couple other members of the senior class
21. 0:50and I ended up going to the
22. 0:51administration to ask that they make the
23. 0:53class required because we learn such
24. 0:55useful skills for life and now 11 years
25. 0:59later I'm working in a financial
26. 1:00institution teaching people every day
27. 1:03about how to build and maintain good
28. 1:05credit I got my associates degree at K
29. 1:08BCC so as a graduate I am super excited
30. 1:11to be bringing this information to you
31. 1:13and without further ado let's get to our
32. 1:16lesson so let's talk about what credit
33. 1:19actually is first credit is receiving
34. 1:23something of value upfront and then
35. 1:24promising to pay it back later borrowing
36. 1:28money for a purchase and then paying it
37. 1:30back in installments which are usually
38. 1:32monthly payments is called financing so
39. 1:37now that you have an idea of what credit
40. 1:38is you might be wondering what's a
41. 1:41credit score well your credit score is a
42. 1:43number ranging from 300 to 850 that
43. 1:47tells lenders or banks and credit unions
44. 1:50your credit worthiness in other words
45. 1:53your credit score tells lenders how
46. 1:56likely you are to practice responsible
47. 1:58money management this is important for
48. 2:00lenders to know because they have to
49. 2:02know if you're going to come through on
50. 2:03your promise to pay them back
51. 2:07there are five major components which
52. 2:10make up your credit score those
53. 2:12components are your payment history your
54. 2:15capacity the length of your credit your
55. 2:19accumulation of debt within the last
56. 2:21twelve to eighteen months and your mix
57. 2:23of credit so let's break down those
58. 2:27components a little more in depth 35
59. 2:30percent of your credit score is related
60. 2:32to your payment history it's super
61. 2:35important to make on-time payments
62. 2:37otherwise a late payment could stay on
63. 2:40your credit report for up to seven years
64. 2:42because your payment history makes up
65. 2:44such a large portion of your credit
66. 2:46score and because it can follow you for
67. 2:49so long if you mess up it's crucial to
68. 2:52remind yourself to make your payments on
69. 2:54time you can put a reminder in your
70. 2:56phone in your planner or the best way to
71. 2:59make sure you don't miss a payment is to
72. 3:01set up automatic payments from your
73. 3:03checking account that way you won't have
74. 3:05to remember to pay your bill every month
75. 3:07the next largest component of what makes
76. 3:10up your credit score is your available
77. 3:12capacity on your revolving lines of
78. 3:15credit to explain a little further a
79. 3:19revolving line of credit is a certain
80. 3:21amount of money you're allowed to borrow
81. 3:23from and then you can repay it borrow
82. 3:25from it again repay it again and repeat
83. 3:28credit cards are the most common
84. 3:30revolving lines of credit so going back
85. 3:33to your available capacity your
86. 3:36available capacity is the amount you
87. 3:38have left before you reach the maximum
88. 3:39amount you're allowed to borrow from a
89. 3:41line of credit a maxed out credit card
90. 3:44has a zero percent capacity but a card
91. 3:47with no balance has a 100% available
92. 3:50capacity the relationship your capacity
93. 3:54has to your credit score is that the
94. 3:56higher your available capacity is the
95. 3:59better your score will be the amount
96. 4:01you've actually borrowed from a line of
97. 4:02credit is called your utilization of
98. 4:05your capacity you want to keep your
99. 4:07utilization below 35% for a better
100. 4:10credit score 15% of your overall credit
101. 4:14score comes from the length of your
102. 4:16credit history the longer your history
103. 4:19is the better your school
104. 4:20we'll be this is why it's important not
105. 4:23to close your credit cards it can
106. 4:26actually negatively affect your credit
107. 4:28score you want to keep your first credit
108. 4:30card open for as long as possible the
109. 4:34smart thing to do with credit cards is
110. 4:36make small purchases with them and then
111. 4:39pay them off every month so you never
112. 4:40get into trouble and you can keep your
113. 4:43credit card line open for as long as
114. 4:44possible it's a good idea with credit
115. 4:48cards to only purchase things that you
116. 4:50can already afford to buy in cash that
117. 4:53way you won't get into trouble 10% of
118. 4:57your overall credit score comes from
119. 4:59your accumulation of debt within the
120. 5:02last 12 to 18 months in other words if
121. 5:05you just bought a car with a loan you
122. 5:08don't want to buy a house the same year
123. 5:10and then a camber and then max out your
124. 5:13credit cards or it's gonna look like
125. 5:15you've accumulated a ton of debt within
126. 5:17a short period of time last but not
127. 5:20least 10% of your overall credit score
128. 5:23comes from your mix of credit an ideal
129. 5:27credit mix would have revolving lines of
130. 5:30credit and installment loans like
131. 5:32student loans or car loans or even a
132. 5:35mortgage however I usually tell younger
133. 5:39borrowers not to worry so much about
134. 5:41building their credit mix right away a
135. 5:43diverse credit mix takes time to build
136. 5:46and it will come naturally as your
137. 5:49borrowing needs increase throughout the
138. 5:51course of your life let's talk some more
139. 5:54about what can actually hurt your credit
140. 5:56score like I mentioned earlier late
141. 5:59payments are something that really
142. 6:01negatively affects your credit score
143. 6:04those will stick with you for seven
144. 6:06whole years maxing out your credit cards
145. 6:09is another way you can hurt your credit
146. 6:11because it decreases that available
147. 6:14capacity we talked about earlier
148. 6:16closing your revolving lines of credit
149. 6:18aka your credit cards is another way
150. 6:21that you can negatively affect your
151. 6:23credit score now you might be asking
152. 6:26what does shopping for credit mean
153. 6:29lenders can see if you've had a lot of
154. 6:32inquiries on your credit within the
155. 6:34few months there are two types of credit
156. 6:37inquiries soft inquiries which are also
157. 6:41referred to as soft credit polls or soft
158. 6:44credit checks won't actually hurt your
159. 6:46credit score soft inquiries are
160. 6:48oftentimes made by employers as part of
161. 6:50background checks during the interview
162. 6:52process and can also be conducted by
163. 6:54credit card companies or mortgage
164. 6:57lenders who are pre approving you there
165. 6:59are several different companies which
166. 7:01provide free soft checks on your credit
167. 7:03including Credit Karma mint
168. 7:06credit wise credit comm and credit
169. 7:09Sesame hard inquiries are the other type
170. 7:14of inquiries that can be made on your
171. 7:16credit report too many hard inquiries in
172. 7:19a short amount of time can actually
173. 7:20start to decrease your score hard
174. 7:23inquiries are conducted as part of the
175. 7:25process of applying for personal loans
176. 7:28auto loans mortgages and credit cards
177. 7:31because hard inquiries do affect your
178. 7:34credit score lenders should be asking
179. 7:36you for your authorization prior to
180. 7:39pulling your credit the three major
181. 7:41companies which conduct hard inquiries
182. 7:43on your credit report are Experian
183. 7:46TransUnion and Equifax other factors
184. 7:51which may negatively affect your credit
185. 7:53score include opening to many new credit
186. 7:55accounts in a short period of time
187. 7:57having more revolving lines versus
188. 8:00installment loans as part of your credit
189. 8:02mix and also borrowing from finance
190. 8:05companies you don't want to live on
191. 8:07credit you want to make as many
192. 8:09purchases in cash as you can and if you
193. 8:13have to use your credit cards you want
194. 8:15to pay them off regularly now that you
195. 8:18have a better idea of what may hurt your
196. 8:20credit score you're probably wondering
197. 8:22what's considered a good credit score
198. 8:24Experian Equifax and TransUnion all have
199. 8:28slightly different scales to measure and
200. 8:31rate credit scores for this example I
201. 8:34used experience scale any score between
202. 8:37three hundred to five hundred seventy
203. 8:39nine is considered very poor any score
204. 8:43between five hundred eighty to 669 is
205. 8:46considered fair
206. 8:48any score between 670 to 739 is
207. 8:53considered good scores between 740 and
208. 8:57799 are considered very good and scores
209. 9:01800 to 850 are considered exceptional by
210. 9:06and large in order to really trust you
211. 9:08lenders ideally would like to see at
212. 9:11least a 700 credit score however it's
213. 9:14not the end of the world if you don't
214. 9:16have at least a 700 especially for newer
215. 9:19or younger borrowers there's a little
216. 9:22more leniency coming from the credit
217. 9:24lenders this is because you simply don't
218. 9:27have as long of our credit history nor
219. 9:29do you have as diverse of a credit mix
220. 9:32when you are a newer borrower or have no
221. 9:36credit history you may be asked to
222. 9:38produce a cosigner just so the lending
223. 9:40companies have faith that you're going
224. 9:42to pay back what they're lending you
225. 9:45having a good credit score can really
226. 9:48set you up for success and smooth
227. 9:50sailing you may need a good credit score
228. 9:53in order to get approved for renting an
229. 9:55apartment without a cosigner to set up
230. 9:59utilities for your living space or even
231. 10:02to purchase a cell phone without a
232. 10:04massive downpayment you'll also want to
233. 10:07keep your credit score up in order to
234. 10:09get the most favorable interest rate on
235. 10:11your mortgage on personal loans or
236. 10:14automobile loans or even the best rate
237. 10:16on your insurance if a prospective
238. 10:19employer checks into your background as
239. 10:22well as your credit history as part of
240. 10:24the interview process and it's a total
241. 10:27wreck they may be less inclined to offer
242. 10:29you a job because it looks to them as
243. 10:32though you're not responsible and can't
244. 10:34be trusted to make good choices by this
245. 10:38point you may be freaking out a little
246. 10:40bit about how much credit can affect
247. 10:42your future and you may already have
248. 10:44made a couple bad choices to affect your
249. 10:46credit negatively don't panic it's not
250. 10:50the end of the world if you don't have
251. 10:52the best credit there are ways that you
252. 10:54can work on rebuilding it although it
253. 10:56does take time some good advice to
254. 10:59follow in order to improve your credit
255. 11:00score would be to regularly monitor your
256. 11:03score with soft checks you should also
257. 11:06clean up your credit report by
258. 11:08correcting any errors and also paying
259. 11:10off any collections that may be showing
260. 11:12on your report you'll want to make sure
261. 11:15going forward that you're making timely
262. 11:17payments remember 35% of what makes up
263. 11:21your credit score is your on-time
264. 11:23payments keep your utilization low on
265. 11:26your revolving lines of credit don't
266. 11:28forget your available capacity makes up
267. 11:3130% of your overall score if you can't
268. 11:34trust yourself not to use your credit
269. 11:36cards just cut them up that way you
270. 11:38won't have to close your lines but you
271. 11:40also won't be tempted to use the cards
272. 11:42anymore if you have a lot of different
273. 11:45credit cards with balances on them start
274. 11:47by paying off the ones with the highest
275. 11:49interest rate first that way you're not
276. 11:51accumulating quite a bit more debt while
277. 11:54you're trying to pay it down it can be
278. 11:56stressful learning how to manage money
279. 11:58and raise your credit score especially
280. 12:00if you've made some mistakes in the past
281. 12:02just know you're not alone and you can
282. 12:05reach out and consult with your credit
283. 12:07union to help you find some solutions to
284. 12:10get out of debt or to raise your credit
285. 12:12score a huge part of why I love what I
286. 12:15do is because I'm helping people help
287. 12:17themselves create a better financial
288. 12:19future
289. 12:20everyone has very different
290. 12:22circumstances and with that said there
291. 12:25are going to be different solutions for
292. 12:26different people credit unions are great
293. 12:29at helping people discover those
294. 12:30solutions because they're established to
295. 12:33help the community strengthen its
296. 12:35overall financial health so everybody
297. 12:37wins if you have questions whether
298. 12:40they're general or specific to you about
299. 12:42building credit establishing credit
300. 12:44taking out loans getting a credit card
301. 12:47etc
302. 12:48please don't hesitate to contact me you
303. 12:50could email me or call me and I'd be
304. 12:52happy to go over some solutions for you
305. 12:55that will benefit you thank you for
306. 12:57taking the time to listen to this lesson
307. 12:59today I hope each one of you has taken
308. 13:01away at least one new bit of information
309. 13:03that will help you create a better
310. 13:05financial future