Speaker 1: Episode one sixty Demystifying the Credit Score. Welcome to the
Speaker 1: Frugal Friends podcast, where you'll learn to save money, embrace simplicity, rights,
Speaker 1: and liberate your life. Here your host Jen and Jill m.
Speaker 1: Welcome to the Frugal Friends podcast. My name is Jen,
Speaker 1: my name is Jill, and today we are talking about
Speaker 1: a really exciting topic, lots of twists, turns, so many things,
Speaker 1: the credit score. I'm so excited. Are you excited, Jill?
Speaker 1: You know what, I'm excited because I'm feeding off of
Speaker 1: your excitement. This does not hold the same level of
Speaker 1: thrill for me. But it is a really important topic,
Speaker 1: and I know that it comes with the territory of
Speaker 1: talking about frugality and personal finance, and I know I've
Speaker 1: had friends and family kind of talk about this. Of course,
Speaker 1: I have a credit score and it has been an
Speaker 1: important factor and the things I've done in my life.
Speaker 1: But yes, I'm glad that we've chosen the word demystifying
Speaker 1: because it has always seemed like one of those things
Speaker 1: that you don't really know how your score happens, and
Speaker 1: don't check it or that will make it bad too,
Speaker 1: and just try and be good, but you don't really
Speaker 1: know how to be good and good luck. So this
Speaker 1: is good. It's good to get into some of the details. Yeah,
Speaker 1: nobody likes to talk about the credit score. I get
Speaker 1: that nobody gets excited about it. I get excited because
Speaker 1: it is a great way to save money on things
Speaker 1: like a house or a car. So I love it.
Speaker 1: And it can also like help you get a job
Speaker 1: if they check your credit report for some reason. So
Speaker 1: this is a super important, awfully debated area of personal
Speaker 1: finance that we are going to really get into shed
Speaker 1: some light on. So but first, our sponsors. So today's
Speaker 1: episode is brought to you by another podcast. You've heard
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Speaker 1: to join the conversation and learn something new about frugal living.
Speaker 1: Also brought to you by demystification, like when the Wizard
Speaker 1: is revealed to be just a regular human, or when
Speaker 1: you learned that no one actually looks that good. It's
Speaker 1: just a filter demystification making seemingly daunting things super manageable.
Speaker 1: Use code Lions and Tigers and Bears to take ten
Speaker 1: percent off the mystery and scariness of credit scores. Wow,
Speaker 1: added a little promo code in there. Don't forget the
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Speaker 1: oh my of yes, I love that. So let's start
Speaker 1: talking about the credit score. So we want to get
Speaker 1: into what it is, what are the parts of it,
Speaker 1: and how do we raise it? Because that's all we
Speaker 1: really care about, right is what is it, why do
Speaker 1: I need it? And how do I make it better?
Speaker 1: So our first article is from Experience, which is one
Speaker 1: of the three major credit bureaus, and it is aptly
Speaker 1: titled what is a good credit score? So if you
Speaker 1: want a good read on credit scores, this is a
Speaker 1: riveting one. Well it's just really good s c e
Speaker 1: O because you know, that's what everybody is Google searching, like, yeah, okay,
Speaker 1: here's my credit score? What what's a good one? How
Speaker 1: do I know where I fall? And if you are
Speaker 1: going to find out, Like, if you want to know
Speaker 1: what a good credit score is, you want to either
Speaker 1: hear from FICO, Experience, TransUnion, or Equifax. Those are really
Speaker 1: the foe most important names that you need to know. Experience, Equifax,
Speaker 1: and TransUnion are the three major credit bureaus. That means
Speaker 1: like where your transactions and everything are reported to. Doesn't
Speaker 1: mean all of your transactions, all of your like debt
Speaker 1: stuff and credit stuff. They're not always reported to all
Speaker 1: three credit bureaus. Sometimes they just use one or two.
Speaker 1: But FICO is actually the name of the score. That's
Speaker 1: the name of the credit score, and there's also advantage score.
Speaker 1: But most banks and everybody if they're not using their
Speaker 1: own proprietary credit scoring method. They're using FICO, And so
Speaker 1: what FICO stands for, it's just fair Isaac and Company.
Speaker 1: They're a data analytics company. That's it. That's so you
Speaker 1: would think that it was more of a title versus
Speaker 1: just a company. I mean, if you think about it,
Speaker 1: this like all finances business, So like you're trying I
Speaker 1: mean theoretically, you're trying to increase your like quote unquote
Speaker 1: personally you know, business or stature or whatever by like
Speaker 1: getting something you technically can't afford with the cash you have,
Speaker 1: which is not a bad thing, but you're just like
Speaker 1: trying to get ahead. You need to take out some
Speaker 1: kind of loan, so you go to a bank, which
Speaker 1: is also a business, and the bank tries to figure
Speaker 1: out if you're credit worthy. So they go to a
Speaker 1: third party business Fair Isain Company or Equifax, TransUnion Experience, whatever,
Speaker 1: and that data company figures out if you're credit worthy.
Speaker 1: So it's all like a business. It's not correct me
Speaker 1: if I'm wrong, But in my experience, when I've gotten
Speaker 1: a credit score for whether I'm applying to live in
Speaker 1: an apartment or when we went through our home buying process.
Speaker 1: We get the scores from at least two of those
Speaker 1: different places. I think for us it was our FICO
Speaker 1: and Experience scores, and they were different. I mean they
Speaker 1: were within relatively the same range, but they weren't the
Speaker 1: same number. For us, we were told we can use
Speaker 1: the higher number to kind of report on and show
Speaker 1: what our credit is. I don't know if yeah, yeah,
Speaker 1: you would affirm that general. Yeah, I mean so to
Speaker 1: my and I'm not a credit expert. I would love
Speaker 1: to be when it's it's I think it's super interesting.
Speaker 1: But these credit reporting bureaus use the FICO data to
Speaker 1: determine their own score. So it is the FICO score
Speaker 1: whether you're going whether you're getting it from Experience, Equifax,
Speaker 1: for trans Union, it's still called a FICO score. When
Speaker 1: you hear credit score, they're interchangeable or Vantage score. That's
Speaker 1: a different data company. So but yeah, you and they
Speaker 1: and they for some reason, they just translate the data
Speaker 1: in different ways, and they will all three of them
Speaker 1: will show you something different. But that's why they have ranges.
Speaker 1: So they have like poor, fair, good, excellent, and the
Speaker 1: range is from three hundred to eight fifty. So a
Speaker 1: good FICO score technically starts at six seventy, but most
Speaker 1: experts usually agree it's probably around seven hundred. Like at
Speaker 1: seven hundred plus is when you start seeing like the
Speaker 1: best rates possible. So an excellent starts at eight hundred,
Speaker 1: and it's really once you hit eight hundred, there's no
Speaker 1: advantage to trying to get your score any higher. I
Speaker 1: see people on the internet that are like going for
Speaker 1: this elusive eight fifty, and it's like, why, You're just
Speaker 1: You're just trying to play a game. At that point,
Speaker 1: it's just a competent. Yeah. I just want to be
Speaker 1: able to say I'm perfect, and they've got another number
Speaker 1: to show that I'm perfect. Yeah. Good. I mean, they
Speaker 1: just need to believe that they are worthy without a
Speaker 1: good without a perfect credit score. So but so, I mean,
Speaker 1: most Americans do have a good FICO score or better.
Speaker 1: So this isn't something where people are trying to hold
Speaker 1: you back or anything. Most Americans do have a good
Speaker 1: FICO score. But if you can get your FICO score
Speaker 1: two at or around eight hundred, then that's where you
Speaker 1: save the most money, whether you're trying to get a mortgage,
Speaker 1: whether you're refinancing or getting credit cards. I mean, you
Speaker 1: can get starting at seven hundred, you can start to
Speaker 1: get the good travel hacking credit cards. So that's kind
Speaker 1: of why the credit score is important for us. Yeah.
Speaker 1: So yeah, and then now now that we know Fico,
Speaker 1: no TransUnion, Experience Equifax. I've been writing about this stuff
Speaker 1: for years, and I still confuse Experience and Equifax. Um,
Speaker 1: it's right, I always remember one and not the other.
Speaker 1: I always remember TransUnion though, So we're gonna skip overlooking
Speaker 1: advantage score. Jill tell us about what effects our credit score. Yes,
Speaker 1: this article from Experience goes through some of the top things,
Speaker 1: which for me was really helpful as I learn along
Speaker 1: with my other frugal friends, what all goes into a
Speaker 1: credit score. There are some things that can be I
Speaker 1: think elusive. There are some things are like all right
Speaker 1: within a couple of points, like how is this completely
Speaker 1: figured out? But there are some basic tenants to this,
Speaker 1: including payment history, meaning are you may being on time
Speaker 1: payments to any of your credit card accounts or loans mortgage?
Speaker 1: Do you have missing payments? Are there accounts that are
Speaker 1: have gone to collections agencies? Have you filed bankruptcy in
Speaker 1: the past. All of these things can affect payment history.
Speaker 1: Which affects credit score. Another component is credit usage, which
Speaker 1: is how many accounts you have that have balances, and
Speaker 1: then how much you owe and the portion of your
Speaker 1: credit limit that you're using on all of those revolving accounts.
Speaker 1: So meaning if you've got a credit card that has
Speaker 1: a max limit of fifteen dollars, how much the percentage
Speaker 1: of that that you utilize in reality determines credit usage.
Speaker 1: Then you've got length of credit history. So a lot
Speaker 1: of this, as we'll talk about later on too, is
Speaker 1: just playing the long game and patients that it does
Speaker 1: take time to build up a good credit score. Sometimes
Speaker 1: people who are younger, if you're just starting out into adulthood,
Speaker 1: you might have a poor credit score. It's not necessarily
Speaker 1: reflective of you've done something bad. A poor credit score
Speaker 1: can just be reflective of no credit you've just not
Speaker 1: interacted with loans and credit card accounts, that kind of
Speaker 1: a thing. So how long of a credit history that
Speaker 1: you've built up, and then all of those other components
Speaker 1: that we've talked about too, how you've interacted with those
Speaker 1: payments and the percentage of credit that you've utilized throughout time,
Speaker 1: and then the types of accounts that you that you have.
Speaker 1: Some people might also call this a credit mix. This
Speaker 1: could include installment accounts, which are your car loan, any
Speaker 1: personal loans, mortgage, and revolving accounts, So those would be
Speaker 1: the things that you're kind of utilizing regularly, like a
Speaker 1: credit card or a line of credit. And so how
Speaker 1: you interact with and manage both of those types of
Speaker 1: accounts and the responsibility that you're showing with each of
Speaker 1: those um plays into your credit score. And then finally,
Speaker 1: recent activity, so this considers whether you've recently applied or
Speaker 1: opened new accounts or closed accounts. Whatever your recent activity
Speaker 1: has been plays into your overall credit score. So those
Speaker 1: are the five things that make up the FICO and
Speaker 1: the vantage score, and so they both take different approaches
Speaker 1: to it, like evaluating the importance of each. But again
Speaker 1: we're just going to focus on FICO because that is
Speaker 1: the main thing that banks use. So let's like dive
Speaker 1: a little bit deeper into all five of these. So
Speaker 1: the first payment history that is most important, so literally
Speaker 1: it's just make your payments on time in full every month.
Speaker 1: It is waited at thirty five and of your credit score,
Speaker 1: and so it's most important is what banks and stuff
Speaker 1: will look at most because obviously they want to make
Speaker 1: sure that you will pay them back. And then the
Speaker 1: rest the last what is it? Three are kind of
Speaker 1: just like icing on the cake, But it's really the
Speaker 1: payment history is really the most important. And then credit usage.
Speaker 1: But I would say this is another part of the
Speaker 1: long game. Like you can't just open a bunch of
Speaker 1: accounts and like make your payment history like longer. You
Speaker 1: have to, you know, do the mortgage thing, do the
Speaker 1: auto loan thing, do the credit card thing, and do
Speaker 1: it wisely for a long amount of time to get
Speaker 1: to an excellent score. I'm putting you on the spot,
Speaker 1: but would you advise somebody to do an auto loan
Speaker 1: for this reason? It would be if you, like never
Speaker 1: had a student loan and don't have a mortgage, then
Speaker 1: it could be wise for you to have an auto
Speaker 1: loan for like a period of time. I think the
Speaker 1: most more important than that. That would just honestly, so
Speaker 1: many people have student loans, and so many people want
Speaker 1: to buy a house. It's not That's not where I
Speaker 1: would put my focus. I would put my focus on
Speaker 1: getting a credit card and keeping that open and letting
Speaker 1: that build up your length of time and we'll talk
Speaker 1: about that in a second, but that's probably where I
Speaker 1: would put my focus. Okay, So the second most important
Speaker 1: part of your credit score is your credit usage. This
Speaker 1: is weighted at thirty percent of your credit score. What
Speaker 1: makes up a big component of how you get your score.
Speaker 1: So this has to do with how much available credit
Speaker 1: you have and how much of that available credit you utilize.
Speaker 1: You could literally figure out your actual percentage of use
Speaker 1: edge and they say you want it to be no
Speaker 1: more than thirty. I think we'll talk about that later
Speaker 1: too in the next article. But this also makes up
Speaker 1: of your credit score. So if you're utilizing a lot
Speaker 1: of your available credit, this could indicate that you're over extended,
Speaker 1: and banks might interpret this to mean that you're a
Speaker 1: higher risk of defaulting. So again to use that example
Speaker 1: of let's say you have a credit limit of fifteen
Speaker 1: thou dollars and you are kind of maxing that out
Speaker 1: every month. That is going to impact your score significantly. Again,
Speaker 1: because your score is indicative of how well you interact
Speaker 1: with some of these loans and payments, how how financially
Speaker 1: responsible you are according to ICO. So making sure that
Speaker 1: that ratio that there's a bigger percentage of ratio between
Speaker 1: what's available to you and what you utilize. Yeah, I
Speaker 1: think this is the most the least understood part of
Speaker 1: the FICO score because people see that thirty percent and
Speaker 1: they say, oh, I need to have somewhere between ten
Speaker 1: and of credit in order to keep a good credit score,
Speaker 1: And that is a miss that's a misnomer. It'stent max,
Speaker 1: not keep thirty percent ad or around. And so you
Speaker 1: should never keep a balance on your credit card. There's
Speaker 1: debate obviously on the topic, but the way that cards
Speaker 1: are set up to be paid is that you're the
Speaker 1: day that your credit card will report to the credit
Speaker 1: bureaus is different from the date you are build, and
Speaker 1: so if you are build on the billing date, you're
Speaker 1: not going to pay any interest for what you just accrued.
Speaker 1: But if you still have a little bit of balance
Speaker 1: on the day that they report to the credit bureaus,
Speaker 1: they're going to see that you had activity, Like the
Speaker 1: credit bureaus will see that without the credit card company
Speaker 1: charging you interest for keeping that revolving balance. So don't
Speaker 1: worry about like if you're paying your credit card off
Speaker 1: every month and they're like, oh, they're gonna see zero
Speaker 1: every month and they're gonna think I'm not using credit. No,
Speaker 1: they see you paid your bill every month. They see
Speaker 1: you know what's on there, and that you paid your bill,
Speaker 1: that you're on time. The credit card company will report
Speaker 1: that you are on time. They will get that. So
Speaker 1: don't worry. Don't pay for a higher credit score. It
Speaker 1: defeats the purpose. Your credit score helps you save money,
Speaker 1: so paying for it is not wise good word. So
Speaker 1: the next part is average length of credit history. And
Speaker 1: so if the first two are highly weighted, this one's
Speaker 1: a midweight but it is important. It just takes the
Speaker 1: average length of every loan or card that you have
Speaker 1: and gives you an app like how long it's been open,
Speaker 1: and gives you an average length of history. And so
Speaker 1: we realized the importance of this one firsthand because we
Speaker 1: churned credit cards for travel hacking, not like every month,
Speaker 1: but every every three or four months. And so Travis
Speaker 1: actually has a credit score of eight hundred. That's excellent.
Speaker 1: So we don't try and we're not trying to get
Speaker 1: any better than that. But he was denied for his
Speaker 1: last two credit cards because and he was fine before,
Speaker 1: but we refinanced our home in July of last year,
Speaker 1: and so we we didn't realize that, um because we
Speaker 1: close cards like before the year's up, so we don't
Speaker 1: have to pay the annual fee. Again, he doesn't have
Speaker 1: any like credit card history like I do. I opened
Speaker 1: a card at eighteen, so like I can churn every
Speaker 1: every other month and virtually no difference on my score.
Speaker 1: But because we refinanced our home and we took those
Speaker 1: several years off of the his credit history, that really
Speaker 1: impacted his average length of credit history. So right now
Speaker 1: it's eight months and he literally just got denied for
Speaker 1: a card last week. So but everything else is excellent.
Speaker 1: How did that take years off his credit history? Like
Speaker 1: if he had still previously had cards, did they not
Speaker 1: see that? Because we closed the cards before a year
Speaker 1: and so he didn't have a full year on the
Speaker 1: other card that he had. And now I mean, he
Speaker 1: only has eight months of credit history according to FICO,
Speaker 1: he only has eight months of credit history because when
Speaker 1: we closed one loan for our first mortgage and refinanced
Speaker 1: that made that started a new loan, so that credit
Speaker 1: history throughout his adult years not had a credit card
Speaker 1: for longer than a year, and we just didn't think
Speaker 1: about it because we didn't start travel hacking until we
Speaker 1: had had our home for almost a year, so he
Speaker 1: had almost a year of you know, on a loan
Speaker 1: and that was that was our only loan at the time.
Speaker 1: We didn't start travel hacking until we paid off all
Speaker 1: our debt, so we started with a year's worth of
Speaker 1: credit history and good credit. So so even with a
Speaker 1: high credit score, they're still looking at what makes up
Speaker 1: that credit score and making their decision off of that.
Speaker 1: Are we able to see, as like the consumers, what
Speaker 1: the different percent like where we're weighted with it. So
Speaker 1: you can sign up for credit Karma actually and they
Speaker 1: will tell you and this is how I figured it
Speaker 1: out that he has like excellent credit, but and it'll
Speaker 1: show you your different um like all the five factors
Speaker 1: and give you a little color. If it's green, then
Speaker 1: it's good. And then under length of credit it's red
Speaker 1: and it says eight months. So we're gonna wait until
Speaker 1: that is at least a year before we try again
Speaker 1: for him. Okay, nice, thanks are answering all my questions
Speaker 1: on I It has to do more with the credit
Speaker 1: cards more so than a mortgage or car loans. So
Speaker 1: that's so that's the different type of credit. Um speaking
Speaker 1: to credit mix, it's so interesting to realize that even
Speaker 1: if you have a good score, they're still going to
Speaker 1: look at the different makeups of that score and make
Speaker 1: their decision off of that. So you do kind of
Speaker 1: want to look good in each of these categories, Yeah,
Speaker 1: you really really do. So the other ones that also
Speaker 1: play into your overall credit score again is your type
Speaker 1: of credit and new credit both carry ten percent weight,
Speaker 1: so not important enough to lose sleep over obviously, but
Speaker 1: you would like to see various types of loans, and
Speaker 1: they don't want to see a lot of credit applications altogether,
Speaker 1: which is kind of what you're indicating with Travis and
Speaker 1: Jen like kind of yeah, this rotating thing, well not
Speaker 1: a lot of time, but also that you've got different types.
Speaker 1: So that's why if you're shopping for a mortgage or
Speaker 1: a car loan, you have the option to get pre
Speaker 1: approved and you can do that as many times as
Speaker 1: you want to get the best deal without that affecting
Speaker 1: your score. So no, that you can do that, and
Speaker 1: I think that that's a thing that has changed too.
Speaker 1: Like I used to hear, don't check your score. It
Speaker 1: affects your score, and now they've changed that where yeah,
Speaker 1: if you know what's happening, it's so funny. All the
Speaker 1: things our parents told us growing up, or other people
Speaker 1: told us growing up their finance related are so negligible now,
Speaker 1: yet we still believe them and they're and they're not
Speaker 1: important anymore because technology has allowed so many advances and
Speaker 1: taken the things that used to be like really annoying
Speaker 1: and made them convenient. And the credit score is one
Speaker 1: of them. So you still your credit score um from
Speaker 1: the actual bureau is free once a year, that's always been.
Speaker 1: But you can do like a regular credit check at
Speaker 1: credit Karma and that doesn't affect You can do that whenever.
Speaker 1: It's not an official report, but you can do that whenever,
Speaker 1: and that's free, that doesn't affect your score. Pre approval
Speaker 1: for loans doesn't affect your score. Like they don't want
Speaker 1: to see you have like twenty applications for credit in
Speaker 1: one month. That's kind of like they want you to
Speaker 1: keep that down. But one every three months they don't
Speaker 1: really care about. All right, that is this one. So
Speaker 1: you guys all know what a credit score entails. So
Speaker 1: I guess we maybe should have we should have also
Speaker 1: defined credit report because that's different from the credit score.
Speaker 1: Your credit score is on your credit report and the
Speaker 1: things that are on your credit report determine your credit score,
Speaker 1: so they are different things. And we will talk about
Speaker 1: the credit report a little bit in this next article
Speaker 1: from the Balance and it is ten ways to improve
Speaker 1: your credit score, and we won't go through all ten,
Speaker 1: but they are really good ways. Again, improving your credit
Speaker 1: score is a long game. So if you don't have
Speaker 1: any deliquencies or you know you're going good, then most
Speaker 1: of the time it's just keep paying those bills on
Speaker 1: time and just you know, keep going maintain right. Like
Speaker 1: it's not there's no secret to growing like by fifty
Speaker 1: points in a month. That's just not the point. And
Speaker 1: uh yeah, anybody that tells you they can do that
Speaker 1: is lying. So the first one on here is definitely
Speaker 1: it's get a copy of your credit report. And then
Speaker 1: I'm also going to combine that with the other one
Speaker 1: that's dispute any errors, because that's why you get a
Speaker 1: copy of your credit report is so that you can
Speaker 1: make sure and you want to get a copy of
Speaker 1: your credit report from each of the major bureau so
Speaker 1: experience Equifax, TransUnion. You need one from each of those
Speaker 1: and then you'll see usually they are the same for
Speaker 1: all three. It's not common, but it's not uncommon that
Speaker 1: there will be errors. Don't expect them, but don't be
Speaker 1: surprised if you find one, and you can get the
Speaker 1: full official report from each of those bureaus at annual
Speaker 1: credit report dot com once a year, or like I
Speaker 1: said before, you can just check at credit Carma whenever,
Speaker 1: and honestly, like I feel like credit carm is good enough,
Speaker 1: and then if you see something weird on Credit Karma,
Speaker 1: then get your annual credit report, but definitely do it
Speaker 1: at least once a year. So if you find an
Speaker 1: an accuracy, you're going to have to dispute it. If
Speaker 1: you see it on multiple reports, you're actually gonna have
Speaker 1: to dispute it at each bureau. So if you see
Speaker 1: it on two reports, you're just gonna report it to
Speaker 1: those two bureaus. If you just see it on one,
Speaker 1: you only have to do it at one, or if
Speaker 1: you see it on all three, unfortunately, you have to
Speaker 1: do it at all three. But the way you do
Speaker 1: that is that each bureau has a dispute center on
Speaker 1: its website so all this can be done online. It's
Speaker 1: very easy. You don't have to pay somebody to do it,
Speaker 1: and so you can literally just google Equifax Dispute Center
Speaker 1: or TransUnion Dispute Center and you will find it. It It
Speaker 1: will be the first thing on Google. But yeah, so
Speaker 1: that's how you dispute any errors. And then also if
Speaker 1: you get any like if you have any delinquencies that
Speaker 1: you pay off and you see one of those like
Speaker 1: negative dings on your credit report but it says paid
Speaker 1: in full, you can actually get that taken off, or
Speaker 1: you can attempt to. So you can write what's called
Speaker 1: a goodwill letter and ask the bureau to take off
Speaker 1: anything like any of those paid in full delinquencies off
Speaker 1: of your off of your credit report. And we're gonna
Speaker 1: I'm gonna put a link to a sample goodwill letter
Speaker 1: in the show notes if you want to see one
Speaker 1: of those. But that's the most important, that's the easiest thing.
Speaker 1: If you're going to improve your credit score by leaps
Speaker 1: and bounds very quickly, this is the most important way
Speaker 1: to do it. But not everybody has these. This is
Speaker 1: just like if you have errors or paid off delinquencies,
Speaker 1: it's a good way it's good to know where you're
Speaker 1: starting from. I mean similar to when we talk about
Speaker 1: budgets and tracking your spending, like this is the equivalent
Speaker 1: to that. What are we working with right, what is
Speaker 1: going on? What with our score? Is the report accurate?
Speaker 1: And then go from there. So another thing that they
Speaker 1: say to improve your score if that's your aim in
Speaker 1: this again not talking necessarily to those who have a
Speaker 1: great score and are just a maintenance mode, but they
Speaker 1: recommend avoiding new credit card purchases and opening new cards.
Speaker 1: So new credit card purchases will raise what they call
Speaker 1: your credit utilization rate, the ratio of your balance to
Speaker 1: your limit, and what we talked about earlier, so we
Speaker 1: don't want to go beyond thirty percent ratio credit utilization
Speaker 1: rate of what is our credit limit and how much
Speaker 1: of that are we utilizing. So be aware of your
Speaker 1: credit limit, how much of that you're spending, and don't
Speaker 1: make those new purchases. Keep that percentage of credit utilization
Speaker 1: rate low. And also opening up new cards can also
Speaker 1: impact your credit score. So if you if you've not
Speaker 1: got a great credit score, opening up multiple accounts at
Speaker 1: once is not going to be a great idea. Yeah,
Speaker 1: absolutely so The next recommendation is to leave accounts open.
Speaker 1: And so this is for that credit length history. So
Speaker 1: if you get a credit card at eighteen and you
Speaker 1: just leave that open, that is going to build your
Speaker 1: credit length history over over your lifetime. So that's what
Speaker 1: I did, and I didn't I didn't know That's what
Speaker 1: I was like. I didn't know that's what it would
Speaker 1: do for me. I just thought my parents never had
Speaker 1: credit cards, and I'm smarter than my parents because I'm eighteen,
Speaker 1: so I'm gonna get a credit card. That was the
Speaker 1: reasoning behind that financial decision. I've been wise from a
Speaker 1: young age. It's always good to say I'm smarter than others.
Speaker 1: But thankfully that card does not have an annual fee,
Speaker 1: and so I've had it open since I was eighteen,
Speaker 1: and that has like solidified my credit history length um.
Speaker 1: And so I think your first step if you're just
Speaker 1: starting out with building credit is to get a no
Speaker 1: annual fee card and just leave it open. Make one
Speaker 1: put one bill on auto pay for that credit card, um,
Speaker 1: whether it's paid monthly or quarterly or whatever, and just
Speaker 1: let it run. Or if you've chase, I don't, I
Speaker 1: don't put any purchases on that card anymore. But because
Speaker 1: I have Chased and I have other Chase cards, it
Speaker 1: considers like my account still active and it's not closing
Speaker 1: the card I don't use. But some credit card companies,
Speaker 1: if I didn't use Chase and I never use that card,
Speaker 1: they might just close it on me. And you don't
Speaker 1: want to risk that, so literally open up the card,
Speaker 1: just put one bill on auto pay and just leave
Speaker 1: it there. But you don't want to do one with
Speaker 1: an annual fee because again you don't want to pay
Speaker 1: for a higher credit score. That's like not the point.
Speaker 1: So yeah. Or and secured cards if you can't get
Speaker 1: a regular credit card, then a secured card is where
Speaker 1: you put money onto the card or you put you
Speaker 1: give the bank like two hundred dollars and that makes
Speaker 1: your limit two hundred dollars, so something like that. So
Speaker 1: maybe you have like a ten dollar bill you want
Speaker 1: to put on auto pay for that and you give
Speaker 1: the bank a hundred and twenty and then that is
Speaker 1: covering for the year for that card. So yeah, it
Speaker 1: was a that's a big thing. And then don't don't
Speaker 1: close the accounts. Yeah, again, if there's no annual if
Speaker 1: there is close it if you're not going to use
Speaker 1: it anymore and it has an annual fee, then there's
Speaker 1: other ways to increase your scored that like you said, jend,
Speaker 1: don't pay for that score. The next tip is to
Speaker 1: pay off your debt. So, as we've mentioned, your payment
Speaker 1: history makes up thirty of your credit score, so do
Speaker 1: not pay to increase your credit score. The point of
Speaker 1: good credit is to save you money on loans and
Speaker 1: credit card rewards, so paying interest on revolving credit card
Speaker 1: debt does not make sense. So definitely this advice of
Speaker 1: frugality and becoming debt free still remains. Definitely, pay off
Speaker 1: that debt. Mm hmmm for me. The last one on
Speaker 1: this list is get professional help. So this is a
Speaker 1: last resort option, but it is an option. I don't
Speaker 1: want you to be afraid of it. Again, don't pay
Speaker 1: someone to help you clean up your credit. Like these
Speaker 1: are all things that you can do yourself, but if
Speaker 1: you do have impulse control problems or if you just
Speaker 1: need somebody, you just need help, there are plenty of
Speaker 1: nonprofit credit counselors that offer debt management plans that can help.
Speaker 1: I was, I was on the phone with a listener
Speaker 1: and she signed up for one of these things. I
Speaker 1: was like, tell me you were experience, and she was like,
Speaker 1: it really just helped, like put everything on one payment
Speaker 1: for me and like made it easier mentally for me
Speaker 1: to get over the hump, Like it puts somebody else
Speaker 1: in charge. And it was a weight lifted. And so yeah,
Speaker 1: I like I understood that it's not something I would
Speaker 1: do because I'm a nerd and like I like to
Speaker 1: do this stuff myself. But sometimes, like if you're not
Speaker 1: a nerd, that's okay. If you have too much stuff
Speaker 1: on your plate and you just need that weightlifted, that
Speaker 1: mental load off, you can definitely find a nonpro fit
Speaker 1: credit counselor and a debt management plan through them. So
Speaker 1: definitely it has to be nonprofit. Yeah, get help, but
Speaker 1: doesn't have to be expensive help, right, And I mean, yeah,
Speaker 1: it doesn't have to Yeah I have to cost you
Speaker 1: at all. Yeah I'm pretty sure, Like I'm not I'm
Speaker 1: not sure what the cost was, but I'm pretty sure
Speaker 1: it did not cost her. That's so great. Yeah, help
Speaker 1: is available. And then the last thing We've talked about
Speaker 1: it already, but just being patient, this isn't going to
Speaker 1: happen overnight. We can't find out we've got a low
Speaker 1: credit score yesterday and have it increased tomorrow. This is
Speaker 1: a long game, so there are very few things we
Speaker 1: can do to build our credit fast. But doing some
Speaker 1: of the things that we've just listed out, you know,
Speaker 1: in these last ten minutes, that will help. Have your
Speaker 1: sights on all of these five areas with a particular
Speaker 1: focus on. Yeah, the payment history and you're the ratio
Speaker 1: of what you utilize in your line of credit. That'll help. Yeah,
Speaker 1: you know what else will help? It helps me. Every
Speaker 1: week it's the bill of the week. That's right, It's
Speaker 1: time for the best minute of your entire week. Maybe
Speaker 1: a baby was born and his name is Williams. Maybe
Speaker 1: you paid off your mortgage, Maybe your car died and
Speaker 1: you're happy to not have to pay that bill anymore.
Speaker 1: That's bills, Buffalo bills, Bill Clinton, this is the bill
Speaker 1: of the week. Hi, my name is Mary Kate and
Speaker 1: I actually just graduated from college, and my bill of
Speaker 1: the week is my dad's bill. Because he fully explained
Speaker 1: everything about paying off my college leans and that they're
Speaker 1: starting in a month and calming me down after me
Speaker 1: freaking out about sending them and helping me figure out
Speaker 1: how to pay them off in about five years is
Speaker 1: my goal. So yeah, that is my bill of the week.
Speaker 1: I hope you guys are having a great week and
Speaker 1: love them life. I love you both. High Bill, your dad, Amen, Amen, Bill,
Speaker 1: given that sage dad advice. Oh, nothing like Dad Bill
Speaker 1: to talk you off the ledge and make it. See
Speaker 1: Dad Bill, Dad Bill, My dad named Bill. Oh, I'm
Speaker 1: so glad. These are the ones that I live for,
Speaker 1: is when there's an actual person named Bill. So thanks
Speaker 1: Mary Kate, and congratulations on graduating and having a plan
Speaker 1: for how you're going to pay down that debt and
Speaker 1: actually listening to your dad, because not many young people
Speaker 1: listen to their parents. And as a new parent, I'm
Speaker 1: starting to really appreciate that. Yes, Oh, it was your
Speaker 1: rebellion of your parents, Jen that led you to get
Speaker 1: a credit card, led me to this life. All right,
Speaker 1: here's our second bill, High Frugal friends. This is Carla,
Speaker 1: and my favorite bill is the bill my employer has
Speaker 1: to pay me for unused sick time every year. Any
Speaker 1: hours accumulated over the allotted amount I get paid for
Speaker 1: at the end of the year. It almost adds up
Speaker 1: to a full extra paycheck. It's the best thing to
Speaker 1: start a new year with. Bye yes, Carla, Carla, that's amazing.
Speaker 1: That is a great bill. I love the bills that
Speaker 1: are paid to us a little bit more than like
Speaker 1: the bills that I pay. I'm going to be honest.
Speaker 1: And what an amazing incentive that your company does. I'm
Speaker 1: not sure that I've heard of that policy before, but
Speaker 1: it benefits them too, because that means you're showing up
Speaker 1: for work. It probably means that it's an incentive for
Speaker 1: you to take care of yourself. It's like a win
Speaker 1: win win across the board for eating well and exercising
Speaker 1: and showing up and then getting paid extra. Washing your hands,
Speaker 1: washing your hands. We've all so much recently about how
Speaker 1: not to get sick a man. I love it. That's awesome, Carla.
Speaker 1: I Travis got his sick time paid to him when
Speaker 1: he left his employer, but that would have been cool
Speaker 1: to receive it the first of the year. So kudos
Speaker 1: to your company for being really cool. If you want
Speaker 1: to submit your bill of the week, visit Frugal Friends
Speaker 1: podcast dot com slash bill. Leave us a bill again,
Speaker 1: whether it's a person named Bill or bills paid to you,
Speaker 1: bills you're paying. We love to hear him. And now
Speaker 1: it's time for Jill's favorite time of the week, her
Speaker 1: real favorite time of the week. Round Round, Round, round, Round.
Speaker 1: So typically we get really vulnerable and honest in this area,
Speaker 1: but I wanted to give Jill a break this week.
Speaker 1: Thank you. I'm resting, I'm resting the vulnerability, and I'm
Speaker 1: protecting my vulnerability this week. Yeah, that's like, that's that
Speaker 1: sounds like a trendy term. Is that thing? Is that
Speaker 1: something the kids are doing right now? Protecting their vulnerability?
Speaker 1: It's something I advise people to do as a counselor good. Okay,
Speaker 1: vulnerability without protection leads to exploitation. Say that again, say
Speaker 1: it more time. Vulnerability without protection leads to exploitation. I
Speaker 1: want that on a on a bumper sticker. Yeah, vulnerability
Speaker 1: is good and beautiful. It's nothing we should be ashamed of.
Speaker 1: But it does require protection Otherwise, in the hands of
Speaker 1: the wrong people, it can be exploited. Oh my gosh,
Speaker 1: that's like hashtag social media. Yea, oh my god. Um, Okay,
Speaker 1: that's not that's not what we're talking about. Sliding around though,
Speaker 1: that we are protecting vulnerability, but because we are I
Speaker 1: love that. Um okay, so we're just gonna talk about
Speaker 1: some tips, like our personal tips with credit that weren't
Speaker 1: talked about in the articles. Um So, my favorite is
Speaker 1: called Experience Boost and it is a free service, but
Speaker 1: it only works for experience. Hence it's called experience Boost.
Speaker 1: So if the bank is looking at the experience score
Speaker 1: and they tend to jill you actually like reminded me
Speaker 1: of this. If they look at two scores, will take
Speaker 1: the higher one. So if one of those scores is experienced,
Speaker 1: this could really work for you. And it's a free
Speaker 1: service and you sign up for it and it when
Speaker 1: you sign up, it will count bills like your phone
Speaker 1: utilities streaming services toward payment history, so you can have
Speaker 1: more payment history. You can get that boost on things
Speaker 1: you're already making. So this is definitely great. If you
Speaker 1: are a renter, then you can I don't I don't
Speaker 1: know if it counts rent it would probably say that,
Speaker 1: but you know, phone utilities streaming can definitely boost your
Speaker 1: credit score if you count those. That is a really
Speaker 1: helpful tip, especially for those, yeah, who don't have a
Speaker 1: lot of credit or aren't really engaging with credit cards,
Speaker 1: but still need a good credit score for maybe these
Speaker 1: other larger purchases like a house. Even our debt free folks,
Speaker 1: we still oftentimes can't pay for a house out of pockets.
Speaker 1: So having a good credit score does apply to yeah,
Speaker 1: most of us. My tip which she helped me with, Jen,
Speaker 1: I'm just being real all, let that be the vulnerable
Speaker 1: part of this lightning round. So don't pay off a
Speaker 1: loan within six months of buying a house. So if
Speaker 1: you do plan to buy a house in the next
Speaker 1: six months even to a year, don't pay off any
Speaker 1: lingering loans that you have within those six months of
Speaker 1: like settlement date where you're going to have mortgage lenders
Speaker 1: be looking at your credit score and all of that.
Speaker 1: This could diminish that score or be a hindrance if
Speaker 1: you've got some of those loans paid off. So yeah,
Speaker 1: that's really just like for a car loan. Sometimes people
Speaker 1: ask me, should I pay off my car loan before
Speaker 1: I get a mortgage, And I'm like, well, if it's
Speaker 1: been within six months, just keep it. Stash that cash
Speaker 1: because closing an account, like we said earlier, closing account
Speaker 1: does lower your credit score for a time. It's just
Speaker 1: a time, it's not a big deal. But if you're
Speaker 1: trying to buy a house like pretty soon, don't, I mean,
Speaker 1: you just need every advantage you can get, so like,
Speaker 1: don't don't do it right then. But otherwise I'm fully
Speaker 1: for paying off cars and student loans, so right then,
Speaker 1: that's the lightning round. Very tips, tips, tips, tips, tips, tips,
Speaker 1: All right, thanks so much for listening, and thank you
Speaker 1: for your awesome fun frugal reviews. Um like this one
Speaker 1: from doodle Gal. Fun and Frugal just happens to be
Speaker 1: five stars. Love this podcast. They make me feel like
Speaker 1: I'm just chatting with my girlfriends. Great information, always making
Speaker 1: me think of other things I can do to save
Speaker 1: money or being more mindful of what I'm buying. Thanks
Speaker 1: doodle and sweet doodle Gal. So glad to have you,
Speaker 1: and thank you for leaving us a review. It helps
Speaker 1: more than you realize. We also want to thank our
Speaker 1: friends who share these episodes on social media, So when
Speaker 1: you share the latest episode and tag us on Facebook
Speaker 1: or Instagram, we add you to our monthly drawing. For
Speaker 1: every five tags and reviews we get each month, we
Speaker 1: give away a copy of the Frugal Friends workbook. Yes
Speaker 1: so keep leaving us those reviews, screenshot them and send
Speaker 1: them to Frugal Friends Podcasts at gmail dot com. And
Speaker 1: don't forget to tag us on social We do see it,
Speaker 1: even if we don't respond because we're lazy and we
Speaker 1: may not see it until several days later. I'm not
Speaker 1: good fully on social media. But we can see it,
Speaker 1: and we appreciate it, and we like it, and thank you.
Speaker 1: See you next week. Bye. Frugal Friends is produced by
Speaker 1: Eric Sirianni Jill. This cake has been staring at me
Speaker 1: the whole time we've been recording the cream cheese frosting. Yeah,
Speaker 1: I just want to let everybody in the air waves
Speaker 1: know I made my I made a cake from scratch
Speaker 1: with blueberries I hand picked with my own hands, because
Speaker 1: how else would you pick them except with your mouth?
Speaker 1: But that's gross. And I made my own cream cheese frosting.
Speaker 1: And I have won the domestic Awards for I was
Speaker 1: going to say, look at how domesticated you are, but
Speaker 1: you've apparently already given for the month of May and
Speaker 1: this was just May second that I did. I'm really
Speaker 1: goodshing it. I would love to try that cake. You will, Yeah,
Speaker 1: I hope it's still good by then maybe, or I
Speaker 1: might just get in the car to you before we
Speaker 1: record the next episode. Get my hands on that cake.
Speaker 1: Blueberries and lemons are such an amazing combination. Yeah, oh
Speaker 1: my gosh, I can't say enough good things about that combo.
Speaker 1: Kind of like us, Oh, you're the blueberry to my lemon,
Speaker 1: because we all know I'm the tart one, you're the lemon.
Speaker 1: Yeah bye,