Building Credit with Garrett & Juan
On this episode of Financially Naked: Stories from The Financial Gym, our hosts are Garrett and Juan, two Certified Financial Trainers at The Financial Gym. This is the second episode in our mini-series about credit.
In a previous episode, we discussed the history and basics of credit scores and reports. Today, we're diving into the logistical steps of building your credit from the ground up, even if you're just getting started. If you have yet to hear that first episode, start there and then come back.
Podcast Notes
A credit score is a three-digit number ranging from 300-850. The score is comprised of factors such as the number of accounts, credit age, utilization rates, and payment history.
The highest score possible is 850, but scores in the 700s are considered great. Anything above 750 doesn't significantly impact your creditworthiness.
Lenders will use your credit score to assess if you will be a 'trustworthy' borrower. Your credit score is used to apply for loans, mortgages, rentals, and more.
You can check your credit score at annualcreditreport.com to assess your current standing.
Why do credit scores matter?
Your credit score affects the interest rates you are offered when borrowing money, which impacts the cost of borrowing.
A lower score may result in higher costs. The better your score, the better rate you'll get.
Revolving vs. Installment Credit
Revolving credit, like credit cards, remains open even after you pay the balance in full, allowing you to use it over and over.
Installment credit, such as mortgages and student loans, has a fixed term and closes after you've paid the balance.
How can I improve my credit score?
There's no wrong time to start building credit, but establishing credit early can be beneficial.
Paying your student loans, cell phone bills, and monthly utilities can positively affect your credit score.
A good way to start is to apply for a secured credit card. With this type of card, you provide the bank with a deposit, and they issue you a line of credit equal to the amount paid.
If you cannot pay your credit cards off in full each month, always make the minimum payment on time. This helps improve your credit score through responsible use.
Being added to a trusted friend or family member’s account as an authorized user can help your score.
Good credit is an aspect of your financial health. There are so many ways to build your credit, and if you need help figuring out where to start, a Trainer can help!
If you want to work with a Certified Financial Trainer to help improve your credit score, schedule a free warm-up call today! If you have any ideas or questions for the show, send an email to trainerpodcast@fingyms.com.
Resources
Meet The Trainers
Garrett Faulconer, Level 3 Certified Financial Trainer
Juan Valeriano, Level 2 Certified Financial Trainer