Get 3 facts about building credit when you have no or bad credit.
Money Girl
269 MG Get Credit with No or Bad Credit
Hey Fidelity. How can I remember to invest every month? With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs. Oh, that sounds easier than I thought. You got this. Yeah, I do. Now, where did I put my keys? You will find them, where you left them. Investing involves risk, including risk of loss, fidelity brokerage services LLC member NYSE SIPC. H5N1 bird flu is spreading in some animals. If you work with poultry, dairy cows, wild animals, or with raw, unpasteurized milk, wear protective gear, and take precautions. cdc.gov/birdflu, a message from CDC. Hi, everyone. You're listening to another episode of the weekly Money Girl podcast. I'm Laura Adams, the author of Money Girl Smart Moves to Grow Rich. I received an email from Amanda, who asks, "Recently, my husband and I applied for a car loan with two different lenders, but got turned down." He was denied due to bad credit, and I was denied for having no credit. I'm confused because the lender showed different credit scores for him. How can we clear this up and improve our credit scores? Amanda's question touches on several issues about credit scores that are commonly misunderstood. It's important to know how the credit system works and to maintain good credit scores, so you have the option to get credit when you need it. Credit fact number one. You must have credit accounts to have a credit score. Lenders and merchants rely on credit scores to make decisions about potential customers. A credit score is a summary of the information in your credit report at the moment it's reviewed. If you have little or no credit history, there simply isn't enough data in your file to generate a credit score. In other words, it isn't that you have bad credit, but you have no credit. This is a common problem for young people and new U.S. residents who are just starting out. But in a moment, I'll tell you an easy way for anyone to build credit. Your credit report can also be too thin to generate a credit score when your previous credit accounts have expired and fall off your credit file. For instance, if you pay off a student loan or decide to cancel a credit card, it only stays on your credit report for a certain period of time. Closed accounts with negative information, like late payments, remain on your credit report for seven years. Old accounts with positive information stay on your credit report for 10 years. Many financial obligations, like utility bills and rent, don't affect your credit because they're not typically reported to the national credit agencies, which are Experian, Equifax, and TransUnion. So I recommend that Amanda maintain at least one credit card or installment loan in her name that reports payment information to the credit bureaus. Active accounts stay on your credit file indefinitely and ensure that you'll always have enough information to generate credit scores. Credit fact number two, you have more than one credit score. The fact that there are over a thousand different credit scores is probably the most misunderstood aspect of the credit system. Lenders can purchase credit scores from the three national credit agencies, from various credit scoring companies, or use their own credit scoring models. There are credit scores for different purposes, like getting a mortgage, a car loan, or insurance. Different scores are used to measure different types of risk, such as the likelihood that you'll repay a loan, declare bankruptcy, or even get into an auto accident. The bottom line is that companies use a variety of credit scores with different score ranges as tools to evaluate you. Your credit score is kind of like your weight because it can change on a daily basis and depends on the scale you use. For instance, if you step on a scale that measures weight in metric kilograms, you'll get a very different number than if you use one that measures weight in pounds. Additionally, it's possible that not all of your payment data gets reported to each of the three credit agencies. Your creditors may choose to report data to just one or two of them. That means the exact same credit scoring model could give different credit scores depending on which agency the data comes from. So the actual credit score number isn't as important as where you fall in its range from poor to excellent. The reason each lender gave Amanda's husband a different credit score is probably because they evaluated him using different scoring models. Or because the scores were based on data from different credit bureaus. H5N1 bird flu is spreading in poultry and cows. It's rare in people, but bird flu can make you sick. If you work with poultry, dairy cows, wild animals, or with raw, unpasteurized milk, wear protective gear like coveralls, NIOSH-approved respirators, and eye protection. And wash your hands often. If you start feeling sick, seek medical care and tell them you work with animals. Learn how to reduce your risk at cdc.gov/birdflu. A message from CDC. I love learning and anything that makes learning easier. If you're a parent and your child needs some homework help, then IXL is a right for your family. IXL is an online learning program for kids covering math, language arts, science, and social studies. IXL has interactive practice problems for topics from pre-K to 12th grade and everything is organized by grade and subject. As kids practice, they get positive feedback, awards, and explanations for wrong answers. IXL figures out what your kids need more help with and recommends more topics to practice. Their videos, lessons, sample problems, and learning games too. One subscription to IXL gets you all subjects and all grade levels. Membership started just $9.95 a month. It's no wonder IXL is used in 95 of the top 100 school districts. I think the positive feedback that IXL gives is really crucial when it comes to learning. So make an impact on your child's learning, get IXL now, and money girl listeners can get an exclusive 20% off IXL membership when they sign up today at IXL.com/moneygirl. Visit IXL.com/moneygirl to get the most effective learning program out there at the best price. Hey Denver, want to pack on the adventure? Well, look no further because two bags always fly free on Southwest. That means this foodie can bring green chili for himself and his hosts. Greatest guest ever? And this comfy couple can pack all the socks and sandals they need. You can never have enough matching socks or sandals as well as something for their best friend Luna. Two bags fly free. That's a big flex, only at Southwest. First and second check bags wait in size limits apply. Credit fact number three, you don't need debt to build credit. Many people mistakenly believe that they have to get into debt in order to build credit. That's simply not true because you can use a credit card to improve your credit for free. Making credit card charges that you pay off in full and on time each month shows that you know how to use credit responsibly and it doesn't cost you one penny of interest. If you cannot get approved for a regular credit card, everyone over the age of 18 can get a secured credit card. You're required to make an upfront refundable deposit that becomes security for your available credit limit. You choose the deposit amount which could range from two hundred to three thousand dollars. Using a secured credit card that reports transactions to the credit agencies would be an easy way for Amanda to establish a credit history and for her husband to improve his low score. The card company may even give you the option to convert to a regular unsecured card after you demonstrate that you can use a secured card responsibly. In the show notes, I'll include links to the best secured credit cards that do report the credit agencies and have the lowest fees. As you can tell from Amanda's dilemma, having no credit is just as problematic as having bad credit. Building up and maintaining good credit is critical to your overall financial health because it allows you to borrow money for emergencies or plan purchases at the lowest possible interest rates. Plus, having good credit gives you other benefits like getting competitive quotes on insurance, paying lower security deposits, and impressing a potential landlord or employer. To raise your credit scores, your goal should be to improve the information in your credit reports by maintaining active credit accounts, making payments on time, and not maxing out credit cards. Also, watch for errors that could be hurting your credit scores. The law entitles you to get each of your three credit reports for free once a year and to get any inaccuracies corrected in a timely manner at annualcreditreport.com. As I mentioned, you'll find links to everything I covered in the podcast, plus more resources like my free credit score survival kit in the Money Girl section at quick and dirtytips.com. Just look for episode number 269 called "How to Get Credit with No or Bad Credit." While you're there, sign up for the free Money Girl newsletter, join the Money Girl Facebook page, follow on Twitter, and submit your money question. Also, if you're not subscribed to the podcast on iTunes, that's how most people get the show. If you like Money Girl, I'd really appreciate it if you'd post a quick review on iTunes so potential subscribers can get your feedback. I'm glad you're listening to change. That's all for now. Courtesy of Money Girl, your guide to a richer life. H5N1 bird flu is spreading in some animals. If you work with poultry, dairy cows, wild animals, or withdraw unpasteurized milk, wear protective gear, and take precautions. cdc.gov/birdflu, a message from CDC. "Cheers to a great day and this ice cold corona." You know what would make this even better? My grandma's carne asada. Or your grandma here with us, making carne asada. She does love a cold corona. Throw in some dancing. We can watch the game. I'll drink to that. So we back your concert with football, food, dancing, and corona. And your grandma. Or we could keep it simple. Simple is good. You want a corona? Thanks. Salute to the perfect day. corona, la vida massfina. Get your corona at ordercorona.com. Relax responsibly. Corona extra beer imported by Coronavirus, Chicago, Illinois.