The basics of credit scores and reporting.

<div class="block">We&#39;re talking credit scores! Karl Jacobs, CEO and co-founder of Debtwellness.com, joined &#39;Stretching Your Dollar&#39; to run down the basics of credit reporting. He talked about resources for finding your score, why regularly checking on it is important and what to know about boosting and maintaining it.</div>

Stretching Your Dollar

Stretching Your Dollar: CEO Karl Jacob on the Importance of Credit Scores

Today is National Get Smart about credit days. So we're diving into credit and how you can better manage including a look at how to repair your low credit score if that's you. And joining me now is Carl Jacobs CEO and co founder of debt wellness dot com and loan Snap. Thanks for joining us. Good morning. Nice to be here. Likewise. So for people who may not even know what their credit score is, how do you get that information? Well, the great thing is there's lots of free resources out there for you to get your credit score. Um There are three bureaus that actually do your credit score. So one thing I would recommend is making sure you get all three of your credit scores. There's not just one. Unfortunately, you need to get all three because when people are lending you money, they're looking at all three scores, all three scores that you need to get to make sure you're in a position to borrow money. So identifying your score is key, but why is regularly reviewing it? So important, Carl I think the most important thing to remember is credit scores change and lots of things impacted. Uh some factors are obviously paying on time. Uh One other factor that's interesting is keeping your usage of credit low uh below 30%. And recognizing that at certain times during the month, that's when your current credit cards or current loans report to the credit agencies and you need to get it below 30% before that time. So the overall thumb rule of thumb is basically get your credit score uh and keep your basically usage of credit, meaning how much you borrow to, to under 30% of what you could borrow usage of credit below 30% of what your potential is. So now that we know what say your credit score is, can you break down where it falls within the range because it's not a particular number we want, right? We just wanna be in the ranges. Yeah, the ranges are that unfortunately, I wish I had a a good rule of thumb for that. Uh basically over 700 is good um over and that and that's kind of like something to think about. I mean, 800 to 8 50 is fantastic. Uh 7 40 to 7 99 is is, is really good. Um And then, you know, in the 5 80 to 6 69 is ok, but you could work to improve it. And that technique I just mentioned which a lot of people don't know which is keeping your usage under 30% will really help you uh on that one, paying on time is really important, obviously, uh that's kind of the, the baseline. Um And then when you get below say 5 80 that's in an area where you really need to go to work because usually that's you've missed a payment somewhere which happens and sometimes you can go back to the person or the group where uh the error happened. Hopefully it was an error and explain the situation and they'll remove it from your credit report. So one other technique is to basically challenge something on your credit report if you find something you think. Well, gosh, I did make that payment. Maybe they didn't get the check or maybe it was lost in the mail department or whatever it might be, then you can usually work with them to, to change that on your credit score, which is important challenge. Anything that you think is fishy on your credit report that's gonna stick with a lot of people. But what about this issue of only using 30% of your total maximum credit? There are two ways to handle this. Obviously, you can restrict what you use or you can get more credit. Is that actually something that could help your credit score increasing the amount of potential credit that you have? You bet. Well, that's another trick I have for, for your viewers, which is basically don't cancel credit cards. Um, a lot of people pay off their debt and think. Oh, gosh, great. Now I'm gonna cancel it. I, I would recommend not doing that. And, and the reason I say that is because your max available credit is an important step. And so that way you don't have to get new credit. You just keep, keep the old credit. In fact, I have a credit card that I got in college that I kept uh my original credit limit was I think $300 on that card, it's a little bit higher than now. But the nice thing is like that, that is a long term credit record um that I've kept up and that's important to people who are lending money to you. So I I recommend not canceling or closing those accounts because they look at that in two ways. One, it lowers your overall available credit. The second thing that it does um is it shows up in your credit report as a closed account, which is a negative as well hearing you said you had $300 credit. I had $50 worth of credit for my first credit card and I was so afraid of going into debt. Uh Now you mentioned a couple of key issues, Carl, what has the biggest absolute impact on lowering your credit score? The biggest impact is just gonna be paying those, those bills on time. Um That, that's the biggest um that, that's the one that will really uh negatively impact you. A late payment is one of those key factors and we actually built a site called debt wellness dot com to help you through the credit report. So the score is one thing you get. But if you've ever looked at your credit report, don't, don't be scared. It's a lot of data, um which is a great thing for computers to chew through and, and, and come up with interest things and the most important things because there's a lot of information to consume beyond your credit score on those, like a list of the different debts you have. Any time, there might have been a late payment, your entire history with that, that credit card or loan or personal loan or car loan, uh will be recorded and it's important to if you're, if you're gonna do it on your own, um to really go through it with a fine tooth comb, make sure that it's correct. Um And as well understand what debt is costing you. And I'd say that's the other thing that people don't think about a lot is, well, if I am gonna fix my credit, if I'm going to raise my score, I need to make my payments on time. So how do I pay off debts or pay down debts that are costing me the most? And I think that's something with rates rising that Americans are, are really concerned about right now. It's so critical because often we think about a bad credit score, but there's also a real consequence to a 23 25% interest rate on say five or $6000 worth of debt. So what is your absolute biggest tip to improve credit scores? Carl by absolute biggest tip is to pay those bills on time to make sure that you don't have a late payment. Mm Thank you so much Carl Jacob. Thank you for being with us and those great tips.