May 18, 2021 • 18 mins
Hello! and welcome to Everyday Finance and Economics with the Siglers! The podcast where we discuss what you need to know about personal finance and economics and give you practical advice on how to get started and be smart with your money.
This episode is a deep dive into consumer credit and credit scores. We go in to all the types of consumer credit, and every single thing that is considered in your credit score. Pretty vital information. Next week we'll be rounding out our credit series with tips on how to build and maintain your credit.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:07):
Hello, and welcome to everyday finance and economics
with the sicklers the podcastwhere we discuss what you need
to know about personal financeand economics, and give you
practical advice on how to getstarted and be smart with your
money.
Speaker 2 (00:20):
Where are your hosts, Glenn and Christina Sigler.
So Christina, what's going ontoday?
Speaker 1 (00:27):
Well matters.
This week is inflation.
Now inflation is simply the rateof increase of prices over a
given period of time.
Since the consumer price indexcame out a couple of weeks ago,
which we discussed, people havebeen really worried that prices
are rising too quickly.
It's natural for prices to riseover time, but since inflation
numbers have been above thefederal reserves target of 2%
(00:49):
recently, investors are worriedthat the federal reserve is
going to have to increaseinterest rates again, to get
prices, to go back down, bothfederal reserve chair, Jerome
Powell, and United States,treasury secretary, Janet Yellen
have suggested that thistemporary spike should not
become a problem because it'sjust a symptom of economic
recovery efforts.
Also, the price increases havebeen, have mainly been
(01:10):
concentrated in a few largerindustries that drove the
average up for everything.
And our economic term for theepisode is a reminder of terms
from last episode, secured andunsecured loans.
Secured loans means that you putup some collateral, something
that's pretty much equallyvaluable to you and the person
lending you money will come takeit.
(01:30):
If you do not pay them back.
And unsecured loan has nocollateral, but usually has
higher interest rates with that.
Let's continue with our secondpart in our credit series.
What are the, what are thestandard types of consumer
credit?
Speaker 2 (01:46):
Well, there's a lot, but we'll do, we'll try to go
over quickly.
The one most, most people areused to are credit cards.
Yeah.
And, um, you know, B you know, alot of people have multiple
credit cards they're issued bybanks, credit unions, other
financial institutions.
There are affinity brandedcards, you know, airlines, you
(02:06):
know, get the United or American
Speaker 1 (02:11):
Miles.
Absolutely.
Speaker 2 (02:13):
Um, um, and, and so you can even have a Disney
credit card card.
Um, so those are the, the, youcan get them through many
institutions, usually backed bysome financial institution.
There's two main brands, visa,and MasterCard are the two main
(02:34):
brands in the U S but there areother brands around as well,
American express.
They didn't start out as, um, inthe same mode.
There's, there's a slightdifference in them, the American
express card, the basic Americanexpress card and a Diner's club
card.
(02:54):
You have, you have to pay thatback at the end of each month,
whereas a MasterCard or visa,you don't have to pay that
Speaker 3 (03:03):
Back.
Now,
Speaker 2 (03:05):
American express has expanded and now they allow you
to not pay it back at the end ofeach month, but, and, and act
like a standard,
Speaker 3 (03:14):
Right.
Also, what about, what aboutblack cards really quick?
What are those?
Speaker 2 (03:20):
All right.
So there are levels withincredit cards, your basic card,
your silver, gold platinum, youknow, the, you know, they have
more and more, um, assets thatyou can charge and more and more
(03:40):
services that go along with it.
And so if you get one of these,you know, super fancy cards, you
can charge a whole lot of money,like buy a car, maybe even buy a
house
Speaker 3 (03:53):
With a credit card,
Speaker 2 (03:55):
Or, you know, all, all at once.
And, you know, they'll, youknow, do super fancy stuff for
you.
Like, they'll, they'll make thehotel reservations for you, or
they'll get you tickets to theconcert that nobody else can
get, or they'll get you intoairline.
They're just a whole bunch ofadditional services, private
(04:18):
services that, you know, people,um, you know, usually with a lot
of money or usually spend a loton credit, you know, those
things are attractive to them.
And so those services are a drawto get, to get their businesses
and those and that business is,um, lucrative to the companies
(04:40):
that have those cards.
Speaker 3 (04:42):
Interesting.
Okay.
Go off with the former brandingand marketing.
Yeah.
That makes sense.
All right.
Other types of consumer credit
Speaker 2 (04:50):
Cards and, you know, and this is sort of going out on
is not as fashionable today asit was, uh, years ago, you know,
before credit cards became big,but if you can get just a Macy's
card or you pick the name of thestore, um, and it allows you to
(05:11):
buy goods at that store oncredit.
Speaker 3 (05:16):
Yeah.
They still have those, those,they
Speaker 2 (05:17):
Still have them there , you know, but because visa,
MasterCard in America can beused everywhere.
They may not be as popular asthey once were.
Um, other types mortgages.
This is how most people buytheir homes.
Um, you take out a 15, 20, 25,30 year mortgage you're you're
(05:39):
alone, uh, that you're going topay back, uh, over that period
of time to, you know, whenyou're finished, you own the
house free and clear.
Uh, then there are home equityloans, which allows you allows
you to tap into the amount ofmoney, uh, the amount of value
(06:00):
that's in your home that is nottied up in debt.
We can get some money for thatand do virtually anything you
want with it.
You can improve your house.
You can pay for school, you canbuy a car, you can go on
vacation, but let me give you anexample, say I bought a house
for$200,000 and you know, rightnow I've paid off half of it.
(06:26):
I've got, you know, it's worth200,000 today.
And I only have a hundredthousand dollars in mortgage
left, left on that.
Well, I could go out and get ahome equity loan for about 10,
$15,000.
You know, if I get approved and,you know, fix up my house, you
(06:48):
know, send my son or daughter toschool, you know, go on a fancy
vacation, but now I've got, youknow, now I owe on my primary
loan.
I still own 100,000, but nowI've got a secondary loan
against
Speaker 3 (07:01):
My house of 15.
Speaker 2 (07:04):
Right.
And so now, if I don't pay
Speaker 3 (07:09):
Collateral,
Speaker 2 (07:11):
They, they take the house and they take, instead of
just taking a hundred thousanddollars, they take 115,000.
Cause I hope of them.
Then there's things calledconsolidation loans, which are
really just unsecured personalloans.
Um, it's not a credit card, butit's, uh, it's, it's going to go
through some of those very sameprocesses and it's not secured
(07:33):
by anything.
It probably has a higher rate.
You can borrow for any reason.
They typically go out and, youknow, up to five years for you
to pay them back, you know, atsome, um, you know, sizeable
interest rate, consolidationloans, personal loans are very,
again, very similar studentloans.
(07:54):
Yeah.
So, you know, paying foreducation can be costly.
Um, student loans can typicallyrun anywhere from 10 to 25 years
, uh, for, for folks to, youknow, finance the cost of their,
um, uh, undergraduate graduateprofessional degrees.
(08:16):
Um, and again, you know, thatis, you know, typically, um,
going to be unsecured.
Um, and, uh, but the, the onething about those is it's hard
to discharge student loans inbankruptcy.
Um, so if you declarebankruptcy, Hey, look, I, you
know, I don't have any money.
(08:36):
I can't pay off my debts.
You're still gonna own theyou're still gonna owe those
student loans.
Then there's things calledpayday loans.
They're short term, highinterest loans.
They're typically not, you know,if you're using payday loans,
that's usually not good.
Um, you know, you need, youknow, you're, you're in a
(08:59):
under-banked area.
You may have some financialdifficulties.
These things are, um, right forscams cash advances, short-term
loans on your credit card.
Um, you know, essentiallythey'll give you cash.
It becomes a charge on yourcredit card with a higher
interest rate, uh, auto loans,the, the loan is secured by the
(09:25):
auto itself.
You don't pay the loan.
They come take the car.
Speaker 3 (09:29):
Oh yeah.
Right.
Okay.
But pay your loan
Speaker 2 (09:33):
Life insurance loans.
So people get what we callpermanent life insurance, where,
you know, uh, there's terminsurance, enlightened and
permanent insurance terminsurance is I, I need this
insurance for 10 years.
You're going to pay a monthlyamount.
Something happens to you in, inthe 10 years you get that
amount.
(09:54):
Okay.
Permanent is a little bitdifferent.
Uh, permanent is not only do youget that, that value, but there
is an, uh, an investment in itwhere, you know, there may be
some equity market investmentsin there.
So not only do you get the valueof the life insurance, uh, state
(10:15):
of value, you get the value ofthe assets to go with it.
And, and you can have that, youknow, for the rest of your, it
doesn't stop when, and, youknow, at 10, 20, 30 years, it
just keeps going on.
And so what some people are ableto do, you know, after they've
had that insurance for quitesome time, they were able to
borrow not against the, thestated value, but against the,
(10:40):
the other assets that are withit.
And so you may have gotten ahalf a million dollars of life
insurance, but you made apermanent and the value of the
insurance.
Plus the other assets may beworth 750,000.
So you can take a loan againstthat 250,000 that, you know,
you've been paying into, uh,investment part that you've been
(11:01):
paying into over the lasthowever many years.
Speaker 3 (11:05):
And when you say, take a loan against what do you
mean?
Speaker 2 (11:08):
So it is like borrowings.
So what that other P that otherpart of the insurance is
essentially a mutual fund typeinvestment, where they've put
money in a certain, uh, mutualfunds that the life insurance
(11:29):
company, um, runs and you canborrow against.
And every month when you payyour life insurance premium,
they've put some money into thatfund for you and you can borrow,
and you can borrow against that.
Speaker 3 (11:46):
What did you mean against, does it just mean
borrow from them
Speaker 2 (11:49):
Borrow from that money now you're supposed to pay
that back.
Yeah.
But there are con you know,there are certain conditions
where you don't have to pay itback.
Okay.
And then there's family loansborrowing from friends and
family members.
You don't need a FICO score forthat, or credits for that.
You just have to get your familymembers to trust you and please
(12:11):
pay them back.
Cause that starts a whole bunchof family fights.
Speaker 1 (12:14):
Yes.
Don't break up your family overalone.
Yeah.
But that happens a lot.
Yeah.
It seems we've been talking alot about a credit score, but it
seems like it's kind ofimportant for your life to get
things.
What, what goes into your creditscore?
Speaker 2 (12:30):
Okay.
Like I said before, credit scoreis a numerical representation of
your credit history.
If you've been good at payingyour debts, it's really high.
You know, and typically they runup a scale to 850 and, and
scores that are above seven 50are considered super excellent
(12:52):
and, and pristine folks who, youknow, always, you know, pay
back, pay back their loans.
They'll get the best rates,they'll get the best deals.
What goes into it, your paymenthistory, Hey, have you paid your
bills on time, your creditutilization?
And what's funny about this isyou, you know, you're, you've
(13:14):
got a great credit score.
One of the things that helps youdrive up your credit score is
not using a lot of credit.
So if you've got a credit score,uh, you know, you got a credit
card and it's got a$20,000limit.
If you use less than 2000, itkeeps your credit score high.
(13:39):
You, uh, you use three, four,five, 6,000.
The more you go up the lower,you know, you'll start to your
credit score will start todeteriorate.
Speaker 1 (13:50):
Even if you pay it all back, well, we'll start to
deteriorate
Speaker 2 (13:54):
It, you know, so that, you know how quickly, if,
if you're not paying it back ina month, it can impact you.
Speaker 1 (14:01):
But if you use the whole limit, but also pay it
back
Speaker 2 (14:04):
Then.
Yeah.
Then you're good.
Okay.
Yeah.
Interesting.
Okay.
Um, length of credit history,you know, if you show a long
somebody who has a long historyof using credit and paying it
back, that person's going tohave a higher credit score than
somebody that just started ontheir credit journey.
(14:25):
That just makes sense.
You've got to you, you got abetter track record.
They've proven themselves, uh,opening new credit.
Um, so you know, every time youopen a new, you know, line of
credit, it can essentiallyreduce your credit score because
(14:46):
then you know that that's a new,that's a new risk.
Yeah.
Oh, you can handle three creditcards and can you handle the
fourth one or can you handlethree credit cards and a
mortgage?
So, you know, it's not going totank your score, but it's going
to take a nap.
That's doubt right now here's abig one.
(15:08):
Um, bankruptcy.
So bankruptcy is essentially afailure in credit and credit
repayment right now.
You've just, you've just said,look, I, you know, I had this
debt, I wasn't able to pay itback.
So, um, you know, your creditscores and your ability to
access credit are going to benegatively impacted by that.
(15:32):
And that's that, that becomes amatter of public record.
And so anybody that's in thecredit, uh, in the credit
agency, the bank, they'll allfind out about it.
Yeah.
Types of credit you use lendersand creditors want to see that
you can handle multiple types ofcredit.
(15:54):
They want to see revolvingcombination of revolving and,
and, and non revolving credit.
So, you know, use credit cardsand use standard loans, loans of
various lengths.
Uh, so you know, you got amortgage or you got a mortgage
you're handling that, can youhandle a two year loan or a
(16:16):
three year loan and a five-yearloan.
And can you, you know, can youhandle the credit cards?
Um, and so, you know, the onething about the, the closed end
credit, as I said, they close.
And so they get removed fromyour credit history after a
(16:37):
period of time.
And so, you know, that's whyhaving a mortgage and having
credit cards and other loansthroughout your life becomes
important to show that you'recontinually on top of your game
and managing credit wise.
You don't want to just use oneand not one tool and not the
other.
Yeah, you gotta, they gotta seevariety.
(16:58):
And then the other aspect
Speaker 4 (17:00):
Which, which
Speaker 2 (17:02):
Hits, uh, hit your credit score, usually negatively
is the number of inquiries onyour credit card.
What is an inquiry
Speaker 4 (17:11):
On your credit card?
So
Speaker 2 (17:13):
Every time you look to open a new line of credit,
whether it's a credit card,
Speaker 4 (17:20):
A store card, a home
Speaker 2 (17:22):
Equity loan student loan, there's an inquiry
somebody's going to an inquiryis checking into your credit
history.
And so every time, so when youopen a new and when you've
opened that new line of credit,there was an inquiry about, so,
(17:42):
uh, credit companies get nervouswhen you have a whole lot of
credit inquiries at the sametime, Hey, it's Glenn trying to
open up five new credit cardsand is he going to go, you know,
and, you know, spend all hismoney on all those credit cards
and not pay us back.
Right?
So they have those kinds ofconcerns.
(18:03):
So you've got to be mindful ofall of those things and, and
understanding how they affectyour credit score.
Speaker 1 (18:12):
All right.
That's our show.
Thank you so much for listeningand be sure to tune in next time
when we discuss how to build anduse your credit.
If you have any questions forus, you can email
us@efspodcastsatgmail.com andfollow our Instagram at EFS
podcast.
Thank you so much for listening.
Take care, everyone.
Hello, and welcome to everyday finance and economics
with the sicklers the podcastwhere we discuss what you need
to know about personal financeand economics, and give you
practical advice on how to getstarted and be smart with your
money.
Speaker 2 (00:20):
Where are your hosts, Glenn and Christina Sigler.
So Christina, what's going ontoday?
Speaker 1 (00:27):
Well matters.
This week is inflation.
Now inflation is simply the rateof increase of prices over a
given period of time.
Since the consumer price indexcame out a couple of weeks ago,
which we discussed, people havebeen really worried that prices
are rising too quickly.
It's natural for prices to riseover time, but since inflation
numbers have been above thefederal reserves target of 2%
(00:49):
recently, investors are worriedthat the federal reserve is
going to have to increaseinterest rates again, to get
prices, to go back down, bothfederal reserve chair, Jerome
Powell, and United States,treasury secretary, Janet Yellen
have suggested that thistemporary spike should not
become a problem because it'sjust a symptom of economic
recovery efforts.
Also, the price increases havebeen, have mainly been
(01:10):
concentrated in a few largerindustries that drove the
average up for everything.
And our economic term for theepisode is a reminder of terms
from last episode, secured andunsecured loans.
Secured loans means that you putup some collateral, something
that's pretty much equallyvaluable to you and the person
lending you money will come takeit.
(01:30):
If you do not pay them back.
And unsecured loan has nocollateral, but usually has
higher interest rates with that.
Let's continue with our secondpart in our credit series.
What are the, what are thestandard types of consumer
credit?
Speaker 2 (01:46):
Well, there's a lot, but we'll do, we'll try to go
over quickly.
The one most, most people areused to are credit cards.
Yeah.
And, um, you know, B you know, alot of people have multiple
credit cards they're issued bybanks, credit unions, other
financial institutions.
There are affinity brandedcards, you know, airlines, you
(02:06):
know, get the United or American
Speaker 1 (02:11):
Miles.
Absolutely.
Speaker 2 (02:13):
Um, um, and, and so you can even have a Disney
credit card card.
Um, so those are the, the, youcan get them through many
institutions, usually backed bysome financial institution.
There's two main brands, visa,and MasterCard are the two main
(02:34):
brands in the U S but there areother brands around as well,
American express.
They didn't start out as, um, inthe same mode.
There's, there's a slightdifference in them, the American
express card, the basic Americanexpress card and a Diner's club
card.
(02:54):
You have, you have to pay thatback at the end of each month,
whereas a MasterCard or visa,you don't have to pay that
Speaker 3 (03:03):
Back.
Now,
Speaker 2 (03:05):
American express has expanded and now they allow you
to not pay it back at the end ofeach month, but, and, and act
like a standard,
Speaker 3 (03:14):
Right.
Also, what about, what aboutblack cards really quick?
What are those?
Speaker 2 (03:20):
All right.
So there are levels withincredit cards, your basic card,
your silver, gold platinum, youknow, the, you know, they have
more and more, um, assets thatyou can charge and more and more
(03:40):
services that go along with it.
And so if you get one of these,you know, super fancy cards, you
can charge a whole lot of money,like buy a car, maybe even buy a
house
Speaker 3 (03:53):
With a credit card,
Speaker 2 (03:55):
Or, you know, all, all at once.
And, you know, they'll, youknow, do super fancy stuff for
you.
Like, they'll, they'll make thehotel reservations for you, or
they'll get you tickets to theconcert that nobody else can
get, or they'll get you intoairline.
They're just a whole bunch ofadditional services, private
(04:18):
services that, you know, people,um, you know, usually with a lot
of money or usually spend a loton credit, you know, those
things are attractive to them.
And so those services are a drawto get, to get their businesses
and those and that business is,um, lucrative to the companies
(04:40):
that have those cards.
Speaker 3 (04:42):
Interesting.
Okay.
Go off with the former brandingand marketing.
Yeah.
That makes sense.
All right.
Other types of consumer credit
Speaker 2 (04:50):
Cards and, you know, and this is sort of going out on
is not as fashionable today asit was, uh, years ago, you know,
before credit cards became big,but if you can get just a Macy's
card or you pick the name of thestore, um, and it allows you to
(05:11):
buy goods at that store oncredit.
Speaker 3 (05:16):
Yeah.
They still have those, those,they
Speaker 2 (05:17):
Still have them there , you know, but because visa,
MasterCard in America can beused everywhere.
They may not be as popular asthey once were.
Um, other types mortgages.
This is how most people buytheir homes.
Um, you take out a 15, 20, 25,30 year mortgage you're you're
(05:39):
alone, uh, that you're going topay back, uh, over that period
of time to, you know, whenyou're finished, you own the
house free and clear.
Uh, then there are home equityloans, which allows you allows
you to tap into the amount ofmoney, uh, the amount of value
(06:00):
that's in your home that is nottied up in debt.
We can get some money for thatand do virtually anything you
want with it.
You can improve your house.
You can pay for school, you canbuy a car, you can go on
vacation, but let me give you anexample, say I bought a house
for$200,000 and you know, rightnow I've paid off half of it.
(06:26):
I've got, you know, it's worth200,000 today.
And I only have a hundredthousand dollars in mortgage
left, left on that.
Well, I could go out and get ahome equity loan for about 10,
$15,000.
You know, if I get approved and,you know, fix up my house, you
(06:48):
know, send my son or daughter toschool, you know, go on a fancy
vacation, but now I've got, youknow, now I owe on my primary
loan.
I still own 100,000, but nowI've got a secondary loan
against
Speaker 3 (07:01):
My house of 15.
Speaker 2 (07:04):
Right.
And so now, if I don't pay
Speaker 3 (07:09):
Collateral,
Speaker 2 (07:11):
They, they take the house and they take, instead of
just taking a hundred thousanddollars, they take 115,000.
Cause I hope of them.
Then there's things calledconsolidation loans, which are
really just unsecured personalloans.
Um, it's not a credit card, butit's, uh, it's, it's going to go
through some of those very sameprocesses and it's not secured
(07:33):
by anything.
It probably has a higher rate.
You can borrow for any reason.
They typically go out and, youknow, up to five years for you
to pay them back, you know, atsome, um, you know, sizeable
interest rate, consolidationloans, personal loans are very,
again, very similar studentloans.
(07:54):
Yeah.
So, you know, paying foreducation can be costly.
Um, student loans can typicallyrun anywhere from 10 to 25 years
, uh, for, for folks to, youknow, finance the cost of their,
um, uh, undergraduate graduateprofessional degrees.
(08:16):
Um, and again, you know, thatis, you know, typically, um,
going to be unsecured.
Um, and, uh, but the, the onething about those is it's hard
to discharge student loans inbankruptcy.
Um, so if you declarebankruptcy, Hey, look, I, you
know, I don't have any money.
(08:36):
I can't pay off my debts.
You're still gonna own theyou're still gonna owe those
student loans.
Then there's things calledpayday loans.
They're short term, highinterest loans.
They're typically not, you know,if you're using payday loans,
that's usually not good.
Um, you know, you need, youknow, you're, you're in a
(08:59):
under-banked area.
You may have some financialdifficulties.
These things are, um, right forscams cash advances, short-term
loans on your credit card.
Um, you know, essentiallythey'll give you cash.
It becomes a charge on yourcredit card with a higher
interest rate, uh, auto loans,the, the loan is secured by the
(09:25):
auto itself.
You don't pay the loan.
They come take the car.
Speaker 3 (09:29):
Oh yeah.
Right.
Okay.
But pay your loan
Speaker 2 (09:33):
Life insurance loans.
So people get what we callpermanent life insurance, where,
you know, uh, there's terminsurance, enlightened and
permanent insurance terminsurance is I, I need this
insurance for 10 years.
You're going to pay a monthlyamount.
Something happens to you in, inthe 10 years you get that
amount.
(09:54):
Okay.
Permanent is a little bitdifferent.
Uh, permanent is not only do youget that, that value, but there
is an, uh, an investment in itwhere, you know, there may be
some equity market investmentsin there.
So not only do you get the valueof the life insurance, uh, state
(10:15):
of value, you get the value ofthe assets to go with it.
And, and you can have that, youknow, for the rest of your, it
doesn't stop when, and, youknow, at 10, 20, 30 years, it
just keeps going on.
And so what some people are ableto do, you know, after they've
had that insurance for quitesome time, they were able to
borrow not against the, thestated value, but against the,
(10:40):
the other assets that are withit.
And so you may have gotten ahalf a million dollars of life
insurance, but you made apermanent and the value of the
insurance.
Plus the other assets may beworth 750,000.
So you can take a loan againstthat 250,000 that, you know,
you've been paying into, uh,investment part that you've been
(11:01):
paying into over the lasthowever many years.
Speaker 3 (11:05):
And when you say, take a loan against what do you
mean?
Speaker 2 (11:08):
So it is like borrowings.
So what that other P that otherpart of the insurance is
essentially a mutual fund typeinvestment, where they've put
money in a certain, uh, mutualfunds that the life insurance
(11:29):
company, um, runs and you canborrow against.
And every month when you payyour life insurance premium,
they've put some money into thatfund for you and you can borrow,
and you can borrow against that.
Speaker 3 (11:46):
What did you mean against, does it just mean
borrow from them
Speaker 2 (11:49):
Borrow from that money now you're supposed to pay
that back.
Yeah.
But there are con you know,there are certain conditions
where you don't have to pay itback.
Okay.
And then there's family loansborrowing from friends and
family members.
You don't need a FICO score forthat, or credits for that.
You just have to get your familymembers to trust you and please
(12:11):
pay them back.
Cause that starts a whole bunchof family fights.
Speaker 1 (12:14):
Yes.
Don't break up your family overalone.
Yeah.
But that happens a lot.
Yeah.
It seems we've been talking alot about a credit score, but it
seems like it's kind ofimportant for your life to get
things.
What, what goes into your creditscore?
Speaker 2 (12:30):
Okay.
Like I said before, credit scoreis a numerical representation of
your credit history.
If you've been good at payingyour debts, it's really high.
You know, and typically they runup a scale to 850 and, and
scores that are above seven 50are considered super excellent
(12:52):
and, and pristine folks who, youknow, always, you know, pay
back, pay back their loans.
They'll get the best rates,they'll get the best deals.
What goes into it, your paymenthistory, Hey, have you paid your
bills on time, your creditutilization?
And what's funny about this isyou, you know, you're, you've
(13:14):
got a great credit score.
One of the things that helps youdrive up your credit score is
not using a lot of credit.
So if you've got a credit score,uh, you know, you got a credit
card and it's got a$20,000limit.
If you use less than 2000, itkeeps your credit score high.
(13:39):
You, uh, you use three, four,five, 6,000.
The more you go up the lower,you know, you'll start to your
credit score will start todeteriorate.
Speaker 1 (13:50):
Even if you pay it all back, well, we'll start to
deteriorate
Speaker 2 (13:54):
It, you know, so that, you know how quickly, if,
if you're not paying it back ina month, it can impact you.
Speaker 1 (14:01):
But if you use the whole limit, but also pay it
back
Speaker 2 (14:04):
Then.
Yeah.
Then you're good.
Okay.
Yeah.
Interesting.
Okay.
Um, length of credit history,you know, if you show a long
somebody who has a long historyof using credit and paying it
back, that person's going tohave a higher credit score than
somebody that just started ontheir credit journey.
(14:25):
That just makes sense.
You've got to you, you got abetter track record.
They've proven themselves, uh,opening new credit.
Um, so you know, every time youopen a new, you know, line of
credit, it can essentiallyreduce your credit score because
(14:46):
then you know that that's a new,that's a new risk.
Yeah.
Oh, you can handle three creditcards and can you handle the
fourth one or can you handlethree credit cards and a
mortgage?
So, you know, it's not going totank your score, but it's going
to take a nap.
That's doubt right now here's abig one.
(15:08):
Um, bankruptcy.
So bankruptcy is essentially afailure in credit and credit
repayment right now.
You've just, you've just said,look, I, you know, I had this
debt, I wasn't able to pay itback.
So, um, you know, your creditscores and your ability to
access credit are going to benegatively impacted by that.
(15:32):
And that's that, that becomes amatter of public record.
And so anybody that's in thecredit, uh, in the credit
agency, the bank, they'll allfind out about it.
Yeah.
Types of credit you use lendersand creditors want to see that
you can handle multiple types ofcredit.
(15:54):
They want to see revolvingcombination of revolving and,
and, and non revolving credit.
So, you know, use credit cardsand use standard loans, loans of
various lengths.
Uh, so you know, you got amortgage or you got a mortgage
you're handling that, can youhandle a two year loan or a
(16:16):
three year loan and a five-yearloan.
And can you, you know, can youhandle the credit cards?
Um, and so, you know, the onething about the, the closed end
credit, as I said, they close.
And so they get removed fromyour credit history after a
(16:37):
period of time.
And so, you know, that's whyhaving a mortgage and having
credit cards and other loansthroughout your life becomes
important to show that you'recontinually on top of your game
and managing credit wise.
You don't want to just use oneand not one tool and not the
other.
Yeah, you gotta, they gotta seevariety.
(16:58):
And then the other aspect
Speaker 4 (17:00):
Which, which
Speaker 2 (17:02):
Hits, uh, hit your credit score, usually negatively
is the number of inquiries onyour credit card.
What is an inquiry
Speaker 4 (17:11):
On your credit card?
So
Speaker 2 (17:13):
Every time you look to open a new line of credit,
whether it's a credit card,
Speaker 4 (17:20):
A store card, a home
Speaker 2 (17:22):
Equity loan student loan, there's an inquiry
somebody's going to an inquiryis checking into your credit
history.
And so every time, so when youopen a new and when you've
opened that new line of credit,there was an inquiry about, so,
(17:42):
uh, credit companies get nervouswhen you have a whole lot of
credit inquiries at the sametime, Hey, it's Glenn trying to
open up five new credit cardsand is he going to go, you know,
and, you know, spend all hismoney on all those credit cards
and not pay us back.
Right?
So they have those kinds ofconcerns.
(18:03):
So you've got to be mindful ofall of those things and, and
understanding how they affectyour credit score.
Speaker 1 (18:12):
All right.
That's our show.
Thank you so much for listeningand be sure to tune in next time
when we discuss how to build anduse your credit.
If you have any questions forus, you can email
us@efspodcastsatgmail.com andfollow our Instagram at EFS
podcast.
Thank you so much for listening.
Take care, everyone.
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