“The Adult Report Card”

The whole American dream is centered around the idea of securing a white picket fence in a nice neighborhood with a good school district. But what has been neglected in that idea is the schools needed to get there. One way we propose to get there is through having good credit. After-all America runs on credit! We will try to teach you in this blog the basics of a credit profile or what we will refer to as the adult report card. But if you want to learn more, tune in to our instagram session on Wednesdays at 7:30pm for those credit gems and how to build your adult report card.

Your Adult Report card is a snapshot of behaviors that signals to lenders that you will be a good borrower. Five factors that can affect your report card are your payment history , credit utilization , credit age, hard inquiries and credit mix. These factors influence whether you have good or bad credit.

Your Credit score can be impacted by your payment history. Your payment history accounts for up to thirty-five percent (35%) of your credit score and reflects up to 192.5 points on the points system. A good or bad rating on your payment history reflects your behavioral patterns when you pay your bills. We recommend you pay keen attention to paying your bills on time due to the massive impact that your payment history can have on your credit score.

The next variable on the block is your Credit utilization (we’ll call it “CU”). CU is as the words imply, it is the percentage of your available credit that you are using. CU represents 30% of your score and reflects up to 165 points. There is some amount of misleading information about CU out there that we wish to highlight and say to you that's bad advice. For example you are being told that your CU rate should be kept under thirty percent (30%) at all times, that is bad advice. Why? If you keep your CU rate at or under thirty percent (30%) you will find yourself mainly paying interest on your loans or credit cards. We suggest you keep your CU at a measly ten percent (10%). This suggestion is due to the fact that if you keep a high utilization you will not only be tackling just interest rates each month but can be a red flag to lenders. A red flag being that you are a risk to take on as it signals a possibility of not being able to pay back the card.

Your credit age ensures that you have a lengthy credit score. The length of your credit history accounts for up to 15% of your score and reflects up to 82.5 points. This section really is a tough pickle because you would need to have a line of credit for a minimum of ten (10) years for this variable to have an impact on your score in a positive way. We therefore encourage you to start building your credit as soon as possible. Take out that credit card and let it age!

New credit or hard inquiries account for up to 10% of your score and reflect up to 55 points . A hard inquiry is a type of credit information request that includes your full credit report.These types of inquiries are used by lenders and creditors when deciding whether to grant you credit or a loan, and they will usually cause a temporary decrease in your credit score.We know that you may stress out when you hear decrease in your score but remember it is only ten percent (10%) and it is temporary. Always remember the advantage of being able to satisfy a creditor that you are creditworthy. Short term loss for a long term gain! Keep in mind, hard inquiries only stay on your report for two years and only impact your score for twelve (12) months.

Yo, so the last variable is Credit mix which accounts for the last 10% of your score and reflects the last 55 points in the breakdown of the Adult Report Card points system. The credit mix represents the different types of credit that make up your report. Your credit mix includes credit cards, student loans, automobile loans, and mortgages. Even though your credit mix represents ten percent (10%) of your report card it may have a big impact on your score if you do not have a lengthy credit report.

We hope that this blog has helped to change your mindset about credit. We hope that armed with this credit knowledge you will be able to buy back some of your time!

Stay Educated!

NB: The variables that are all listed and explained in this blog can also be found on MYfico which is the official website to obtain your true credit score.