Kick start to credit
A credit score can affect more than just your ability to get a loan. Bank of America employee Dilan Gomih discusses the importance of building and maintaining a good credit score.
Kick Start to Credit
Librarian character: Renter’s checklist! Driver’s license? Check! Letter of Employment? Check! Credit Score?? What is that??
Dilan: You know how before you go on a date, you ask a mutual friend about the person’s reputation? Your credit score is kind of like that.
Librarian character: Whaaat?
Dilan: Well basically your credit score is one of the tools lending institutions such as banks, credit card companies, mortgage lenders, and even landlords use to figure out whether to give you a loan.
Librarian character: But what is a credit score? Can’t find it!
Dilan: It’s a number between 300 and 850 that represents your creditworthiness.
Librarian character: What? By who and based off what? I feel quite judged at the moment. Shhh..
Dilan: It’s not a judgment, but it is an important indicator of how you manage your credit. A judgment would be something like you wearing black shoes with a brown belt. Analytical companies such as FICO generate your credit score from a compilation of your payment history, how much you owe, types of credit, and how long you’ve had credit. So for lending institutions it’s like calling up a mutual friend for reference before they go on a date with you.
Financial worker character: Hey FICO, it’s me Joe Big Bank, so I was thinking of giving this guy a mortgage, and like how would you rate him? 3—whaaaat?
Librarian character: These credit scores sound awful. I just won’t get a credit card and therefore, no score! Brilliant!
Dilan: False. Whether you like it or not you do have a number. With no credit, it’s a big fat zero because you’ll have no institutional record of your financial reliability. As a result, it’ll actually be harder to get a loan and someone WILL likely have to act as a guarantor for you. And look, I don’t care how happy that guy in that credit report commercial sounds. Having little to no credit is not something you sing to the world about.
Musician character sings:
My credit score is zero, And I can’t get a loan.
My credit score is so low,
That I’m moving back home
Dilan: NO! So let’s talk about how to build up credit. Well, you should probably get a credit card. Try to get a general card with a reasonable interest rate. As time goes on, you’ll be able to get cards with more benefits such as travel or gas points. After you have a card, buy something with it that’s reasonable. Don’t go crazy and buy a sports car. Buy something affordable that you’d normally buy with cash anyway. Think groceries, gas, or drinks.
And now for the important part.
Pay it back!
This helps to show your creditors that you’re reliable. BAM! The trick is to keep doing this frequently. Don’t miss payments and when you are behind, it is important to communicate with your company. It’s simple in theory, but the stupid mistakes we make with debt in our 20s could last a long time. So let’s get diligent about credit scores because a bad credit score will last MUCH longer than a bad date.