introduction
(1) How can your credit score impact your financial situation? Did you know that your credit score impacts everything from the premiums that you pay on your auto insurance all the way to whether or not you get that new job that you've been looking for. So stick with me this entire video, I'm going to tell you everything you need to know about how your credit score impacts everything in your life.
(2) In this episode, we're going to talk about how the credit score evolved and how it became so important in our lives. Credit scores aren't just important for the things that you need. But they're also important for the things that you want, we'll go through the necessities you may have to go without if your credit scores aren't on point, then we'll discuss some things that you may
(3) not have known are affected by low credit scores, and they'll give you some insider tips on how to grow your credit scores. All right, let's get to it. So how did the whole credit score thing become
The Origin Of Credit Scores:
(1) an intricate part of all of our lives? Well, the simple of it is, is that businesses wanted to have a way to evaluate risk. This became a way for them to evaluate each person and how much risk it would be to lend them money. Okay, first of all, let's talk about what a credit score is.
(2) A credit score is going to be a mathematical computation or an algorithm that's placed over each one of your credit reports and it spits out a numerical number, it's really just that simple, it's going to spit out a number and that number is going to be telling as to the amount of risk that you present to any specific lender. One of the main credit scoring algorithms that's been around forever, since the 1950s, in fact, is going to be FICO Fair Isaac Corporation. And this is a
(3) scoring algorithm or model that was originally developed by a mathematician and an engineer, they got together and they were trying to determine how they could quantify risk when it came to specific people. It began early on by it being a back office number that's used mostly by financial institutions, they would assign a number to their borrowers, and it would dictate how much risk they presented. Later on in the 1980s, this algorithm FICO became public.
(4) And since that day, FICO has been the most widely used credit scoring algorithm all around. The government ultimately ended up adopting FICO, which made it universal across the board. As an example, when it comes to mortgages, the only credit scoring algorithm that's used is going to be FICO and it's a very specific subset of FICO called FICO, two, four and five, in industry specific score and some
(5) might say that FICO has a monopoly right now on the mortgage industry. And they wouldn't be wrong by saying that. There's other competing scoring algorithms out there. They're not allowed to enter into the mortgage industry just yet. But there's legislation that's going to ultimately allow for competing credit scores when it comes to mortgages. Anything in terms of credit scores,
Limitations Of Low Credit Scores:
(1) there's actually hundreds and hundreds on the market, there's going to be insurance, credit scores, there's going to be Vantage scores, there's going to be FICO scores. In some cases, there's educational or informational scores. In fact, within FICO, which is the most widely known credit score, there's around 80 plus different scores within that algorithm themselves and I'm actually accredited by the state of Texas to teach realtors, and it feeds into their credits that
(2) they need to keep their realtor license and one of the main questions I ask every single time is how many credit scores are on the market? And you'd be surprised how many people think that there's just one or two or three credit scores in total, and it couldn't be further from the truth. Sure, it can be really disturbing if your credit is positioned such that you're not able to get some things that you really, really want like a new iPhone or a new vehicle.
(3) But what if your credit scores are positioned in such a way that you can't get the things that you actually need? In many cases, a poor credit score is going to stop you from getting a checking account. Can you imagine going through life and not even being able to get a checking account, okay, but you say sure, that's fine, I don't need a checking account, I can
(4) use chime online, or I can use a variety of other online type solutions or I can do prepaid cards, or I can have my check loaded to a prepaid card. Sure, that's fine. There might be a workaround, you might be able to just use cash. But what about in some cases where you're not able to get a vehicle.
(5) If you're somebody that drives to work, and you're not able to get a vehicle, because your credit scores are too low, you can really be caught up in a jam and I can tell you that I've had many, many clients over the years that is subprime. And they're not even able to get a second chance loan on a vehicle. They're stuck either taking public transportation, which is fine if you live in a big city, it's commonplace, or they're stuck with
(6) a vehicle that they got to keep throwing thousands of dollars into in order to fix. So at the end of the day, a low credit score can not only cause you to not get the things that you want, but it can also cause a situation where you're not able to continue progressing in your life. If you can't get a checking account, you can't get to work because you can't get a vehicle and in some cases you can't even get an apartment because your credit is so low, it really puts you
(7) at a massive disadvantage. So this may sound all like really terrible news. But there is good news. If you liked my video, subscribe to my channel. I'll be bringing you all kinds of relevant content every single day of the week. In many cases, you're not able to get your wants or your needs.
How Credit Scores Can Impact Your Life:
(1) But what about the basics of life? One of the biggest areas where someone might pull your credit and credit score that may affect your overall world is going to be employers In many cases, employers will pull credit, the hard truth is that they're judging you. It's not that you're a bad person, because you had some financial issues. And this truth applies to me as well.
(2) People go through their ups and downs in their financial world. Luckily, I haven't had credit issues in a very long time. But definitely in my early 20s, I had massive credit issues. At the end of the day, some employers just aren't going to hire people that have current credit issues going on.
(3) Another area or basic of life that might be slightly out of reach, it's going to be auto insurance, did you know that if you have sub five at less than a 580 credit score that you're going to pay, in many cases, up to three times as much as somebody who's got excellent credit, that's three times the premium for the exact same service. Unfortunately, when it comes to insurance, insurance companies believe that people that have poor credit scores file more claims.
- I'm not certain that that's true or not. But they've determined that low credit scores equals higher risk and more claims, okay, trying to get an apartment, of course, this is one of the big ones. I have clients reach out to me consistently, and it happens periodically, every single month, where they've got an amazing income, I'm talking a good income 100, 150, $200,000 a year income, they make lots of money, but they don't have the credit to even get an apartment, very frustrating to work
- your whole life have a fantastic income that you had whatever life situation that caused your credit to get where it is, and not be able to even get an apartment for your family. In these last few things that we've talked about, we're talking about how the world views somebody who's had credit challenges, or problem credit. Understand that a vast majority of the world is going to have credit issues at some point in their life and it's not a direct snapshot of who you are as a
- person. In other words, don't let it assign value to who you are as a human being. The truth is, is that you may be having some issues right now, you may be having some financial issues right now as again, most people do, but it's what are we going to do about it now to get ourselves out of that? If you've had credit challenges or just need help with your credit then I have a gift for
Get A Complimentary Credit Analysis:
- you. I'll have my team complete a complimentary credit analysis tailored specifically to you. The only cost is going to be that you need to buy a smart credit report. This credit report gives us the data that we need to create a customized plan for you. Please click the link in the description below for more information.
