I’ve been a financial educator for over a decade and while many people inquire about better ways to save and budget, understanding credit is still the number one topic I teach. Credit can be a gift or a curse depending on how you use it. It can help you on your journey to financial freedom or it can keep you in a cycle of debt repayment. Understanding how your credit works is the first piece of the puzzle, but what happens when you know and understand the credit game but still can’t seem to get ahead?
Some believe credit is not necessary but the truth is that credit can sometimes be the deciding factor to your quality of life. Those who have high credit scores usually get the best rates on loans and/or have to put the least money down on high ticket purchases. On the flip side those who have a low credit score can find themselves paying higher interest rates, or worse be disqualified for basic life necessities like a job or shelter.
This is why I got excited when I heard about the Experian Boost program, that is helping millions of people across the country get the assistance they may need to take their life to the next level by getting better access to credit.
Check out the video below where I discuss the program in great detail and give you tips on how to properly manage your credit. Simply put Experian Boost works by giving consumers credit for the utility and telecom bills they are already paying. This means your water, gas, electric, cable, and cell phone bills can all count to give you an instant boost on your credit scores.
This is an absolute game changer because for years many community based organizations have fought for better access to credit and they asked for this exact feature for those who have opted to not use credit cards hence having a thin credit file. This not only works for those who have little credit activity but for everyone who would like an extra jump to their credit file.
The great news is that only positive payments will be factored into your credit file so boosting your score can only help you. In the rare instances were someone’s credit score goes down after boosting it, they can simply disconnect it from the Boost program and their score will go right back to where it was.
If you’re interested in seeing how Boost can help your credit score visit www.experian.com/ashcash
NCAA Will Allow Athletes to Get Paid + 3 Ways Athletes Should Manage Their Money
In what seems like a big win for NCAA athletes, the NCAA announced that it will allow them to profit from their name, image, and likeness in a major shift for the organization. It started in September when California became the first state to pass a law that would allow college athletes to get paid for endorsement deals and hire sports agents. Now The NCAA’s top governing board voted has unanimously voted to allow college athletes to be compensated. Student-athletes must be treated similarly to non-athlete students, must not be treated like employees of their respective universities, and there should be a “clear distinction between college and professional opportunities,” the NCAA said.
This is a big win because Athletes bring in billions of dollars for their schools and coaches get paid millions but Athletes and their families stay broke. So how will this change affect athletes and their wealth? Below are 3 ways athletes should manage their money in order to not go broke:
Set Up Direct Deposits and Automatic Transfers
Making sure that your money gets directly deposited into your account is a smart idea and will help you organize your funds. Instead of relying on you or a trusted advisor to set up things for you the right way make sure that you also set up automatic transfers every time a direct deposit hits. One transfer should be for savings and the other should be for investing, what’s left ofter should cover bills and discretionary funds. This strategy will ensure that you never go broke because you are paying yourself first
Let Your Assets Pay for Things
I know as an athlete you are going to be tempted to buy things and enjoy the fruits of your labor but it is imperative that you get out of the habit of working for money and instead allow your money to work for you. Instead of spending the money you earn on things, use that money to buy income-producing assets like real estate that you rent out and allow that asset to pay for the things that you want. This way as you continue to make money that money will never run out and you don’t ever have to find yourself working at Walmart after your career (Not that there’s any wrong with working at Walmart)
Lastly, make sure you are putting money aside for education. Even after your collegiate days are over you want to make sure that you are also on the leading edge of what is happening in the business world. Stay educated on the do’s and don’ts of business and understand what evolutions are happening so that you can continue to grow and build your wealth
Amazon Aims to Help People Build Credit + Credit Knowledge to Keep You on the Right Track
Amazon is opening up its rewards credit cards to people with no or bad credit. The tech giant and Synchrony Financial are launching “Amazon Credit Builder” for people who don’t qualify for the company’s other reward cards. The cards will offer Prime customers 5% cash back on Amazon purchases, with the person’s credit limit equal to the size of the deposit they make before receiving their card. Since 11% of the U.S. population have credit scores below 550, the move could increase Amazon’s customer base, says CNBC.
This seems like a good move for those who are unbanked or underbanked but without being of how to manage or maintain good credit this effort might exacerbate the problem. Many people are aware of the important role the credit rating plays in their lives. However, understanding what goes into a credit score (the credit score breakdown) might present some difficulty. There are several different methods of scoring, but most lenders and banks rely on the FICO method that has been in existence since the 1980’s when it was developed by the Fair Isaac Corporation. The three prominent credit bureaus (TransUnion, Experian, and Equifax) all worked with Fair Isaac in order to come up with the FICO algorithm.
Your credit score may be any number from 300 to 850. The average American falls at about 690 which is deemed relatively good credit. However, while this score should secure you a loan, it will not get you the very best interest rates on a loan. In fact, 300-640 = Bad Credit, 641-680 = Fair Credit, 681-720 = Good Credit, and 721-850 = Excellent Credit. Excellent credit should be the aim.
Following is the credit score breakdown:
The biggest chunk of your score (35%) is derived from your payment history. This score is influenced by how well (or not) you pay your bills on time, how many have been sent to collection agencies, bankruptcies, tax liens, etc. Keep in mind that missing a payment is worse than making a late payment and that being late or especially missing a mortgage payment is a bigger blow to your credit score than missing a credit card or utility payment.
The amount of debt you have (compared to the amount of credit you have not used) accounts for 30 percent of your score. Try not to max your credit cards out. In fact, it is recommended that you only use 25 to 50 of the credit that is available to you. A way to balance this out is to obtain more lines of credit and not use them. However, you do not want to apply for a bunch of credit cards all at once as this is marked against you. If your credit is in good standing, apply for a reputable card every six months or so and save it for a rainy day.
Length of Credit History
Fifteen percent of your credit score is based on how long you’ve established credit. This is common sense. The longer your credit history, the better your overall score will be. More data about your past leads to a more accurate prediction of your future credit worthiness.
Having several types of credit will actually boost your score if they are managed well. This counts for 10 percent of the overall rating.
As mentioned earlier, opening new credit accounts all at once will negatively affect your score in the short term. It’s also important that you are aware that your score can be lowered for too many “hard inquiries” about your status. A “hard inquiry” is one that you have authorized a lender to perform. If you are inquiring about your own score, this will not count against you.
Understanding what goes into the credit score breakdown is the first step in improving your score and what will allow you to design your score and begin you on the journey to financial freedom.
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