What Goes Into Your Credit Score?
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- čas přidán 11. 12. 2018
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It's not just about payment history. Several things are taken into account when your credit score (or FICO score) is calculated.
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Two Cents was created by Katie Graham, Andrew Matthews, Philip Olson CFP® and Julia Lorenz-Olson and is brought to you by PBS Digital Studios. We love dropping some knowledge on all things personal finance and helping you make better money decisions.
Two Cents is hosted by Philip Olson, CFP® and Julia Lorenz-Olson
Directors: Katie Graham & Andrew Matthews
Written by: Julia Lorenz-Olson and Andrew Matthews
Produced by: Katie Graham & Amanda Fox
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Sources:
www.investopedia.com/terms/f/...
time.com/3961676/history-credi...
blog.credit.com/2015/04/how-ma...
I am from India and I initially I had no idea why YT even recommended this to me. I mean, most of the time the things you covered didn't even apply to my country. But then I realized, even though the cover might look different, the book inside is pretty familiar i.e basic economics. As a single guy about to start my own life, I really appreciate these tips and guides both of you put out. Especially the innovative spin you put on it to mitigate any influx of boredom. These are the kind of things I wish they would have taught me back in school/college. Well, long live the internet that allowed someone like me to connect with content made by you folks from so far off. Keep up the great work.
@@kumaransrinivasan7199 what??
Exactly my thoughts!!!!
I don't know what you mean by "don't apply to India". I am from India too and everything they talk about in their videos is general finance. It applies to everyone. And definitely to India.
@@DurgaswaroopPerla You need to look at their old videos Durga. Yes, you are right that most of their advice is universally applicable but a lot of it comes from US's history and how it affects present modern day decisions. You can't really expect me to take property estate advice from them and apply it to the Indian market, can you?
A co-worker asked me to lend him a pen, I asked him what's his credit score.
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I really like that you said the fico score is a relationship with debt.
Which is probably the reason why it's not always easy for people wanting to live debt-free, or as debt-free as possible. I mean, if they don't have any history on you, how can they score that history? Or if you just moved into the country, data can't be collected as easily from outside sources, although I have a mortgage which I pay off correctly, and have one credit card and a credit facility, which is paid back every month (about once a year I might miss a payment, but never for more than say 200 euro, and never longer than 1 month). I don't have a drivers' licence, so no need for a car, and thus no car loan. But if I'd emigrate to the US, I would have no, or an abysmal FICO score...
@@barvdw - Missing a payment a year is not great. If it's due to forgetting, maybe take 10 min and set calendar reminders for times next year when you expect payments to be due on the bill you're most likely to forget, and also automate what you can. The purpose of good credit is to borrow on good terms, as in for a home or car purchase. If you're not buying a car and already have a mortgage, maybe you're fine at the moment not maximizing your score.
@@darlantro Luckily for me, then, we don't do FICO scores, here. And of course, the minimum payment is automatically withdrawn from my account. But I agree, paying late is never a good idea, if only because it's expensive.
I do not plan to buy a car any time soon (I have no driving licence and living in a city with decent transport and only 3 km away from my work, I get by without one, a car would be useless half of the time, eating up my money with insurance, paying for a garage (easily 100 euro/month), etc.) I already have a mortgage, yes.
@@barvdw - I built up my score by just having one credit card. I lived most of my adulthood without one and just opened 1 up. I set my Netflix on autopay on that card, and within 6 months my score was 730. Having no history is better than having a bad history, bc you can quickly build up your score as soon as you decide to build your credit.
Kim not American, so it works a little different for me, but thanks for the information. Somebody might be helped with it.
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One downvote I guess someone wanted to resist
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CZcams has changed their likes/dislikes algorithm so that you don't see dislikes because of bots and people who don't finish watching going around spamming that shit. They eventually show up.
@Lovingthetruth7 Ltt7 bots are usually scripts that log in and out of different accounts and go add fake views and ratings on videos. a lot of videos that are controversial also have the problem of people not watching a video all the way through but still leaving a rating, which obviously isn't entirely fair.
I really wish this was around when I was 18 omg I made SO many mistakes in my 20s out of ignorance 😒
I like how they reduced the cringe of having them both in frame, one talking and the other not knowing what to do or where to look at, and they finished well, with a straight cut to them both saying "... and that's our two cents". Nice editing!
I love this channel so much! I hope you guys grow exponentially & help many many people.
From the bottom of my heart thank you and merry merry Christmas 😊🎄
That’s a very nice sentiment, “My Life is a Meme, My Life is Pathetic”
You're assuming I even have $100 lol
@Lucas Zhu how? You use the card minimally.
You have it. But barely need to use it. That screams "im managing my money well."
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First! This channel is awesome, and not being old enough to have a credit card this video is really great in explaining them! I'm always looking forward to the next video this channel post! I love the graphics and the script! It mixes entertainment and information! Now I know all about Credit Scores!
I am 26 years old and my credit score hit a 795. I am so proud of this achievement 💞☺️🔥
It's 796 now
This system blows my mind. The US and Canada are the only countries that use a credit score, and tbh I find it absolutely absurd.
You need to have an arbitrary score calculated from things that are the very contrary to what you're trying to achieve...
Like, you need to borrow money (that you might not need in the first place), which is equivalent to be irresponsible with money, to show that you're going to be responsible with money when you're actually going to need that money lent to you.
Also, that still didn't prevent the 2008 crisis because banks didn't do their due diligence, which is to say that credit score doesn't work and doesn't mean anything.
By contrast in other countries banks just check what you've actually been doing with your money if you have a steady income and how good are you with your budget, which makes a lot more sense. Also, in most other countries, credit is not a thing, so you only spend money you have (except to buy a house), which is a much better system because people don't go into debt.
But about the channel itself : love you guys, and love what you're doing! you're making an amazing job at explaining the completely backward thinking NA model ^^ (which as a foreigner is kinda important to understand when you come over :D)
You deserve every bit of appreciation for your efforts and the knowledge you provide. You one one of the very few channels who actually deserve a lot more because you teach us what school never thought us.
Oh my gosh, you guys listened! I suggested this video in the comments of the last video! Thank you for making it! I really enjoyed it, and it was full of helpful information!
You downplay how problematic the credit bureau are but their fallibility should not be understated. The way they can get things wrong, like mixing you up with another person etc is compounded by how hard it can be to fix those mistakes and how they have zero accountability to the people they judge with their scores. Their real customers are those who would check credit history, not you.
Agree, you are the product. But you gotta play by their rules if you want to make a go at a decent life. Your credit score determines whether or not you can rent, buy a home, buy a car, get a job. It can also affect the cost of insurance, debt, etc. It really sucks that the credit reporting agencies care so little for the product they are selling. You would think they would do their absolute best to be sure that a person's credit history is accurate, but they do not. I have been lucky and we have maintained a very good score. The stories told of people who slip through the cracks are truly horrifying. John Oliver did a piece in it a while back.
There are legal protections in place, and credit bureaus are now held to a higher standard with credit reporting and fixing errors.
Credit is a big joke. I had a judgment placed on my credit that wasn’t supposed to be there. I had to fight to get it off my credit report for three whole, long, grueling months proving that there was an error. The courthouse did not even have a record of it. It was a big mess, to say the least. It was removed due to my tenacity!
I got nothing to add but I got to say this: love you guys! You guys are awesome! :)
No amount of articles could have summarized the credit score like this video. Thanks guys.
This is now my favorite video, I recently got a hard pull on my credit score which I’m completely devastated by and I don’t know how to make it go back up quick enough 😔 I check my score like every day, it’s troublesome
I love this channel so much. Useful and precise information. Keep up the good job. :)
The most important take away from this video is "you have to pay it back". I wish more people realized that credit isn't free money.
My son wanted to buy a new car and asked his grandmother to pay for it to get a better price and interest rate. However my mom had no credit rating because my parents had never borrowed any money for anything. They always waited until they had the cash for cars, furniture and even the two houses that they bought. The few credit cards they owned were just for convenience and were paid in full every month. So you don't need credit if you are careful with your finances.
I am a finance major and I find these accurate. Good job guys! Been subscribed since the first video
lovely video. i had always wondered how this was calculated. This was exceptionally useful. Thanks a ton!
Perfect video to my age old question... what is a FICO SCORE!! PS IM gonna watch this another 999 times :)!!!!
Also keep in mind the amount of debt you have. When I got out of college, I had an excellent credit score, but couldn’t get credit cards or loans because my DTI (debt-to-income) was high due to my mountain of student loans. Making debt payments on time didn’t mean anything if I had too much debt in the first place.
Speaking as a professional in the area of personal finance, this channel is extremely valuable for people.
Credit Karma, anyone?
Yea if only creditors took that score into account. The FICO score is the one that is used. Credit Karma is their own system that is sorta close to your FICO score, but not the exact number
Credit karma is really good for keeping track of credit changes. New accounts added, new inquires, things like that. Also seeing the general track of your credit over time. The actual number it gives you though, is pretty meaningless.
@@jasonharris765 Creditors don't look at any score! They calculate it on their own, based on their own criteria and using all the info from your credit report. They see your credit report, but not your score.
FICO or any other score that you can see, is only visible to YOU. It is just an INDICATION provided by credit reference agencies of how they think a potential creditor would score you. If you don't believe me, ask directly at Experian or Equifax like I did.
@@SecretRabbit93 meaningless how
1:29 thanks. i needed to hear that.
Thank you for such wonderful videos on life. This is quite the effort and we appreciate it!
Growing up in an anti credit card household, I learned later in life that credit cards are actually a great tool toward achieving my goals! I only have one credit card and I think of it as an extension of my bank account. If I have $1400 from my paycheck in my bank account, that means I need to spend less than $1400 on my credit card each month. I only use my card for groceries, gas, and expenses I KNOW I can pay off with what I already have in the bank. A credit card isn't something you should use to buy stuff you cant afford.
Good for you. I find that most of the negatives that people associate with credit cards can be eliminated with a simple budget, or at the very least keeping track of your spending. The cash back on them are great and they're great for emergencies and to hold you over if you are a little short on cash before payday.
I worked in a fintech company that gives out credits. And I was working specifically on the software the staff uses to evaluate clients for credits. From what I've seen there was a lot more then just this. Of course, we were using a special credit score model, created by the company co-ceo. It involved statistical data, like what job you have, your age, even gender (and quite a few others too). The most important was the credit score of course. The credit scores explained in this video, to which countries do they apply/cover?
I'm pretty sure there's a similar system in many European countries, but they're rarely internationally opened and often not as regulated, or even known. In Belgium, where I live, banks have lists of bad creditors they share, but how and with what conditions, I have no idea.
It had statistical data on over 100 types of gender? Amazing.
I found some new information for the Netherlands, and we use a similar system (run by our National Bank). There is a Central Credit Information System, run by the Bureau Krediet Registratie, started by the Dutch banks and financial institutions. They keep track of all credits, and whether these have late payments of over 3 months, and mortgages after 4 months. After 5 years after the end of the debt, it's deleted.
@Darkov Darkov, That's interesting! Can you write a bit more pls? But... are you sure the FICO score was taken into account?
As far as I know, the FICO score is only visible to YOU, not to your creditors. Every creditor have their own methods of calculating their own score, with their own scale. FICO score or any other number that is visible to you, is only to give you an indication of how a potential creditor might score you. Credit reference agencies show this number only to you, not to creditor. Creditors wouldn't give a sh*t about it anyway, as they do their own scoring themselves. What they DO care about, is your credit history and other informations on your credit report.
Thanks for educating people on the important issues.
This should be a commodity subject in schools.
You guys are awesome! The videos are the perfect length and the content is engaging and helpful
Every person should be watching this channel. You learn the life skills you never learned in school. Great video once again guys!!
I'm in California, I bought a vehicle, but in my shopping I had 12 hard inquiries done in a one month period, I have heard (and I can't remember where) that in Ca. if you BUY a vehicle within 30 days of the first inquiry that any inquiries within that 30 day period would be combined into ONE inquiry. But this has not been changed on my reports which is giving me headache along side collections, charge offs & tax liens but few weeks ago I read about CREDIT MASTERFIX from an article created from 2019 by a UK blogger. They didn't only delete all negative items that's giving me headache, they also raise by score by 265pts in under 3 weeks using them CREDITMASTERFIX🟢COM
As always thanks for these Really informative videos itw honestly helped me a ton, just wondering though when we will be seeing that part2 of imaginary money 😅
Another great video! Maybe a video on how to build your credit safely? I need it because I'm moving to the US soon and have zero credit history. Although, from this video, it seems like history isn't that crucial.
I hope you have great holidays and a happy new year!
They said what it takes at the end of the video
Here’s a few pointers from when I first started building credit. Start with a credit card with no annual fee. If you’re having trouble getting a credit card without a credit history, try looking into getting either a secured credit card (basically a credit card that requires a deposit held by the credit card issuer to limit their risk of losing money) or a credit card from Discover (they tend to be more lenient with who they give cards to). Then, use that card for small purchases that you can afford and pay your credit card bill in full each month. The combination of small credit card usage and consistent payments over time will put you on the right track to building a strong credit history.
this is some good advice. I feel like credit is pretty important, however, I think saving when possible is more important.
Another awesome simple to understand video!
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Just want to say thank for teaching me a lot unlike school and that i watched all of videos just now and took notes.
Thank you for uploading these kind of videos. It's really important information that allows me to further understand.
I'm learning too much from this channel and I love it.
Great video as always!
I would add an advice/tio/trick - borrow when you don't need it, and pay it back on time - that will increase you "trustworthiness".
This channel is a great resource for building financial literacy!
Wow you guys have grown so fast in the past couple of months!! Awesome keep it comin :)
Love you guys! I have learned so much with your videos! please bring more with interesting topics! you are a blast!
This is awesome, One thing that I dont have a good grasp on is Balance Transfers... could you guys cover that? there are lots of info on it on youtube, but i'd love to know what you guys think :)
As a non-American this credit score system as a whole looks insane.
It's been used in other countries too, but most people don't know about it. In the UK it's pretty similar to the US. In other countries, it's not so important but it still exists. There are many registers of non-payers, etc. But if you take out a credit card outside US or UK, it won't really help you too much (maybe a little bit). What I like about this UK credit score system is, that you can also build your positive image, rather than just avoid building a bad image. So, taking out a credit card in the US and in the UK (even if you don't really need it) is a good idea, as long as you're not a dumbass who starts spending recklessly just because he's got a credit card, or even worse, does not pay off bills. I took out my first credit card only because I wanted to start building my credit history. Now I got used to it and I earn small cashback on every purchase. Just pennies, but still better than nothing. After a half year I earn 20-30 pounds which I otherwise wouldn't have. That's two full bags of food for myself for free. I only buy things that I would have to buy anyway, such as food and fuel. And I've never paid a single penny of interest or any fee, simply because I pay the balance in full every single month. Credit card is a good thing for financially literate and responsible people, but really bad thing for financially illiterate or irresponsible.
@@cancelled_user I get your pragmatic point though it still makes my skin crawl. We are human beings, not soulless herd animals to be branded at will. The FICO score is deeply immoral because it disproportionately reduces the risk of the rich lenders at the expense of the most vulnerable poor debtors. I will not be complicit in any branding scheme that is designed to pre-judge me in my future dealings and deepen the social inequality. If you offer the devil even just a little finger, it takes the whole arm.
I honestly love you guys thank you for every video
Could you guys do video on the cost effictiveness of owning a motorcycle over cars?
Thats so helpful. Thank you
A great resource for teenagers to learn about financial topics that the system brushes over in school.
Also can you make a video discussing the finances of a teenager and potential tips? I currently make a small part time wage since I'm still in highschool.
Great Channel, need to show this to my niece.
Love your videos! They are really helpful! The new life university on CZcams, jajaja.
These videos are amazing. Keep up the good work! :D
Another good video. Keep up the great work, guys!
Your videos are amazing
What a great video! Thank you.
I use Credit Karma because I can check my credit score more than once a year (I actually check mine every month) and they offer great advice and help you understand what in the world is going on. I signed up for Credit Karma last year and I believe my credit score was in the low 500s now as of today it is in the mid 700s
While there is some stuff that I don't fully understand, videos like these in addition to the advice & notifications from CK only help me learn so my score can keep growing.
What great illustrations and simplifications
Another great video! I never knew the details of what my credit score was based on.
I know, crazy right?!
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What differences if any is there to Canada's credit score system?
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i love your every video...Your explanation on financial sector was awesome,
Love from INDIA🇮🇳
love you guys.... really good videos
Your videos are quite pleasant. I especially like the pretend roleplaying/costumes, really adds a novel entertainment aspect to the learning experience. If I were you, I would make your channel logo brighter. It would help draw more attention and give the feeling of a "fresh perspective." The dark color right now makes you seem more like a history channel.
I just found this channel and being a Dave Ramsey follower I have to say I love your videos
I'm taking the Dave Ramsey classes through my work smart guy
Josh Mulder good luck to you. My wife and I took the classes in 2015. We are only $10k away from paying off our house and being completely debt free. It takes discipline and patience. I hope you get the life changing lessons that we got out of it.
Also you shouldn't cancel your oldest credit card because it will affect your credit score. Credit inquiries on your report will last up to 7 years before they go away.
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I subscribed. This is a worthy channel.
I was lucky enough to have a few teachers who went off on tangents and explained credit to us.
Great video
Please do a video on how to make more money! Or one about stocks and investing! Thank you
You should have also explained that not borrowing money after x amount of years drops your score to 0 regardless of how high it before it dropped. Not borrowing money cost me a score of 850 that I worked really hard to achieve.
Her shirt is beautiful, Looks amazing on her. Great video,like always.
"Try to borrow as little as possible." Lol, this came back to bite me and my wife when trying to get a rental house without any credit scores. We are both too responsible apparently, and never take on debt. Trying to get a score by having a small line of debt I pay off every single month. Once I get the score, I kind of want to stop using the card, but not until I lock in some purchases it affects. I HATE debt, wishing they would judge us based on something other than having and paying off debt.
I had improved my credit score from 500 and up to 775. I highly recommend this company they have a good reputation and they follow through with what they say thank you for your services Roy.
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Good informative channel
I paid off a 15 year mortgage in 9 years.
My FICO score went down like a rock.
I don’t believe that this video properly reflects how it really works.
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I have a FICO 848 at age 35. It’s a lot of financial responsibility. Been 848 for ten months in a row.
any tip for us who just started using cards? perhaps in a video?
My recommendation is DON'T use them..... I'm serious, trust me. Your quality of life will be better without debt
Set your credit card to automatically pay its full balance from your checking account every month. And, of course, make sure you always have enough money in your checking account -- by keeping a large, self-imposed minimum balance. I started doing this before I deployed to Iraq for a year in 2003 because I might go months without being able to take care of my accounts. Now, I couldn't imagine doing it any other way. My chances of missing a payment are zero and I never pay a penny in finance charges. Your credit card account website might only show an option to pay the minimum balance automatically. If so, you might need to call the 800 number on the back of the card to set it up.
"Borrow as little as possible and pay it back on time"
Start with a gas card. A card from one of the big oil companies is easy to get, and it's very hard to "spend too much" on gas. You're certainly less likely to be driving past a gas station with an already full tank and say, "Look! They're having a big sale on gas!"
@@buc_mac yeaa thats kinda hard in this modern world don't you think?
If I keep watching you guys by the time I'm 18 I'll be a pro at this 😎
Thanks guys
Also included in a credit score is the number of accounts on record, the more the better. This is a little counter intuitive since it means someone with loads of credit cards will have a higher score. But keep in mind if you go out and get a bunch of cards your average account age will drop, the cards need to age.
You might want to mention that you can use creditkarma to check your scores as well. Other than that good video.
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Love from India, you guys.
I've suck at money. And now I'm learning from you guys.
Binge watching.
Awesome
We're part of the 66% of 18-29 year olds without credit cards. Happily debt free and scoreless. I hope this credit card fad comes to an end soon, it hurts so many people
Wait, pay as in...pay everything back? Or pay the minimum payment. I'm new at this. Also I LOVE THIS CHANNEL!!!
Always pay at least $5 above the minimum payments! Otherwise you won't see your payments go down due to APR charges. If you have extra money pay modestly above the minimum payment.
Yussef Saber: I have a credit limit of 24599 and I ran it up to 21250 and I watched my score drop lower till I paid the card off then my score went up to 834, then it dropped to 833 then 832 without cause. Now it's at 817 because I had a hard score check.
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I'm one of those savers with a low debt score. If fact, since I cut up my only credit card my score is now indeterminable, with a debt score of 0.
Sure it'll be harder to get a mortgage, but if I remain single, I'm okay with saving for the next 20years and paying in cash for a house. Now I'll have to see if I can find a wife that'll agree with me; not holding out too much hope for that one, though, lol. But it's not impossible to get mortgage without a debt score.
There's more of them out there than you think I got one
A wife that'll be okay waiting 20 years to pay for a house in cash?
No just cash it should take much less time than that most people using debt to buy a house pay for it twice so you can probably get it done in 10 or less if you rent cheap and be intentional
@@HikerHansen and housing market will crash in that timeframe so there's that to look forward to
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Question about the different types of credit:
If I want to get a house, how do it if the only types of credit I have is credit cards and student loans? What other types of lines of credit are there?
How are you doing
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