credit-basics

New to the Live Richer Challenge: Credit Edition? Learn more about it HERE.

Did you miss Day 1? Catch-up, HERE.

 

Week 1: Credit Knowledge

Day 2: Credit Basics

Today’s Easy Financial Task: Learn about credit and your credit report

How to rock this task:

  • Learn about credit
  • Learn the purpose of a credit report

You’ve made it to the second day of the Challenge. Woot, woot!

Today we’re going to dive into credit basics including what credit is and why it’s important. We’ll also discuss what a credit report is. Let’s get to it!

 

What is Credit?

There are two definitions of credit.

When an entity offers you a product or service that you agree to pay for later, they’re offering you this product or service on “credit.” In this case, credit is the promise or “IOU” with the understanding that you will pay later.

The second definition of credit is how good (or bad) you are at keeping the above promise. If you have “good credit,” it means you’re generally good at sticking to the agreement of paying your debts.

 

What Is A Credit Report?

A credit report is a detailed record of your financial history (like your ability to repay debt on time) and public records. It’s like your “money report card.”

Credit bureaus store financial data about us in huge databases. The financial information in the databases comes from data reported to the bureaus by our creditors.

When we (or other entities) search for our name, address, and social security number within the database, it pulls information about us and compiles it into an easy-to-read report.

The final product is (drum roll) your credit report. You can jump ahead of tomorrow’s task and get your FREE report here: www.annualcreditreport.com.

This site will not ask for your credit card. It will ask you to verify information that you only know about. Make sure you have access to a printer so you can print each one or save as a .pdf to access it later before you close your screen and lose access. 

Items that appear on your credit report include:

  • Personal information like your social security number, address, date of birth, and employer
  • Open and closed accounts including credit cards, mortgages, loans, etc. and the payment history on each account
  • Public records like bankruptcies, liens, or judgments and accounts in collections
  • Credit checks (also called credit inquiries) from lenders, employers, and other companies that you give authorization to check your credit report

 

The Three Credit Reporting Agencies

There are hundreds of different credit reporting agencies that collect information about us, but there are three major ones:  Equifax, Experian, and TransUnion.

These three bureaus collect financial data and sell the information to other entities, including us. The information is sold to us if we sign up for services like identity theft or credit monitoring.

Sidebar: Superman’s (my boo’s) identity was stolen and it resulted in someone buying a car in his name, running tolls, lights and eventually a car accident. He had to go to court four times as a result. Yikes!

He signed up for an Identity Theft service and it stopped instantly. It’s worth it.

Here’s a tool I recommend: Credit Sesame. Yes! When you sign up for Credit Sesame’s free credit monitoring, they’ll automatically give you $50,000 worth of identity theft insurance, plus live access to talk to identity restoration specialists for freeeeeeee. In the event you are ever a victim of identity theft, you won’t be alone to deal with it (like Superman), because they’ve got you covered.


Protect yourself and your credit with Credit Sesame for free>>> HERE.

 

Back to who gets your financial information….

Your information is also sold to creditors for their review when you apply for credit. (In order for these creditors to check your report, they must get your authorization. A credit check results in a credit inquiry on your report. We’ll talk about the impact of inquiries on your credit report on Day 4 of this Challenge.)

Since there are three main credit bureaus, you also have three credit reports; one from each reporting agency.

Why?

Although most of the information on your credit reports will be similar, there may be some small differences. This is primarily because creditors are not required to report your credit history to all three of the credit reporting agencies.

They may report to one, two, or none at all!

 

Why Credit and Your Credit Report is so Important

Financial institutions, employers, telephone providers, and other companies review the information on your credit reports to determine your creditworthiness.

Creditworthiness is an evaluation of how likely you are to repay debt in the future. Creditors make a judgment about your creditworthiness by reviewing items on your reports like your payment history and the amount of debt you have. Based on this judgment, they decide whether or not to extend you credit and at what interest rate.

Keeping your credit report void of negative records like late payments and unpaid balances is important because poor financial history can hold you back from qualifying for a low-interest rate or qualifying for forms of credit at all.

 

Why Credit Isn’t All Bad

Let’s address the elephant in the room: credit is a form of debt.

Usually, when we talk of debt, we think bad news.

However, using debt responsibly isn’t always negative. For example, buying a home with a home loan can be a worthwhile investment.

You need a positive credit history to qualify for that home loan.

You need to use credit responsibly to establish that positive credit history.

Don’t worry, I’ll show you how during this Challenge.

That’s it for today Dream Catchers!

We covered a lot of information, so feel free to reach out if you have any questions! Leave a comment below.

Remember to reach out to your accountability partners to encourage each other through the Challenge. Check into the Dream Catchers: LIVE RICHER group as well. 

 

What’s your KEY takeaway from today’s task? Share in the comments! Then…

Share what you’ve learned today with your tweeps:

Today I learned what credit is and how to read my credit report. Day 2: #Liverichercredit Click To Tweet

Live richer,

Tiffany

P.S. Don’t forget to get your free Live Richer Challenge: Credit Edition Starter Kit. Get it HERE
P.P.S. Here’s a copy of the Challenge Calendar. It’s a fun way to keep track of your progress.

lrcccalendar

 

You can reach out to me here:

Twitter: @thebudgetnista

Instagram: @thebudgetnista

Facebook: The Budgetnista

Private Forum: Dream Catchers : LIVE RICHER

 

*** Need Help? Feeling Overwhelmed? Want to work with someone one-on-one to improve your credit? Netiva “The Frugal CrediTnista” is offering her renowned, full credit improvement services & consultations at a special discounted price just for Dream Catchers! Learn more and get the help you need, HERE. ***

Want to work through the Live Richer Challenge: Credit Edition in a workbook? It’s part of a bestselling series and has already hit #1 on Amazon! Get your copy below.

 

 

My Lisa Rule: I have 4 sisters and Lisa is the baby (well she’s not a baby anymore). Of all of my sisters, I’m the most protective over her. Before I share any product or service with you, it must pass my Lisa Rule.

What’s the Lisa Rule? If I would not advise Lisa to use a product or service, I won’t advise you to either. YOU are my Lisas. I feel protective over you and your financial journey.

The products and services I recommend pass my Lisa Rule. Yes, I may be an affiliate and earn a commission off of referrals, but I would not recommend a product or service that I didn’t believe was helpful and useful.

The Challenge is sponsored by

Tagged with:
 
  • Laurie Pierre

    My key takeaway is that to improve and use my credit better I need to understand how it opens doors for me and there’s no reason to bury my head in the sand anymore in regards to my credit.

  • Jaqlyne Gabrielle Grant

    I learned…
    Not be afraid of my credit/credit score. With time, discipline and patience, I can improve my credit/credit score no matter where it’s at. Not all credit it bad, but I must understand how it’s used and when it’s being misused.

  • Monica Cornelius

    My key takeaway is in understanding the importance of credit report which is used by creditors to judge how creditworthy you are which determine whether you are extended credit. Your credit report can also affect other aspect of your life like being able to secure employment.

  • Juanzel Cardoza Felder

    I learned that not all credit is bad, a small amount of debt can actually be good thing because paying monthly balances allow companies to report to the credit agencies and boost your score. Credit scores can improve by making payments on time and decreasing debt.

  • Dallas Freeman

    Today i learned all the info that actually goes into your credit report. I learned about creditworthiness and that it effects your employer also.

  • Juliet Donkor

    Today I am reminded not just getting a great score but maintaining it is the application for my own personal journey.

  • Layla

    My main takeaway is that even though credit is a form of debt, it can be very beneficial in the long term. Credit is important for me because it will ascertain the interest rate I’ll receive on student loans, it will show employers that I’m reliable (I’ve had friends get fired for having poor credit), and it will help me in purchasing my first home.
    So although credit is something we don’t necessarily want, we do need it.

  • Sheli

    I never checked my card because I was scared. But I realise that it’s not all bad to check my report and make smarter choices.

  • Charlene

    My key takeaway is credit does not have to be scary! Thanks to the credit sesame freebie, I’m one step closer to my credit goal!

  • Kerri Lynn

    My key takeaway from this article and what I’ve learned in the past few months is to know what’s on your credit report. I filed bankruptcy in 2011 and hadn’t checked my credit report until a few months ago when I went to apply for a home loan and found that items that should’ve been removed, were still on my credit report. It has been very challenging to have these items removed.

  • Anita

    My key takeaway, I need to vigilant about my money/credit report card. Being aware of whats posted on my report. Continue to take the necessary steps to build a better report card. Thank you for all you do Tiffany!

  • Tiffany (Harrison) Major

    The key thing I learned in todays lesson was to not be afriad of credit or debt by credit. I have a deeep fear of getting into any debt and owing anyone any money so now I realize that its important in the long run to have some credit worthiness in order to be able to do things in the future. I also JUST ran my anual credit report a few days ago so its exciting to know that was on our list!

  • Tommi

    My key take away from this lesson is the importance of knowing what is on your credit report. I didn’t realize that the three different reporting bureaus may or may not have the same information. I am interested to check all of my credit reports as we get further along in the challenge and learn what to look for.

  • Wanda

    Key point: Some debt is necessary,
    If I ran my credit report within the last 12 months, will I be able to get it free today?

  • Latonia

    My key takeaway is some debt is good as long as you are responsible.

  • Charaun

    My key takeaway is that it is essential to be responsible with your credit and to also protect yourself by signing up for a credit monitoring/ Identity Theft Service.

  • Tamika

    My key take away from this lesson is to not only be vigilant in finding out about your credit score but once you do that become proactive in paying off any debts to remove negative inquiries from it. You never know how this may effect you in the future when it comes to purchasing a car,home, and etc…..

  • Fay Henry Reddick

    KEY Takeaway: To thoroughly review my credit report to ensure there are no anomalies listed. I found 2 today and submitted a dispute request to see what returns. Unfortunately, I was not able to retrieve my credit report from Equifax online today. Credit Sesame offered some valuable information as well.

  • Dorcea S Brown

    Key takeaways:

    1. Credt isn’t all bad, it just depends on well you manage and pay back what you say you’re going to borrow.

    2. Identify theft is a must to safeguard your credit from hackers.

  • Jamie Simmons Allen

    I’m learning that I alone control what goes on my credit report, be it positive or negative. I have to make sure that only positive things go on my report.

  • LaTrisha Blunt

    I learned that using credit responsibly is beneficial to my financial future. Credit affects everything concerning me. I need to do better which is why I’m doing this challenge.

  • Kenisha Roper

    My takeaway from today: thoroughly review your credit report and credit monitoring is a must have.

  • Charmaine Glover

    My takeaway from today is that credit can be a good thing and a bad thing!
    And that my credit is my life.
    I need an accountablity partner……

  • Bailey R.

    I learned that having a mortgage(debt) is not bad debt. Also, it is important to check your credit report frequently.

  • Saidhah

    My takeaway is that all credit is not bad and there is help after identity theft.

  • El Kelz

    Hi Tiffany,
    Thanks greatly for this kind and wonderful service that you are providing us at no charge. I joined the group because I moved to the USA a few years ago and I don’t think I have built a credit history, which is obviously something I need to have. I tried to get a credit report from Credit Sesame but got a failure report saying that my verification info was wrong or that no credit info was found for me. After several attempts I was told I cannot attempt again for at least 30 days. PLEASE ADVISE.

  • JB Sicard

    My take away for Day 2 #LRC #MagnifyMoney #DebtisNOTbad #reviewURCreditReport #DontBeAshame

  • C Brown

    My take away for day 2 is, I have much work to do and I signed up for Credit Sesame and found and account that I didn’t know about. And the recommendations to fix the problems.

  • Sharon Gamble-King

    I am already signed up for Credit Sesame, so I was familiar with them. I’m also really familiar with reading my credit report and knowing the different areas of what makes a credit report, so I have no excuse for being where I am except not staying focus and doing due diligence. Thanks for the refresher always help!

  • Billie Brickhouse

    My take away is all debt isn’t bad debt #homeowner

  • Vivian Mitchell

    Reminder to keep my credit report free of negative records. And check out Credit Sesame.

  • Nikia Kae Cummings

    My takeaway is that I have increased my attentiveness to my credit reports, but I need to get even more detail-oriented and serious about keeping track of things. I want to learn better how to go about the dispute process, so that as much as possible, the stuff on my credit report is working in my favor.

  • Lydia Jonas

    Have a question. I have credit protection due to the federal government being compromised and because my name was attached to my ex-husband. I was notified after the fact. Should I go ahead and sign up for credit sesame now or wait until the fed’s protection has come to an end.

  • Koko Brown

    Did anyone have difficulties obtaining their free credit report? The link kept returning back to its original page.

  • debtfree

    This was just a reminder to me to pull my credit report for this year.

  • Linda Inquisitive

    Today was a refresher for me. I was aware of most that was discussed. However I have learned to take my credit, my credit reports and credit score seriously and to change my mindset towards credit.

  • Robresha

    Day 2: Liverichercredit KEY TAKE AWAY: Credit is NOT bad! You just have to learn how to manage it.

  • Renee

    Today I learned that identity theft monitoring is in fact worthwhile. I always thought that signing up for that kind of service was a joke since they can only alert an individual after the fact and it’s still a mess to clean up. Day 2: #Liverichercredit

  • Sherrett Meme Stanley

    I’m having problems with verified my address while signing up, it keep stating not correct address….I need HELP

  • Tyjuanette Smith

    My takeaway is that debt is not bad always bad.

  • Paulette Elbers

    A question for more clarity…Credit sesame will store for your information and give you protection for free? It’s a little hard to believe how a company can do this as things are rarely totally free, so what does credit sesame get out of this arrangement?

    • neceyluv

      Good question! Companies like Credit Sesame and Credit Karma are paid by companies who advertise on their sites (like the credit card, credit repair, and insurance companies).

  • Lois Samuels

    My take away is creditors are not required to report your credit history to all three of the credit reporting agencies.

  • empressamber

    My takeaway is that credit is not bad or evil. I have been so bad and irresponsible with my credit that I have viewed credit as something bad. It’s time to change that thought process.

  • neceyluv

    All debt isn’t bad! I attended Dave Ramsey’s FPU, and while I love his advice and common sense methods, I think he has a personal vendetta against credit and discourages it at almost all costs lol. Credit itself isn’t “bad”, it’s all in the way you use it. The key is to use it to OUR benefit, not the credit companies!

  • Tammy Nelson

    Today I learned importance of knowing how my credit score is determined and what things go into the credit report.

  • Ericka Davis

    Hello Tiffany! I am a member of #DCLV and love everything you are teaching. Because I am a recent Savings Challenge Grad this helped to tie in key parts during that challenges’ 4th week. On Day 1 of this challenge I learned that credit is not bad and how different entities use my information. Thank you!

  • Donna

    Today i learned that i can safe guard myself with Seasame!!!!

  • Joanna Connelly

    Today I learned that I can use my rewards to pay down some of my credit card debt. I can’t believe I never looked into it before! I like Sesame, but it didn’t pick up the correct information regarding my mortgage’s interest rate…so make sure you double check it with your lender.

    • Tessa

      I noticed that also about my mortgage interest

  • Patricia

    I signed up w/ credit sesame as suggested on day 2:credit edition and I found out that my credit score if fair, I have no debt and the suggestion for a credit card is the capital one platinum card.. credit Karma suggested the same card and I applied for it when I was on the credit karma site only to get a HARD HIT, this hard hit is also showing on credit sesame so why is it recommending the same card… I applied dec 2016… FUSTRATED!!! PLEASE HELP!!! THANK YOU!!

  • Juanita

    Hi Tiffany,
    Lesson 2 I completed this task and was ahead of the game a little.
    1) Per your suggestion I applied to credit Semame on January 3 and it was interesting that it was in alignment with the Transunion report that I had someone pull for me that early that morning 572 Yes! I celebrate because I was in the high fours a year ago.
    2) I review my credit report and score with Experian every month through a monitoring program through Capital One in which I may cancel it is $24.95 a month.
    3) I even applied for a credit card and was declined, another Capital One.

  • Gorgelia Pollard

    I learned that my utilization is way too high. I applied for a credit card when I first joined the group and in six months my limit was increased. But, I usually just spend close to the limit and pay it off in full. I will work on credit utilization.

  • Kimberly Emery

    Day 2: credit is your money report card! Wow… ok , so if that is the case, I have ALOT of work to do. I was at almost 700 years ago, but then used my CC for college expenses for my daughter. Have to work it back up. #ROADTO800CLUB

  • Nyoka Michelle

    My takeaway is that credit is like a money report card and it is not all bad.

  • Dychaun Dunbar

    I have learn that credit is not bad. I also learn your credit is what you make it. Good or bad. I learned that paying your bills and debts on time takes you a long way.

  • sheilondaD

    I learned to from working on my credit that you have to look at you report often to make sure that items are taken office.

  • Karen

    I’m learning that if I take these little steps each day, I will be able to take control of my finances and little by little work my way out of debt.

  • Fredrick Williams

    I was recommended by a friend to Grandbasedata@techie.com ­when i had a low credit, he is g­ood his services are ­legit and safe  i was­ able to get a v.good­ score , i always rec­ommend them to people­ with credit related ­issues you will be gr­ateful.

  • Angela Perry

    I have learned that I will need to pay off my $100,000 student loan before I can buy some property. Bummer

  • LaTeisha Clement

    Today I learned that not paying bills on time can negatively affect your credit score. That is what I am working to remove.

  • Genia Msaries White

    I’ve learned what credit means. How credit is a report card of my debts. My credit is best when it is in the positve, especially when making major purchases. The one point in today’s lesson I would takeaway from is to protect myself with the recommended identity theft company call Credit Sesame, which will be a must do as soon possible. Thanks Tiffany!! Enjoyed this lesson!!