New to the Live Richer Challenge: Credit Edition? Learn more about it HERE.
Did you miss Day 1? Catch-up, HERE.
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!
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.
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 only you 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.
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 having 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….
Since there are three main credit bureaus, you also have three credit reports; one from each reporting agency.
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!
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.
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.
P.S. Don’t forget to get your free Live Richer Challenge: Credit Edition Starter Kit. Get it 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.