WEEK 1: CREDIT KNOWLEDGE

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

Need to catch up? Click on yesterday's task and then come back.


Day 2: Credit Basics

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

How to rock this task:

  1. Learn about credit
  2. 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 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. 

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 late husband’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 For Credit Score Monitoring: SoFi...Yes! SoFi allows you to monitor your credit score...for FREE! While SoFi does not offer Identity Theft coverage, you can contact one of the 3 credit bureaus to enroll in their Identity Theft Coverage service and protect yourself against Identity Fraud!
Get your Credit Score with SoFi 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 social media friends...tag me @thebudgetnista


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.

You can also reach out to me here:


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 Lisa's. 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 or partner and earn a commission off of referrals or income, but I would not recommend a product or service that I didn’t believe was helpful and useful.


Share the wealth!


  • Okay, so on Day 1, I thought the Budgetnista’s tools ain’t workin.’ I logged on to Sofi. I had opened account during a previous Budgetnista program, but I had only registered. This time I my intention was to bee more diligent. I logged in and there was a promotion for a credit card with 2% cash back on all purchases. I applied online, and I was denied. Two days later I tried again to get my Experian credit report and Experian kept sending messages that I was not recognized in their system. Today I reached a live person who experienced the same issue and assured me they would work with me to resolve it. They asked that I call back in 72 hours and they would walk me through setting my account up again (this one is somehow corrupted), going through everything to determine where they may be problems, and assisting in submitting disputes, if needed. Morale of this long story – Day 1 got me to identifying a problem that I didn’t know was a problem, BUT was one of my 2 goals, which was review all 3 credit reports. AND, BTW, previous Budgetnista sessions got me into a different money mindset and enabled me to get to a high 700=, low 800 credit score. AND I still need help with controlling my spending, creating and sticking to a budget, saving and learning to invest. Just making my mess, my message (thank you Budgetnista for caring so much and thank you Robin Roberts for that saying.)

    • Hi Toni,
      I understand if I can get a handle on saving, budgeting, spending, and giving to my grown son.. I would be okay. Thank you for sharing. And thank you Budgetnista because this time I’m fully committed to applying everything you show us so I can get into the high 700s and 800s.

  • I often wondered why some things were on one report and not another. My TransUnion report always seems to be different from the others. It now makes sense that now everything gets reported the same.

  • Days 1, 2 and 3 done. I started on this path on my own back in October, but it was slow going. It’s nice to have a plan and be a part of a community so I can stay on track.

  • So far I am loving this! I jumped on a little late (I just completed Day 1 and 2) but I have already learned so much. Thank you Tiffany for breaking it down in a way that is easy to understand. I am hopeful and excited to go into this new era of having power over my finances and not it having power over me. Thank you to everyone else on here for sharing your stories.

  • Wow I was so anxious to learn more about Credit, so I had already downloaded materials regarding credit, credit score, and credit report. I also have my credit report from a couple of the agencies.

  • Hello Everyone!! I am finally in a mindset to start and finish this three-week challenge. I have finished all days now. I had to come back to Day 2. I have printed my reports before but it has always been a challenge to deal with. I will commit to dealing with the issues in hopes of pulling up my score, or moving in the positive direction over the next few weeks. I like the identify theft programs and I have even locked my credit where I had to approve who looked at my credit. At least that was my understanding on how the “lock” work. I’m looking forward to ROCKING this challenge with each of you!! Budgetnista THANK YOU for sharing your knowledge and making what we need available!!

  • Really enjoying the opportunity to learn from the Budgetnista! I am reminded of the importance of the “Identity Theft Programs.” My hope is to increase my credit score and to stay away from the pitfalls, i.e., spending on unnecessary things. Let’s go!

  • It just dawned on me how carrying a balance shows that you are not responsibly using your credit. I knew having a high balance was bad but it never really clicked.

  • I am literally playing catch up but this is not my first go round on this credit journey, I actually have been with Tiffany from the very beginning and my score has risen tremendously since 2016, I just don’t want to ever forget the process in keeping up with my credit.

  • In the past I have requested and received my credit reports but I have not read through them. This time I am going to read through them and question anything that seems incorrect.

  • I recognize the value of maintaining a debt-free lifestyle, and often, debt is unfairly criticized. My key insight today is that debt, when approached responsibly, can be a strategic tool for enhancing one’s financial position, particularly when making significant purchases such as a home or a vehicle.

  • Day-2 completed! First of all Thank you so much Budgetnista!! I learned Items that appear and include on our credit report and so much more.

  • I didn’t realize that different things went to different credit bureau’s, I was wondering why Equifax is different from TransUnion, now I know.
    Thank you for all these eye openers Budgetnista.

  • Day 2 I better understand that credit is an IOU or promise you will pay later. When you keep the promise of paying your debt the result is good credit. After reviewing my credit score with SOFI, it is not as bad as I thought and improvement is imminent.

  • Day 2:
    Since September of 2019 I started monitoring my credit score. Prior to that I did not having anything to my name for 10 years. I was a stay at home mom who aloud my husband to control things. I woke up one day and needed change.

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