Episode Transcript
[00:00:00] Speaker A: Today is a very special edition of Take Control Tuesday because we are entering year 11, helping you make money, smart decisions. So the episode you're about to listen to was the very first one with Mansa Musa. The voices are going to sound so youthful, but the information always matters.
[00:00:20] Speaker B: Here we go.
With me on the phone is a financial coach and a housing counselor. We've heard from them before, but it is Manta Moussa. How are you?
[00:00:31] Speaker C: I'm fine, Randy. How are you?
[00:00:33] Speaker B: I'm doing fine. Hello to the listeners. I am so glad that we finally got this together because you have a wealth of information that I think a lot of people need to know, especially when it comes down to their finances. And what I want to talk about today is something that you brought up to me a few weeks ago. Why paying your bills on time does not guarantee a good credit score. Now, you not saying we're not supposed to pay our bills, but
[00:01:01] Speaker C: no, please don't anybody leave thinking that's what we're saying.
But what we're saying is just paying your bills on time will not insure you of a good credit score. Now we also need to say this. If you don't pay your bills on time, you will not have a good credit score. You cannot have a good credit score without paying your bills. But here's the thing. Paying your bills on time, they call it payment history, is 35% of your credit score. It's the biggest single factor that affects your score. However, the real revelation there is there are 65% of other factors that affect your score other than just how you pay your bills.
[00:01:43] Speaker B: Wow, that is a lot. What are some of the other factors?
[00:01:47] Speaker C: All right, the next largest factor is what they call proportion of balance to limit on revolving charges. And basically what that means is if you have a revolving charge, which is a Visa, Mastercard or credit card like that, then how much balance you carry compared to your limit begins to affect your score. If your balance is over 30% of the limit of your credit card, it will begin to negatively impact your score even though you're paying your bill on time.
[00:02:22] Speaker B: Wow.
[00:02:23] Speaker C: So, for example, if you have $1,000 limit on your credit card and you owe more than $333, it will begin to negatively impact your score even though you're making your payments on time. And the closer you get to 100% of your balance, the greater negative impact it has on your score. Wow.
[00:02:44] Speaker B: I did not know that. Are there other things that we need to be aware of? I know that you know Running a credit check has something to do with it as well.
[00:02:54] Speaker C: Right. Those are called inquiries. That's about 10% of the score. And you can control your inquiries by controlling your Social Security number. And there are different types of inquiries. So, yes, definitely do not just go willy nilly. Applying for credit. For example, one of the things that people are not aware of, you know, you go into a local retailer and they say, if you apply for our credit card, we'll give you an extra 5 or 10% off. Well, that's going to be an inquiry. And depending on what you plan to do with your credit in the future, that could have a negative impact.
[00:03:27] Speaker B: Mm. A lot of people don't understand that at all. And I got caught up in that some years ago and thank God I learned my lesson.
[00:03:36] Speaker C: They call them inquiries or the way the credit scoring people look at it, it's a new application for credit. The other thing they do is type a credit. Believe it or not, even though you pay your bills on time, there are certain types of accounts that appear on your credit report that have an overall negative impact. These would be finance company accounts. For example, Gardner White. No payments to 2020.
That's a finance company account. Even though you don't owe any money, it can negatively impact your account.
Payday loan places, those kind of places that report out finance companies, they can negatively impact your credit, even though you're paying your bill on time.
[00:04:15] Speaker B: My God.
[00:04:17] Speaker C: And then the final factor is how long you've had credit. New credit will always pull your score down. When you get new credit, it'll pull your score down. So the longer you have credit, assuming it's good credit, the better the impact.
[00:04:35] Speaker B: All of that, you know, a couple of them are a surprise to me. So I'm really glad that we talked about that today. I think that we should keep this going and we will talk more on next Tuesday about some important things that will impact our finances and, you know, pretty much our life too. So thank you so much, Manta.
[00:04:55] Speaker A: Oh, my goodness, what a great throwback. And you can hear that again if you missed any of it on our website, takecontroltuesday.com it is an honor to bring you Take Control Tuesday each Tuesday. And I thank Mansa Musa from the bottom of my heart for helping us out for 11 years. Can you believe it?
