The Basics Of Credit

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Contents

Introduction ............................................................................................................................................... 3

What is Credit? .......................................................................................................................................... 4

Are You Starting to See Why Good Credit Is So Important? .......................................................... 5

Who Are the Credit Bureaus? ................................................................................................................ 6

Let’s Talk About Credit Score for A Minute…..................................................................................... 7

Let’s Learn a Bit More! ............................................................................................................................. 9

I Am Ready to Build My Credit… Can You Tell Me How? .............................................................. 10

Now That You Have Credit… Let’s Build & Maintain It! ................................................................. 11

Here Are 10 Words I Want You to Know! ........................................................................................... 12

What Can I Do If Something Happens to My Credit? .................................................................... 13

The Basics Of Credit

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Introduction

Greetings Teens and Young Adults!

You have probably never heard of me, so allow me to introduce myself.

My name is AL Jackson aka @Credit_Fix_Guy on Instagram, and well… I fix credit =). More on that later.

Now… This book is not about credit repair. This book is about putting you in a good position, so Insha’Allah (God Willing), you will never need to have your credit repaired because you would have used the knowledge in this book to protect your credit.

My goal is to teach you some very important things they don’t teach us in school, at least not the schools I attended.

So… let’s cut to the chase!

Who am I, and why do I care?

I don’t want to bore you with the details of my life story, so let’s just say I am someone that’s has been through life and learned some important lessons the hard way. I don’t want you to have to experience the same struggle, heartache, and disappointment I did because of my ignorance of the “Credit System.” I want you to understand the major impact it can have on your lifestyle.

If someone had taught me what I am about to teach you, I would have been very grateful but… I was meant to go through my struggles because Allah knew I would not only get through them, but help others get through as well.

So… let’s get started!

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What is Credit?

“Credit” is when someone gives you something of value, such as a loan, a car, a home, furniture etc.… And you agree to pay them back within a certain timeframe and, in most cases, with interest.

Credit is used to make a purchase when you don’t have all the cash on hand, or sometimes, you have the money but choose to use your credit to finance the purchase instead of spending a lump sum of your own money all at once.

Here is an Example of How Credit Works Let’s say, for instance, you want to purchase your first new car after college. You may not have $30,000 cash to purchase the car the day you go to the dealership, but… you can afford to pay $500 a month for the next 5 years (60 months). If you have good credit, a bank will loan you the money to purchase the car from the dealership, and then you will pay back the bank each month until it’s paid in full. This is called financing. Anytime you use your credit to make a purchase, you are financing it. Now, if you make late payments or miss payments this will have a very negative affect on your credit report and it score.

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Are You Starting to See Why Good Credit Is So Important?

Your credit report is your financial reputation. If you have a bad financial reputation, no one will want to do business with you. You will have limited opportunities and options in life, and you will always find yourself settling for less than you want. You will not be able to buy a car, rent an apartment, purchase a home, or get credit cards, and sometimes, you cannot get a job!

So, What’s A Credit Report? When someone is considering doing business with you, they contact the credit bureaus for a copy of your credit report. The information on your credit report will tell them if it is a good idea to loan you money or do business with you. This is assuming that a credit check is required, which in most cases, it is.

Two things make up your Credit Report: your Credit Profile and your Credit Score.

• Credit Profile: This contains all your personal information, such as your Name, Current and Past Addresses, Social Security Number, Employment History, and Birthdate. They also keep track of who has given you credit and how you paid them back.

• Credit Score: This number simply tells potential creditors how big or small of a risk they are taking if they lend you money. The score ranges from 300-850. The higher the score, the lower the risk.

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Who Are the Credit Bureaus?

The credit bureaus are companies that keep track of all your personal information and payment history. They use this information to create a credit report, and the information in that credit report will generate a credit score.

Your credit score is important, but more on that later!

Your credit report and score are then sold to anyone you have given permission to run your credit because you want to do business with them.

There are three main companies you need to know of: TransUnion, Equifax, and Experian. Some people believe that they are a part of the government, but they are not. They are just corporations in the business of selling your personal information for huge profits. Don’t believe me… check out the stock prices for Equifax Here , Experian Here and TransUnion Here.

Never fear them!

They have a set of laws they must follow, called “The Fair Credit Reporting Act”, which protects us from them reporting incomplete, inaccurate, and outdated information. These are the same laws I use to help my clients and customers.

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Let’s Talk About Credit Score for A Minute…

Your credit score will depend on how well you have built and maintained your credit profile.

The higher the credit score, the greater the chances of your getting approved for whatever you are applying for.

Your credit score is determined by five major factors. Payment History (35%) – Don’t ever miss a payment or make late payments!

Debt to Available Credit (30%) – Spend only 25% of your available credit.

Length of History (15%) – Keep accounts open as long as possible.

Types of Credit (10%) – Have Installment and Revolving credit on your file.

Inquires (10%) – Don’t run your credit often. Inquiries stay on for 2 years.

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How Do I Know If I Have a Good Credit Score? Here is a quick guide!

• Poor credit is considered a FICO score under 630.

• Average or Fair credit rating will be between 630 and 690.

• Good Credit is between 690 and 720.

• Excellent credit is anything above 720.

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Let’s Learn a Bit More!

There Are Two Basic Types of Credit • Revolving Credit: With this type of credit, you are given a line of credit with a

limit. It need not be paid in full each month. You can carry a balance (revolve the debt) over into the next month and continue to make payments.

Example: If your credit card balance is $500, your minimum payment might be $25 for that month, but… if you run the balance up to $1000 the next month, then your minimum payment would be $50. The higher the balance, the higher the minimum payment.

• Installment Credit: This is an agreement to pay back a loan in installments, usually with interest, over an agreed time period.

A car payment is the perfect example of “Installment Credit”. When you purchase a car using your credit, your monthly payment will be the same each month until the car is paid off.

Example: $250 per month for 60 months (5 Years)

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I Am Ready to Build My Credit… Can You Tell Me How?

Absolutely!

There are several ways you can establish and start building your credit.

1. Apply for a secured credit card.

2. Apply for a credit builder loan.

3. Become an authorized user on someone else's credit card.

Once you have established your credit, you want to keep building it by:

1. Making all payments on time.

2. Never letting anything go into collections.

3. Always staying under 25% of your credit limit.

4. Having a good mix of credit… Installment & Revolving.

5. Keeping inquiries low.

For a more detailed guide on how to build credit I have a book called “The Master Plan” at CreditFixGuy.com that teaches people EXACTLY how to build credit if they have “No Credit” or “Bad Credit”.

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Now That You Have Credit… Let’s Build & Maintain It!

• Watch the Inquiries: Every time you apply for something, an inquiry will be on your credit report for 2 years, unless you know how to remove them. Too many inquires will lower your credit score and make you look desperate for credit.

• Avoid collections, and if something goes into collections, make payment arrangements to avoid it showing up on your report.

• Put your bills on autopay. With credit cards, you can always pay the minimum as a default and pay more on it as you choose.

• Never carry a balance of more than 25% of your credit limit. This will have a negative effect on your score.

• Never miss or make late payments on your credit cards or loans. This is lower your credit score dramatically.

• Don’t ever purchase something you cannot afford. Do not get in over your head in debt. Just because you have good credit and could get approved does not mean you can afford it.

• CreditKarma.com is a free site you can use to keep track of the direction your credit is heading. The score is inaccurate; it is usually higher. We simply use this site for alerts and updates. Use a paid site, like Privacy Guard or Credit Check Total if you want a more accurate credit score.

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Here Are 10 Words I Want You to Know!

Collection: Unpaid debt you owe a creditor that is now with a collection agency and shows up on your report as a collection.

Collection Agency: A company that comes after you for your unpaid debts. They will either purchase or be assigned your debt, and they can legally come after you for it.

Charge Off: Debt not paid in 90 days will show as charged off by the original creditor before it is sold or referred to a collection agency.

Creditor: A business or person you owed or owe a debt to.

Debt: Money owed.

Credit Inquiry: This is when your credit report is reviewed because you applied for something.

Principal: This is the actual amount of money something costs before the bank adds interest to it.

Interest: The extra money you are charged outside the price of your purchase, so the bank can make money for giving you the loan.

Judgment: When you have an unpaid debt and a creditor takes you to court and wins. This is a judgement, and if this happens, they can take money directly from your pay check each payday. Avoid This!

Bankruptcy: When your expenses are higher than your income and you can no longer afford to pay everyone, you can file bankrupt to restructure or eliminate your debt.

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What Can I Do If Something Happens to My Credit?

If you find yourself with bad credit, there is no need to worry, unless… you are not doing anything about it.

No matter what happens to your credit, it can always be repaired with a little work and some patience.

All you need is the willingness to learn and the right tools!

Hopefully, you will never need to repair your credit, but if you need help, below you will find a list of resources to help you get back on track should you ever need them.

My Website: CreditFixGuy.com

FAQ Section: CreditFixGuy.com/info

So, in conclusion I simply want to say… Make Good Decisions.

Someone cared enough about you to purchase this book so that you can have a better future.

When the time comes, your credit will be your best friend or your worst enemy!

I know that learning about credit may not seem cool now, but it will be the coolest thing in the world when it’s time to buy a car, purchase a home or start a business.

I pray that you take the knowledge in this guide and use it to your advantage to build an awesome future.

And remember, life does happen, so if you ever do run into unforeseen financial difficulties… Insha’ Allah (God Willing) my books and services will still be available to help you get back on track.

YOU are the FUTURE… And I know you will make us proud!

Al Jackson