Credit and Credit Scores: A short lesson

[PokerFox]

OK, So I have to give a short presentation to my bank about credit and credit scores as part of some team-building crap, who knows.

Anyways, I actually think my topic is useful and something people need to know, so I thought I'd share with a bunch of poker players who keep all their scrilla on Neteller.

There are 3 major credit reporting agencies, TransUnion, Experian, and Equifax. The 3 are all regarded as fairly accurate, however, there are discrepancies between the 3. You are entitled to 1 free credit report per year from each agency (obtainable at annualcreditreport.com), therefore, the smart consumer pulls his credit once every 4 months, each time from a different agency.

The big misconception is that checking your credit hurts your score. This is simply not true. There are 2 types of credit inquiries; soft and hard.

A soft inquiry is when you check your credit, such as your free credit report, or an employer pulls it for job purposes. These do NOT affect your credit at all and do not show up on your credit report.

A hard inquiry is when you apply for a credit card, loan, mortgage, etc. These will affect your credit if you are denied and especially if you continue to apply at other financial institutions and continue to get rejected.

The best way to maintain a good credit score is not having any 30+ day late payments, because they stay on your record for 7 years.

The best way to build credit, if you have none, is to get a CD and take out a loan against the CD, paying it off, establishing credit.

Anyone want to know anything about credit?! Manage it well and you'll be paying off that 30 year mortgage in no time.

Fox

[Cubswin]

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The best way to build credit, if you have none, is to get a CD and take out a loan against the CD, paying it off, establishing credit.


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huh?

[Cubswin]

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The best way to build credit, if you have none, is to have someone with great credit add you as an authorized user on one of their credit cards (preferably their oldest card with no delinquencies)

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[___SK___]

whats the best way to rebuilding your credit?

[PokerFox]

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The best way to build credit, if you have none, is to get a CD and take out a loan against the CD, paying it off, establishing credit.


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huh?

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You deposit $5000 (arbitrary amount) into a 6 month Certificate of Deposit earning 6%. You go for a secured loan at a lower interest rate (may need a cosigner). You pay off the loan, and earn some small interest in the process, and increase your credit.

[PokerFox]

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whats the best way to rebuilding your credit?

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Get yourself a credit card if yon don't still have one, and make all your payments on time, and unfortunately, wait. You can't get those 30+ late payments off of your credit report like I said. Don't use one of those credit repair clinics. All they do is offer to remove wrong or bad info from your credit report and you can do that yourself.

[The X-Factor]

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The best way to build credit, if you have none, is to get a CD and take out a loan against the CD, paying it off, establishing credit.


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huh?

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CD is a Certificate of Deposit where you take x amount of money and put it in the bank for x amount of time. The bank will pay you a percentage on that money. Lets say 5.0% for 1 year or something and you will make money on it yuntil that year is up. It is easier to borrow money from the bank when you have something to back it up with. This is why banks are big on Home Equity lines and loans because the home will increase in value. Hope that helps some.

[Cubswin]

I know what a CD is I just fail to see how borrowing against the CD is the best way to establish credit. The best rate I currently find for a 1 year CD is 5.46%. Put yourself in a 25% tax bracket and you are effectively earning somewhere around 4.25% after taxes. Where are you going to get a loan for less than 4.25%?

[The X-Factor]

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I know what a CD is I just fail to see how borrowing against the CD is the best way to establish credit. The best rate I currently find for a 1 year CD is 5.46%. Put yourself in a 25% tax bracket and you are effectively earning somewwhere around 4.25% after taxes. Where are you going to get a loan for less than 4.25%?

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You wont get one that low now. The prime rate is 8% now. What he is saying is to build your credit and get it started its not a bad idea.

[Cubswin]

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What he is saying is to build your credit and get it started its not a bad idea.

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I completely agree that building your credit sooner than later is a good idea. I do not agree that spending money to increase your credit score is the best method.