The Credit Chatroom: enter & soar

Hi, welcome to the “chatroom” (blog). 

The year is 2005. You just got home, grabbed some yogurt strangely prepackaged in a tube as your after-school snack, and plopped down in front of your family’s enormous desktop computer to continue the hot lunchroom gossip online. You spent all day learning about rhombuses and the Pythagorean theorem but not much about the importance of having good credit history, let alone customizable renters insurance and auto insurance you can customize. 

Well, you can finally stop scouring the deep dark web for answers. Let Toggle^® shine some light into the financial darkness. This chat is about claiming the credit you deserve. With good credit (generally, a score of 670 or higher), you may be able to secure the apartment of your dreams, get approved for utilities, and even get cheaper rates on a car loan. So keep reading, because everyone can be capable of building great credit.

Photo by Windows on Unsplash

UnicornGuy70: Um…what is credit?

ToggleCreditAsk3000: Put simply, credit is the ability to borrow money or access goods or services with the understanding that you’ll pay later.

It essentially quantifies the level of financial trust you’ve earned, packed into a cute little three-digit score. The higher your score, the less of a risk you are to financial lenders, in their eyes. Having a high credit score can have its economic benefits too. A high credit score may facilitate a lower interest rate, called a “tier,” when applying for car loans or a mortgage. When you want to swap out the plastic inflatable chairs for more expensive furniture, having a better score may help you receive better financing options too. With a better credit score, you may also get better interest rates on credit cards. Check out this site to learn more about your credit.

^{Photo by Valentina Barreto}

GymnasticsAllStar12: Interesting. What is a good credit score? 

ToggleCreditAsk3000: A good credit score is flexible depending on which scoring model is being used, as there are many. However, two of the more popular credit score charts are below. 

Using the FICO® model, the credit score ranges are:¹

300–579 = Very Poor
580–669 = Fair
670–739 = Good
740–799 = Very Good
800–850 = Excellent

Using the VantageScore® model, the credit score ranges are:²

300–499 = Very Poor
500–600 = Poor
601–660 = Fair
661–780 = Good
781–850 = Excellent

PunkKid72: How is my credit score calculated? Do I have to calculate it myself? 

ToggleCreditAsk3000: Fortunately, you don’t have to whip out the algebra. The three major credit bureaus (Equifax®, Experian®, and TransUnion®) calculate it for you. As with the scoring models, FICO and VantageScore have two different scoring formulas. 

FICO breaks it down like this:³ 

35% payment history: Pay your credit accounts on time.
30% amounts owed: How much debt you carry in total. Credit utilization (percentage of a person’s available credit that is being used) is an important part of this. Using a lot of your available credit may mean you are overextended. Experts generally suggest keeping your ratio of debt to credit at no more than 30%. That is, if your credit card limit is $1,000, then it’s best to keep the balance you carry at or below $300.
15% length of credit history: Obviously, the length of time you’ve had credit matters.
10% new credit: How often you apply for and open new accounts (FICO notes that opening too many accounts in a short period of time can result in greater risk).
10% credit mix: Having a variety of installment loans and revolving credit accounts, which may include credit cards, auto loans, mortgages, and personal loans.

And VantageScore looks at it like this:⁴

Extremely influential: Payment history.
Highly influential: Type and duration of credit and percent of credit limit used.
Moderately influential: Total balances/debt.
Less influential: Available credit and recent credit behavior and inquiries.

MeowPurr3: Hiii, so where can I find my credit score then? ¯\_(ツ)_/¯

ToggleCreditAsk3000: Hello, MeowPurr3. Everyone is capable of finding their own credit score, and it’s very easy to do so on the web. We actually highly recommend that you check your credit score frequently, so there are no surprises when you go to apply for that dream apartment of yours. 

Myth alert:⁵ Many people think that checking your credit score too much will negatively affect it. This is a common concern, but it is not always true. When you check your credit score, it will not be impacted since that is considered a “soft” inquiry. Other soft inquiries include when one of your current creditors checks your score or when a company checks your score to see if you qualify for a pre-approval offer. “Hard” inquiries, however, can affect your credit score. Those occur after a new potential lender reviews your credit history, usually when you apply for a loan or a new credit card. The good news is that if you’re trying to make a very large purchase, like your first home, for example, multiple hard inquiries within the same time frame are usually lumped into one. 

Back to the “soft” inquiries, though. Credit Karma lets you check and monitor your credit score whenever you want. To get the most out of Credit Karma you might want to download the app to get your credit score for free on the go. So no more wondering what your current credit score is while sitting at the cat cafe. Go check it out! Xoxo :)  

Photo by Wes Hicks on Unsplash

HOrseGal_19: That’s kind of scary! Can everyone see it? XD 

ToggleCreditAsk3000: That’s a great question, HOrseGal_19. With lots of personal data available online, it’s easy to assume that everyone and their mother can just hop on any search engine and look up your credit score. Fortunately, you can feel better knowing that credit bureaus only give this information to those who legitimately need it. Some legitimate needs include when you apply for a loan or credit card, utilities, and an apartment. So when you’re going through any of these processes, or similar, there may be an inquiry into your credit report. If you see a credit check that you didn’t approve, there’s a chance it could be fraud. This would be a good time to check your accounts and report any suspicious activity to the credit bureaus.

Photo by Daria Nepriakhina on Unsplash

EatSleepSoccer18: What if I don’t have a credit history? S.O.S.

ToggleCreditAsk3000: Don’t worry. Everyone is new to the credit game at some point. An initial way to get your credit started is to see if you can be added as an authorized user on a family member’s credit card. Being added as an authorized user allows you to piggyback off the primary account holder’s credit (with their approval). As a result, you establish your own credit history. One caveat is that this typically works well if your family member has good credit and uses their credit card responsibly. You will also want to make sure you use the card responsibly to avoid racking up debt on someone else’s account. 

Another way to start building your credit can be to apply for a secured credit card. A secured card can be similar to an unsecured credit card. The main difference, generally, is that you must make a security deposit up front to secure the line of credit you are receiving. The deposit amount differs for all card carriers, but it can start as low as $49. Often, the amount of your deposit then becomes your credit limit. Depending on your credit card carrier, the benefit of having a secured credit card is to help protect yourself from maxing out a credit card with a high credit limit, which could negatively affect your score. 

Photo by Clay Banks on Unsplash

Millenniumbabe94: Why can’t I just get credit for paying my rent on time? Or can I? 

ToggleCreditAsk3000: It’s possible! Unfortunately, that often doesn’t happen automatically, which is kind of bonkers. Credit Lift^SM by LevelCredit^TM is a way to build credit with your rent, cell phone, and utility payments. There’s a good chance you already pay these bills, so why not get the credit you deserve for them? All you have to do is sign up, connect your bank account, select your payments, and then it will report those to all three credit bureaus (Equifax, Experian, and TransUnion) for a monthly subscription fee of $6.95.

^{Photo by BONNINSTUDIO}

Sk8rboy1212: Does applying for a Toggle insurance policy negatively affect my credit score? 

ToggleCreditAsk3000: Dude, not at all! When you apply for a quote with Toggle, we may obtain your credit information or other third-party consumer reports to offer a renters insurance price uniquely for you, depending on your state of residence. Don’t worry, though; any credit inquiry we do is considered a “soft” inquiry that won’t affect your credit score in any way. Ready to apply for renters insurance online, Sk8rboy1212? Drop in at GetToggle.com for your free quote. 

^{Photo by Tim Gouw on Unsplash}

TrampolineKing2008: Are there ways to get your credit score to jump quickly? 

ToggleCreditAsk3000: Yes, there are several options for you to choose from when trying to get a quick jump in your score. LookBack is an optional add-on to Credit Lift, which can look at up to two years of past payments and report them to the major credit bureaus to be included in your credit report. This may help you build your credit fast for a one-time fee. Opening a Credit Builder Account with Self Financial is another way to quickly build your credit. Once you open the account, you make a monthly payment for the specific amount you’ve chosen for 12 or 24 months from the plan options. Each on-time monthly payment builds credit history and adds to your savings, which are yours to keep at the end (minus fees and interest).

Photo by Alba Vitta

ToggleCreditAsk3000: Congratulations! You’ve reached the end of the chat. Ready for your credit to soar? 

We hope that all the conversation in our chatroom (blog) has helped enlighten you on some of the details related to credit. Fortunately, with a few steps and precautions, everyone can work on building great credit from the ground up or can help get it back on track after some bumps in the road. Having good credit can help make the significant steps in life become a possibility for you, like maybe getting approved for that first apartment, a new car loan, or finally being able to open your very own cupcake shop. Whatever your plan is, remember, being a member of the adulting elite means knowing what’s going on with your credit. And now you do! 

^{1 ficoscore.com/education
2 vantagescore.com/press/what-is-a-good-credit-score-and-how-to-get-one
3 myfico.com/credit-education/whats-in-your-credit-score
4 vantagescore.com/consumers/education/tips-about-credit/how-credit-scores-work
5 myfico.com/credit-education/credit-reports/credit-checks-and-inquiries}