Money, Health, and Other Things

Educational Blog in the Area of Family and Consumer Sciences for the Middle Peninsula


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[Replay] Four Common Credit Score Myths, Part II

Over the next few weeks, we’ll revisit our past posts on credit, credit reports, and credit scores. Today we will discuss the final two of four common credit score myths.

Myth #3: In order to build credit, you need to carry a balance on your credit card

There is no evidence that this is true, so if you’re carrying a balance just to improve your credit score, you’re likely wasting money by paying interest for no reason. Part of the reason for this misconception may be a misunderstanding regarding credit utilization ratios. While its true that those with 0% credit utilization have a lower credit score on average that those with small credit utilization ratios, not carrying a balance does not mean you have a 0% credit utilization ratio.

Which brings us to myth #4: paying off your credit card in full each month will result in a 0% credit utilization ratio. Credit card companies will generally provide information to the credit bureaus once a month. However, this is rarely done right after you’ve paid your credit card bill; in fact, more often than not, this information is sent to the credit bureaus at the end of your billing cycle. Which means, your credit utilization is usually calculated using your balance at the end of the billing cycle, when you receive your statement. So even if you’re paying your credit card in full each month, if you’re using a large percentage of your credit card balance, you could still be damaging your credit score. Going back to myth #3, the primary reasons people with 0% credit utilization tend to have lower scores – in order to have a 0% credit utilization that consumer is likely not using their card at all, meaning they’re not creating payment history, which is the largest factor that determines your credit score.


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[Replay] Four Common Credit Score Myths, Part I

Over the next few weeks, we’ll revisit our past posts on credit, credit reports, and credit scores. Today we will discuss the first two of four common credit score myths.

Myth #1: Don’t check your credit report too often or it will hurt your credit score

While it’s true that when someone checks your credit, it’s recorded as an inquiry on your credit report, and some of those inquiries can negatively affect your credit score, checking your own credit report isn’t one of those inquiries. Pulling your own credit report is considered a soft inquiry and has no effect on your credit score. Furthermore, creditors generally won’t be able to see your soft inquiries, so not only will checking your own credit not hurt your credit score, it’s unlikely creditors will have any idea how often you have or have not pulled your credit report.

Myth #2: You shouldn’t close unused credit cards because the loss of credit history will immediately hurt your credit score

This one is a little more complicated because there are a few true pieces to it. It is true that closing your unused credit cards will result in a loss of credit history…eventually. Assuming the credit card was in good standing, accounts in good standing with no history of missed or late payments will remain on your credit report for at least 10 years from the account closing. That said, closing an unused credit card can have an immediate effect on your credit score. If you have multiple credit cards, closing one credit card will likely impact your credit utilization ratio, which is the 2nd largest factor that determines your credit score. For instance, if you have two $1000-limit credit cards, and credit card A has a balance of $500 and credit card B has a balance of $0, your credit utilization ratio is currently 25%. If you close credit card B, your credit utilization ratio would jump to 50%, negatively impacting your credit score.


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[Replay] Demystifying Credit Reports and FICO Credit Scores, Part II

Over the next few weeks, we’ll revisit our past posts on credit, credit reports, and credit scores. Today we will discuss five factors that make up your FICO credit score!

Today we’ll move forward and discuss FICO credit scores, a score from 300-850 that is meant to reflect your credit worthiness. Here are the five factors that make up your FICO credit score: the largest factor for your credit score, at 35%, is your payment history – are you making your credit and loan payments on time? Are they being paid as asked? More than a third of your score is based on how well you’ve done making payments!

The next highest factor, at 30%, is your credit utilization ratio – what percentage of your open credit (for example, your credit card limit) are you using? Keep in mind, this is NOT calculated after you make your payment; if you’re consistently using a high percentage of your credit limit, even if you pay your bill in full at the end of each month, this could still damage your credit score! While there is no universally agreed upon target credit utilization ratio, keeping your utilization ratio below 30% is a common recommendation. FICO has provided data that those with a credit score in the 800s have an average utilization ratio of 4%, so the lower the better!

Next, at 15%, is length of credit history. In general, having a longer history of well-maintained credit will help you increase your FICO credit score, and it may take some time to re-establish or build credit for the first time.

A smaller factor, at only 10%, is credit mix. In general, a consumer that is doing a good job maintaining a credit card, student loan, car loan, and mortgage will have a better credit score than someone who only has a credit card, all other factors equal.

The last factor, also at 10%, are inquiries. Inquiries occur whenever someone checks your credit; however, not all inquiries impact your credit score. “Soft” inquiries, such as credit checks from employers or credit checks that haven’t involved you applying for a new credit item or service, will show up on your credit report (*for you, they likely won’t be visible for creditors checking your credit report), but will not impact your credit scores. “Hard” inquiries, which occur when you apply for a new credit/loan item or service (*depending on the type of service, it may be a hard or soft inquiry), may negatively impact your score. While one hard inquiry is unlikely to have a significant impact, numerous hard inquiries in a short period of time can! Fortunately, if you’re rate shopping for a mortgage, auto loan, or student loan, inquiries made in a 45-day period are likely to be counted as only one hard inquiry, and the first inquiry shouldn’t impact your credit for 30 days.

That concludes our two-part discussion on credit reports and FICO credit scores, if you have any questions, feel free to contact me at gjsturm@vt.edu.


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[Replay] Demystifying Credit Reports and FICO Credit Scores, Part I

Over the next few weeks, we’ll revisit our past posts on credit, credit reports, and credit scores. Today we will discuss what’s on your credit report.

Most people are aware of what a credit report is – a detailed document of your credit history, typically from one of the three major credit bureaus: Equifax, Experian, or TransUnion. However, there are plenty of misconceptions about what exactly shows up on your report. Generally, there are four sets of information that make up your credit report: identification information, your credit accounts, inquiries, and your public record information.

Your identification information includes things such as your name, addresses, past addresses, a portion of your social security number, date of birth, spouses or co-applicants, and possibly certain employment information. While none of this information is used to determine your credit score, there is a lot of sensitive information. If you do choose to print or save your credit reports, be sure they aren’t easily accessible to others.

The largest portion of your credit report is usually your credit accounts. These can include a variety of different accounts such as credit cards, charge cards, auto loans, mortgages, and student loans to name a few. There is also quite a bit of information to go along with each of these accounts: including the creditor, account numbers, recent balances, when the account was opened, if the account is current, 30, 60, 90 or more days late. There may also be data about credit limits, high balances, and possibly even month-to-month data on balances, when payments were received, and the amounts paid each month.

Another section is your credit inquires. This section contains a list of everyone who has accessed your credit report in the last two years. Some of these can potentially have a negative impact on your credit score, while some have no impact at all. We’ll talk more about that next week!

The final section are your public records and collections. Credit bureaus collect public record information from state and county courts, including bankruptcies, foreclosures, and debts that have been sent to collections. Traditionally, your credit report also included civil judgements and tax liens, but recently credit bureaus have been moving to remove these from your credit report.

Need a copy of your credit report? Since the passage of the Fair and Accurate Transaction Act in 2003, consumers are able to get a free copy of their credit report, once per year, from each of the three major credit bureaus through annualcreditreport.com. This allows you the option to check one of these credit reports every four months to more regularly monitor your credit, and check for errors or possible cases of identity theft. If you need a reminder to periodically get a copy of your credit report, University of Wisconsin’s Extension has a great tool, linked in the text below! If you find any errors or accounts that do not belong to you, the Federal Trade Commission, or FTC, has a great step-by-step guide to help you dispute them, also in the text below.

That concludes this week’s discussion on credit reports, we’ll see you next week when we talk about FICO credit scores!


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[Replay] Six Interviewing Tips

Last week we replayed our post on resume writing tips for those looking for new jobs. This week we’ll follow up that post and replay our post on interviewing tips! If you’re interested in learning more and attending a free resume writing and interview techniques workshop, check out our flyer below for our workshop in partnership with Virginia Career Works – Hampton Center

  1. Don’t show up unprepared with little knowledge of the organization and their initiatives. Learn as much as you can about the company; at minimum, researching some of their history, their focus areas, and their organizational mission.
  2. Show an interest in the job first. In most situations, it’s not a good idea to ask about salary, benefits, and perks right off the bat, and avoid talking about future aspirations, especially if they don’t involve that company.
  3. Don’t turn the weakness question into a cliche positive. Avoid answers like “my greatest weakness is I work too hard” or “my greatest weakness is I care too much about my job,” most interviewers have heard it before, and they’re not buying it. Instead, think about aspect of your resume that may be weaker than other job candidates, particularly things the interviewers probably already know about, like limited experience, lapse in time working in that field, different educational background than that position, etc. Discuss that weaknesses and how you would overcome it, that way you’re not admitting a new weakness and have the opportunity to address it with your interviewers.
  4. Be conscious of your body language. Even if you’re not interviewing in person, if you’re interviewing over video-conferencing, like Zoom, professional body language is still important. Be sure you have good posture, positive facial expressions, and avoid playing with hair, adjusting your clothes, or biting your nails.
  5. Give specific examples when answering questions, but be concise. Avoid answering too many questions with a simple yes or no, but don’t rattle on for 15 minutes with each answer.
  6. At the end of most interviews, your interviewer will ask if you have any questions for them. The worst thing to do is say “no.” This is your opportunity to ask more questions about the position and the company. Not only does this show interest from your end, this also gives you a chance to evaluate the company and the position. Remember, interviewing isn’t just about convincing the interviewer that you would be a good fit for them, it’s also about figuring out if they would be a good fit for you!