What is a Good FICO Score? [and 3 Steps To Get One Fast!]


Video Transcript:

A bad credit score will cost you over $70,000
in extra interest payments on a mortgage…and that’s if you even get approved. But what is a good credit score and how does
that loan officer decide whether to greet you with a smile or slam the door in your
face? In this video, I’ll not only show you the
difference between a good FICO score and bad credit, I’ll show you the average credit
score by age and the score you need to buy a house. I’ll then reveal three credit score hacks
I guarantee you’ve never heard and that will increase your FICO fast! We’re talking FICO scores and credit today
on Let’s Talk Money! Beat debt. Make money. Make your money work for you. Creating the financial future you deserve. Let's Talk Money. Joseph Hogue with the Let’s Talk Money channel
here on YouTube.

I want to send a special shout out to everyone
in the community, thank you for taking a little of your time to be here today. If you’re not part of the community yet,
just click that little red subscribe button. It’s free and you’ll never miss an episode. So I just saw a report out of the New York
Fed that as many as 60 million Americans are locked out of the financial system, unable
to get access to credit or the money they need. Now that’s twice as many people as the Fed
previously thought and it all has to do with the banks and their requirements around credit
score. So what I wanted to do with this video is
answer one of the most common questions I get on the channel, What is a good FICO score
and how to get one.

We’ll start by looking at the FICO credit
score, what makes a good or bad score. Then I’ll show you the average credit score
by age to see where you stand. We’ll dig into the numbers to see what kind
of a credit score you need to buy a house or a car and then I’m going to reveal three
hacks to boost your score as much as 100 points fast. Now your credit score is just a number based
on everything in your credit report. The FICO company looks at each of your credit
reports from TransUnion, Experian and Equifax, and then scores you based on things like payment
history, how much debt you owe and bad marks like late payments, defaults and bankruptcies. That FICO score ranges from 300 to 850 with
about half the population up around 700 FICO or higher. Here I’ve taken data from FICO to show the
percentage of Americans within credit score ranges, both for 2015 and the most recent
released 2017.

You see about 55% have a score of 700 or above
with another one-in-four Americans in the middle here with a score between 600 and 700
FICO. What really shocked me though was this 20%,
about one-in-five Americans with a credit score of 600 or lower. While you see credit scores rising from 2015
to 2017 for these people with higher scores, those with lower scores are actually seeing
their score fall! And a lot of you are probably sitting there
saying, so what. I don’t plan on borrowing any money, I don’t
need a credit score if I don’t need a loan. Please take this seriously because you never
know when you’re going to need emergency cash or a loan. The average out-of-pocket for a hospital stay
is over $1,100 according to TransUnion and a new transmission for your car will run eight
grand. After destroying my credit score in 2009,
I couldn’t get a loan to save my life and it pushed me into cash advances and payday
loans costing hundreds in fees. It didn’t end well and I want you to know
what I didn’t about your credit score.

So what I want to do here, to get a feel for
where everyone is at in the community, I want to put a question out there. What were the times or instances when you
needed credit? When do you use your credit cards or what
have been the times you’ve used a mortgage, student loans or some other loan? If you’ve never used credit, tell me that
and why. So scroll down and share your story in the
comments below.

But what is a good credit score? What’s the score that will get you the money
you need without those double-digit interest rates that break your budget? The rule of thumb is that any score over 670
FICO is good even though rates don’t start going down much until you get a score of 720
or higher. Anything below 600 FICO is getting bad and
we saw how people with bad credit are getting shut out, seeing their score fall over the
last few years. There’s actually a reason for this 670 cutoff
for what’s considered a good credit score. That’s the score you need for a loan to
qualify for federal guarantees and other programs. Most people don’t understand that banks
aren’t really in the business of holding your loan. Banks are in the business of making loans
so what they’ll do is sell the loans to investors for the cash to make more loans.

Now being able to sell those loans is a lot
easier if the loan qualifies for some federal program or guarantee so banks don’t want
to make loans to borrowers with a credit score under 670 FICO. But that means nearly four-in-ten people are
shut out of the financial system with a credit score below that prime lending cutoff. Worse is the one-in-five in that bad credit
score range where you can’t even look at a loan for less than 30% interest.

And bad credit isn’t always your fault. This graphic shows the average credit score
by age group and because a lot of your credit score revolves around things like credit history
and account age, millennials are just getting screwed. The average FICO score is around 630 for people
under 29 years old. That’s well into that bad credit range where
you’re locked out of the system and way below the average of 688 FICO for all Americans. Now you know what’s considered good credit
and bad, but what kind of a credit score do you really need for some of life’s major
decisions? What credit score do you need to buy a house
or a car? TransUnion ran the numbers for different credit
scores on a 30-year mortgage for $200,000 and found a cutoff around 620 FICO for loans. That’s not all though, it’s not just that
you’ll have trouble getting a loan with a credit score under 620 but the extra cost
you’ll pay if you can get a loan. That 620 credit score means you pay a rate
of 5.75%, more than a percent and a half higher than someone with a FICO of 760 or higher.

What is a Good FICO Score? [and 3 Steps To Get One Fast!]

You’d also be paying almost $200 more a
month and nearly $70,000 more in interest over the life of that loan. It gets worse for car loans. The rate on a loan for a used car averages
almost 20% if your credit score is below 500 FICO. That’s five-times the rate someone pays
on good credit and could mean the difference between paying off your car and repossession. Now that we know what a good credit score
looks like and the score you need, the question is, “How do you increase your credit score?” How do you save that $70,000 on your mortgage
by getting good credit? Here I want to share three tricks I guarantee
you haven’t heard. We’ve all heard that you can get bad marks
knocked off your credit report and that a limit increase will increase your score. In fact, I’m linking to a video in the description
below with the five credit tricks I used to increase my score from 560 in 2009 to an 805
FICO where it is today. These three credit score tips are different
though. I had never heard of them until a few months
ago but was shocked at how fast they actually worked.

Our first credit score hack is to get missing
accounts added to your credit reports. Most people know that you can write the credit
bureaus to get things removed from your credit report that shouldn’t be there. This is usually like late payments or bad
marks hurting your score. But what about the good stuff that isn’t
on your reports? The bills you pay every month that aren’t
on your credit reports and helping your score? Now creditors don’t have to report your
account to the credit bureaus so sometimes they don’t. Most often, this includes things like your
utility bill, cable TV and rent is another really common one. Since payment history is as much as 35% of
your credit score, getting these accounts and those regular on-time payments added to
your report can be a huge boost. Better still, the change is almost immediate
and it can help make your report look better if it has a few bad marks. So what you want to do here is to contact
all the people you’re paying monthly that don’t report on your credit.

If you can get them to start reporting, it’s
an instant win. The phone company and cable usually won’t
report but you can get your landlord to start reporting rent through sites like PayYourRent
and Rental Kharma which even allows you to add past rent history. Next here to increase your credit score is
to pay your card balance before it’s reported to the credit bureaus. Even if you’re paying your credit card balance
in full each month, it might be getting reported that you have a balance on your credit report. This is because card companies don’t always
report balances after your due date for the payment. In fact, most card companies report balances
to the credit bureaus at the end of the month.

It’s after your monthly statement has closed
for that month but before the payment is due. For example, Barclays closes my statement
on the 24th of the month but the payment isn’t due until the 13th of the next month. I pay it down to zero every month before it’s
due but was surprised when I looked at my credit report and it showed I was carrying
a balance. The problem was that Barclays reports balances
to the credit bureaus at the end of the month, after my statement closes but before the payment
due date. So even though I was paying my card off, it
was still showing a balance on my credit report every month and hurting my credit score. This one’s an easy fix though. Just call your credit card customer support
and find out what date they report to the credit bureaus.

You can usually get your payment due date
switched to before this date or just make it a point to pay off your card before they
report. Another credit hack you can try is to pay
off your highest balance cards first. Now I’m one of the biggest proponents of
the debt snowball method. That’s where you rank your debts by amount
and then make extra payments to the smaller ones first.

It’s a great motivator because you see those
smaller bills dropping off your list faster. The problem is, it’s not the best for your
credit or your checkbook. Those bigger debts, especially the credit
card balances, hurt your FICO score more because of what’s called the credit utilization
ratio. This is the amount you owe on each debt versus
your credit limit. So if you owe $8,000 on a card with a $10,000
limit, your utilization ratio is 80% which is really high. A higher utilization ratio, so owing up to
the limits on your cards or other revolving debt, is a sign of being overextended and
a big warning for creditors. Paying down those bigger card balances first
is going to lower your utilization ratio and it might save you money as well if those higher
balances happen to be on higher-rate debt.

Click on the video to the right to see how
I increased my credit score after financial disaster. The five credit hacks I used to boost my score
and how I now have a score over 800 FICO. Don’t forget to join the Let’s Talk Money
community by tapping that subscribe button and clicking the bell notification..

As found on YouTube – Creative Commons License

License: Creative Commons