Credit scores mean more than people realize

BY STACIE BOSTON
Reporter – @cp_sguthrie
04/20/2017 08:15 AM
Main Cherokee Phoenix
Cherokee Nation citizen Brian Hartley, an Oklahoma State Bank employee, offers a two-sheet guide that provides a look into credit scores and what they entail. He said it’s important to first know what exactly a credit score is. CREDIT.COM
Main Cherokee Phoenix
Brian Hartley
MONKEY ISLAND, Okla. – Credit scores act as buffers between consumers and banks or institutions from which they wish to borrow money. Whether it’s for daily items, a car or a house, credit scores play roles in many expenditures, so it’s important to know about them and how they affect consumers.

Cherokee Nation citizen Brian Hartley, an Oklahoma State Bank employee, offers a two-sheet guide that provides a look into credit scores and what they entail. He said it’s important to first know what exactly a credit score is.

“A credit score is a scoring system to let creditors know what type of past history you had,” he said. “Meaning that if you paid on time and have not been in any trouble you’ll have a high score, and it tells creditors like a bank or an institution that the likelihood of this person paying is very high compared to someone who may have a low score. It’s the possibility that the low score is a person that could be very non-paying or late-paying or have some other issues that may have came into their past.”

Hartley said a credit score is determined from various factors.

“It’s anywhere from paying your bills to getting credit lines or getting a car installment payment or any type of other credit out there as well as medical. I mean, your whole life is tied to your credit score almost,” he said.

He said the credit score range is typically between 350 to 850, and Transunion, Equifax and Experian all calculate a score for the consumer, which typically vary but closely reflect each other.

Hartley said when it comes to calculating scores there are various types of credit that come into play – anything ranging from bank and gas cards to personal finance companies loans.

For bank cards, he said consumers would be considered “lowest risk” if they only have two cards.

“So if you have zero cards you’re considered a high risk because you don’t have a line open. If you have one your risk goes lower. If you have two of them it automatically is the lowest risk level that you can get. It’s not lowering your score, it’s just a lower risk,” he said. “As soon as you get three or more then that risk goes up. It’s not helping your score.”

As for travel and entertainment cards, Hartley said, if a consumer has more than one card from this group the consumer is considered “high risk.”

“You have travel and entertainment cards, which is Diner’s card, American Express. If you don’t have one no problem, it’s a neutral zone. If you have just one you’re at a lower risk, but if you have more than one you’re automatically considered high risk,” he said.

He said the same goes for department and gas cards. He said if a consumer has just one loan from a personal finance company the consumer is considered “high risk.”

“Here’s where most people get in trouble – personal finance companies, payday places and other places. If you have one of these open, doesn’t matter just one, you’re automatically considered a high risk. Unfortunately we have a lot of people that go and utilize these companies and they serve a need for several people, but it’s not helping their credit score,” he said.

Hartley said even if the consumer has the suggested amount of credit lines open he or she is considered “high risk” for the first 12 months the credit line is open.

“So once you open it and you’re paying great you’re still considered high risk until one year. After you’ve paid non-stop for 12 months your high risk status goes down to neutral level,” he said.

Hartley said once a credit line is open, if payments are missed it can hurt one’s score.

“Now if you are to hit 30, 60, 90, 120 days (late) or anything else during that time it automatically counts against you and the higher the risk goes,” he said. “Just try to keep those down as low as you can and to zero as much as possible.”

Hartley said if payments are not paid on time or missed completely “derogatory” marks would be on a consumer’s record for “seven years.”

“The seven years don’t start when you start having problems. It’s when the credit line has been resolved in some fashion,” he said.

He said the “seven years” applies to everything except for bankruptcy. “Once it’s (bankruptcy) finalized and they put it on your record, it stays on your credit score for 10 years.”

Hartley said credit scores mean more to consumers than they realize.

“Everyone is looking at them,” he said. “Some people are looking at it for employment or say if you’re renting a apartment. That’s going to be looked at as well. So it’s very important that people pay attention, pay their stuff and not get over extended in credit.”

Hartley said Transunion, Equifax and Experian give consumers free looks at their credit scores annually. He said consumers can also check their credit scores at ftc.gov or annualcreditreport.com.

Seven-day Rule

Hartley said when consumers are looking to purchase a car, home or do anything where they need to get their credit checked, it’s best to fit it within seven days.

“In a seven-day period you can go and shop 100 different (car) dealers and have them all pull your credit and everything else and it only counts against your credit score one time,” he said.

Percentage of Credit Used

Hartley said when dealing with lines of credit it’s best to use only 20 to 30 percent of credit that is allotted to the consumer, which is considered “low risk,” and that reaching 70 to 80 percent of credit used could determine that the consumer is considered “high risk.”

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