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Paul Oster on why the big three credit reporting agencies are considering using utility bills for credit scoring.
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Welcome back how your credit score had he -- recently.
How do you feel about if you pay your -- on time your one he -- rent on time every month our.
-- -- -- -- -- -- -- Included in your credit for.
Forming my opinion that a lot of these things -- follow Oscar it's gonna help -- out right now the CEO.
With better qualified and we're gonna we're gonna rate our own credit scores basically right now how how a company.
The three big credit rating agencies Trans Union Equifax etc.
how do they rate our credit scores who will.
The Big Three credit bureaus are actually just repositories for the data they collect the payment -- -- us.
They give that information to the Fair Isaac Corp.
that's -- come up the acronym fight -- scores.
So the bureaus don't actually generator scores.
They maintain -- -- Cycle comes up -- -- The 45 biggest things that go into it -- payment history of course -- utilization ratio that's the ratio between.
Your credit card balances to your credit limits.
Can we talk about that sure let's say you have 101000 dollar -- as a -- on your credit card and you charge 8000 dollars every month.
And you pay -- Scores going down flat at that they like to see utilization ratio below 30%.
And there's actually a designation of -- high achiever that's for someone who keeps their balances below 10%.
Of the overall credit limits and it is total so -- three or four cards with a total of 101000.
You never want those balances to be over 30%.
I know lots of people probably thought it was 50% that's what we hear all the time.
I get it I don't agree with it.
I don't understand it.
When someone says your credit good -- you pay your bill managing all your expenses we're -- up your limit we're spending you can spend this much money.
We know we're gonna pay off or we hope that you -- an ideal yet why despite a pair.
Because they don't wanna hope they wanna know they or less -- to them over the past five years that I've been paying their credit card that I.
Hands with so many people they have a positive payment history up until certain point -- and then life happens.
And unfortunately they start to this -- -- amnesia start paying cash brother running for democratic no actually.
No no.
They can't treat everything and less using debit cards has no bearing on your credit screen -- Democrat using it evercore I like -- -- else.
If it.
And then opening lots of new credit courts will also drivers were down.
So you have credit history.
Is an important factor that's why -- should not close.
Any credit cards and -- their advice to do so unless they know what they're doing.
So when you keep that and Keller.
Card open hardly used it but it's open and not used -- -- that debt.
Still -- need to keep them he played an active.
At and hurt anyone's listening I'm not telling you to go out and use all your credit cards.
All of our -- -- it is you know while the Apple Store credit -- can we get a discount -- all the -- the female clients was often say im gonna go back into my husband that.
From the CEOs that are qualified just told me that I should use my.
Handler carted stuff right so I think what the consumer can't point hair mom -- -- not ways to -- new credit is that -- for your credit for.
No inquiries wheel drive your scores down for sure I need to be careful about allowing people to pull your credit reports.
Now opening up lots of new credit in a short period of time and actually short period of talking about twelve months.
Increase.
One inquiry every twelve months is up now.
Them they're going average rate -- -- -- job or future players.
Check your credit history to step -- and -- it doesn't that's not considered a hard inquiries only when you're applying for a line of credit costs does that inquiry count towards you.
And it but it can lower your school -- three to five points per report.
How many times should you monitor your own credit score.
We get this question all the time and unfortunately.
With identity theft is the fastest growing crime in the country hear about it all the time on fox you know you typically almost every day.
So unfortunately I now believe that people need to monitor their credit every thirty days.
Now last -- -- because early detection is the key.
If you don't find out that your victim of identity theft.
Most people don't find out for years when they -- they think go to buy -- new car and they realize that they have collections and stuff that are American.
I -- -- my husband live on a rental place and we put through our credit reports and all this stuff of identity theft came up on his -- and we had -- get the apartment undermining.
Right.
But that was problematic and make money -- -- I needed him.
So there's there's the perfect example yeah fortunately.
Again at its.
You don't you yourself have not been a victim you know someone -- yeah so.
People need to take steps to protect themselves can you describe what -- perfect credit.
Looks like how how what -- his -- -- let what is his spending look like.
Two to three.
Open and active revolving trade lines and one -- two installment.
Lines of credit and -- lines of credit or like mortgages auto financing student loans things that you have to pay a fixed.
Payment every month so cycle likes to see a good blended mixture they don't like did you see all installment contracts or all revolving lines of credit cards.
So essentially we should tell -- high school.
When they're not college when they're starting to make money efforts job not to open all -- credit -- because once.
It is at once they're open and they should be active and -- -- opening you should -- that yeah well.
It's in high school you know there are no classes on credit right now we see this all the time there's no classes in college -- there's macro economics micro economics but there's no credit.
Academics.
-- hours and we don't shopping together and I'm buying something -- -- open -- credit -- and I already have that credit cards fifty new credit card form each I'll give.
Money looking at like 20% it's -- So that's the worst case scenario.
Merchants.
Department stores -- offer those credit cards at the point of sale for 20% discount.
The reason why they do that.
The studies show two things.
-- you're gonna spend that much more money -- and -- you're gonna carry a balance.
So whatever discount was given to you at that point of sale is quickly enough.
And it can again be in its gonna be problematic for your overall credit.
Now those -- excellent tips.
And a half without -- -- them up something so the other thing we're discussing is the fact that there's been a lot of talk lately about getting the gas the electrical the utility bill and even the rents.
As part of your credit history -- explain this.
Well experience already included rental payments.
It has to be set up with a -- -- prior to.
But they have Experian rent bureau credit reporting and that can be a very good thing to help people's credit.
They're paying your rent some time for years just like a mortgage shows they should be getting credit to do that.
The problem with utility bills is.
Usually that's the last thing people pay when times are tough they'll pay their mortgage -- pay their cargo pay their rent.
But the utilities they can push offer a month or two or three.
And sometimes even wait until they get the shut off notice so.
Right now it's in it's in the news and there's some buzz about this.
And some people are trying to put a spin on it that it's actually going to be good for the consumer man who is.
Beginning.
Their credit lives but.
That's not why it's being done it's being done because.
The utility companies want the leverage to report this data to the credit -- yeah.
-- I think weigh in on a chat teen thing that your utility bills should be part of your credit -- should be used as part of it it -- people think.
Is cable it's it's going to be part of it -- sure it's going to be -- cable right now that no it's not.
You don't know utility bills.
Know cable -- paying utility -- with the corporate.
-- you get a crack sorry I don't.
I'm not -- -- kind of meeting time the so let me cable bill yet and so democratic.
Suitors sooner than later it is going to be adding yet they're putting the steps in place right now -- -- dominant software driven technology they have it.
So it's gonna be it's going to happen so people that are out there listening and watching.
Make sure that you start this positive payment -- towards utility bills.
You just tell me form my opinion I think come for -- us.
-- -- -- They learned a lot and have a payment every month you have a day I imagine go right as -- as -- -- -- -- ample time in place before they implement right.
And there's talk about only starting with positive.
Bill payment histories -- first which is a great way to.
Implement the utility bill -- -- I understand how this is going to be hard for those.
Struggling to make ends meet for lower income areas.
But in it's fair to say that that group typically doesn't -- credit as -- It is and that's why the proponents of of the bill are saying it's going to help them establish.
Their first credit histories but with a negative.
Then it's gonna be negative credit histories that's that's the problem you know nothing good for everybody -- -- that's true.
But listen on the first person to say that I don't agree with the credit reporting system it's not always indicative of the person's credit worthiness -- but let's face it.
We have few tools to measure 300 million people.
Right you -- -- let's say we're not -- perfect storm.
Score credit get the credits -- rather what are some steps preferably three that help you repair -- bad credit score.
Well the first thing would be knowing what your credit scores are -- unfortunately most people make the mistake and they walk around assuming.
There either good or bad right so you have to know you have to pull your credit report go to annual credit report dot com.
That's the government's website gives us all one free look every twelve months about a great place to start the second is payment history.
One times thirty day delinquency.
That occurs if you don't make your payment before the next due date.
Can drop -- for a 200 points.
So most people should I pay most of my bills on time yeah -- make some -- that they don't realize how devastating it gave -- In point you know we on this credit payment -- -- -- forget get to get that company on the phone and say hey can you just.
Give me credit like you know for -- this this one time take off the -- me.
The late fee and yes still there is -- -- right now with discovered the discovery card.
-- -- marketing sizzle right now on these waving the late payment fees if you got a credit court in good standing for awhile and you miss a payment.
Not a thirty day delinquency but you're just late morning call the credit card company most of the time they're going to waive the late -- but under no circumstance.
To divesting your ability don't let that -- go past the next due -- because again thirty -- late payment try to drop this work 200 points.
And it hasn't been on television.
What's your amazing -- thank you so much better filed -- CEO great pets.
