Rick Bee: Fico Score and Credit Cards [Financial Stewardship]

**Rick Bee: Fico Score and Credit Cards [Financial Stewardship]**



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(upbeat music) Let's talk a little
bit about credit scores while we're at it. How many of you know what a Fico score is? How many of you have no clue what a Fico score is? You need to know. Bottom line, a Fico score is the score that the credit agencies give you for your credit standing. A credit score can run somewhere between, I guess they can go lower than 300, but 300 to 790, 780, somewhere up there. The higher your credit score, the lower costs of interest when you go to take out a loan to buy a car, to buy a house, to get credit for opening up a water account. They'll look at your credit score. The higher your score, the lower your cost of money if you take out a loan. The lower your score, it becomes very, very difficult to take out a loan, and people don't wanna give ya credit. How do you improve your credit score? If you could get an account where, you have an electric account and you make your payments every
month, that will improve your credit score. If you have a credit
card, and we're gonna talk about those in a second, does paying off your
credit card every month improve your credit score? Yes or no? – [Student] Yes. – No, it doesn't. If you pay your credit
card off every month and you carry over no balance, it will not improve your credit score. (gasp) Am I suggesting you carry credit on a credit card? (laughs) No. Don't put that on tape. (laughter) Yes, sir. – [Student] I thought your
score was also affected by your debt to credit ratio. Where if you have, like, $3,000 worth of credit
and you have no balance, that's gonna help you. – It does. Good point. Did you guys get that? Your score is also
affected by the number of possible loans you have out there. If you have multiple credit cards, it will lower your credit score. If you have multiple credit cards with debt on them, it will
lower your credit score. If you have a few credit
cards with a little bit of debt and you're paying it off on a regular basis, it will increase your credit score. I do not encourage you to
get a ton of credit cards 'cause it will drop your score. If you've got a car loan, a home loan, three credit cards, two gas cards that you're carrying a balance on, it's gonna drop your score like a rock. You don't wanna have multiple credit cards or multiple
loans at the same time. Does that make sense? Back to the carrying a little bit of a debt on a credit card. If you choose to increase
your credit score based on your credit card, you can do that with five or 10 bucks. Just carry over a tiny little amount and pay it off next month. If you're gonna put stuff
on your credit card, take out enough that you can do the same the following month. Just carry a small balance, and it will ultimately
improve your credit score. You guys get that? Any questions about that? You can check your
credit score in a couple of places. I think annualcreditreport.com. – [Student] If you just Google free credit report government, it'll get ya to it. – Freecreditreport.gov. – [Student] It's annualcreditscore .org or gov. – I think it's gov. – [Student] I don't think it's a com. – No, you're right, it's gov. What's the one that does all the commercials? – [Student] Free credit report. – Freecreditreport.com. You can actually do that, but what they'll do, they'll put you into their magazine subscription list. Yeah, you get a free credit report, but then they suck ya in. Unless you cancel it,
they'll start sending you a monthly magazine. They do check for stolen Social Security numbers,
so there's some things that are valuable. I can't encourage you enough to protect your Social Security numbers because if somebody gets ahold of your Social Security number, or they get ahold of
your credit card number, you can rack up a lotta debt really fast. The difference in using an ATM card and a credit card, you
guys know about that? If you use a credit card, you don't have financial liability on the expenses. You can go back and they will cover the losses that you sustained with a credit card. If you use a debit card, they will not. If you use it right outta
your checking account, it's much harder to get reimbursed. If you run it at the restaurant and somebody sneaks it in the back and gets your details off of it and they get your little secret code on the back, you could be in real trouble. You gotta be really careful about credit cards versus ATM cards. My wife always gives me grief 'cause I usually, I don't like to give, I'd rather pay out of my checking account than I would my credit card because then I know it's paid for, other than, it doesn't come around as debt. As you're reading that, did you get the danger of credit cards? Is this amazing? You look at that and you go, a lot of the people that
they're talking about, they aren't very educated. They aren't very savvy. They let themselves get into trouble by getting into debt. For those who are kinda watching on the computers, this article's talking about how risky and dangerous it is. If you have a credit card and it's a small, maybe a small amount that they're gonna loan ya, and it's a probably pretty decent interest rate, and you take it. Pretty soon, it's filled up. They know that it's filled up. They'll send you an ad saying, "Hey, "you can get another card. "Here's the interest rate." What happens is people really do. They'll take out that card and they'll make payments on the second card on the first card. Then they'll get those two filled up, and they'll take out a third credit card. They'll make payments on the second one and make payments on
the (laughs) first one. They get deeper and deeper and deeper in debt. It's so amazingly dangerous. It is so risky. When we talk about credit cards, when we talk about the importance of being cautious with credit, this is what we're talking about. Credit cards are the most expensive interest rate that you can pay. I always have students say, "You know, "I've seen credit card offers "where it's a zero interest rate "for six months or a year. "Is that a good thing?" I'll say, "If you are able "to control your spending and you roll "a large balance onto a card "for six months at 0%, great. "Make sure that you're checking "the fine print, however," because oftentimes, those zero interest rates, at six months or a year or a year 1/2, can be 18, 20, 24% interest. Interest rates are so low right now. A credit card is the last place you should be going to
put some purchase on it. It's very, very dangerous. A couple of thoughts about credit cards. You can actually call and negotiate your interest on a credit card. You can call the company,
the bank, and say, "I've got an offer from another company. "My interest rate's 18%. "I don't wanna pay 18%. "I'm gonna move my credit card over, "or my debt, over to another card." If they say, "We just can't
do anything about that," ask to talk to a supervisor. Card companies are in a place right now where they don't wanna lose your business. They will actually negotiate down your interest rates. Back to the idea of a 0% card. Check it out. I've actually done it. It's a good way, if you've
got, carrying a balance at eight or 10 or 12%, and you know in six months or a year you can pay that debt off, it's not a bad way to get a 0% interest on a credit card. But beware, any new purchases you put on that card are
gonna be at a new rate or they're gonna be at a greater rate. It's a very, very dangerous place. You've gotta make sure
that you're strategic in how you use credit cards. Any reflections, comments, questions about credit cards? Yeah? – [Student] Do you need a credit card? – Yeah. Actually, it's really
good to have a credit card because once you start, once you get out into the world, if you wanna rent a car, they'll ask to see a credit card. If you wanna use a hotel room, they'll ask to see a credit card. There are places where credit cards are invaluable. They're really, really of value. I always have students
say, "How do I qualify "'cause my Fico score is so bad. "How do I get a credit card?" There are places, in fact, we've got banks that come visit campus that offer fairly reasonable interest rates, low finance amounts. They won't go more than maybe 1,000 bucks. But if you are good about it, if you use that card, you don't
exceed the credit limit, they will grow that. That's (laughs) one thing
they're ruthless about. If they see that you're making payments, they're gonna try to bump you up on how much you can have credit on their card with. It's really easy to get a card with a pretty reasonable interest rate and a small amount of credit, and it'll grow. Suze Orman, I don't know if you've read anything by her, she's
done a lot of writing for your age. She says they're a good tool. I say yeah, they're a good tool, but be very, very careful with them. Good question. Anything else on credit cards? Yeah? – [Student] What about
opening and closing one? – It's to your advantage, if you've got multiple cards, it's to your advantage to narrow that down so that maybe you have just two or three or one or two cards. Is that what you mean? – [Student] If you have a 0% interest rate, and then by the time you're done paying off whatever you wanted at 0%, cause it was
gonna take you that long, then would you just close it or how would that look? – Credit companies, the credit agencies look at the number of cards that you have. They also look at the number
of closures and changes. It's like being in a snake pit. Don't make any quick, jerky movements because it'll get ya. It actually will hurt your credit score if you start canceling all your cards, and you just cancel five or six or eight cards, they're gonna go, "Ooh, something's going on." It will actually reduce your credit score. Ultimately, it will rebound because you don't have as many opportunities for debt out there. It's good to close 'em,
just do it strategically. Do it very, very carefully. Make sense? Anything else? My caution, yeah, I'd kinda pursue it. It's good to have, pursue it carefully. My ATM card is also a credit card. There are banks that will do both, where you can have an ATM that also works as a Visa. Doesn't have quite the protection of another type of credit card, but it's a good way to
kinda work on your credit. You can hold onto those articles. It's a couple years old. There have actually been some really good changes that the government has put in place with the credit card companies on advertising. Credit card companies can't advertise like they used to. It used to be that they were ruthless. They were just ruthless. One of the good things Washington has done is put some parameters around what credit card companies can do, so it's a little bit
better than it used to be. That would be negotiable debt. Bottom line is credit cards are one of those areas
where you can choose to pay less than the whole thing off. You can make a payment that's less than writing the whole thing off. Do I ever encourage you to do that? Try to avoid it. Try to get it paid down. When I do my budget at home, credit cards are the first thing that I pay because I wanna pay as much of that down as I can. It's the worst interest rate, it's the worst kinda credit to have. You wanna get it paid down. Do I ever suggest the minimum payment? Only if it's a brutal time and for some reason you have to pay something else. Try to pay more than the minimum payment. One of the things that the law has done, it's now put in a credit card statement how long it will take you to pay down a credit card if you pay the minimum. If you look at that, you will cry because it's crazy. It's absolutely crazy how long. If you pay the minimum amount on $1,000 debt, it could take ya three
years, and it'll cost ya $4,000 to pay down 1,00 bucks. It's absolutely ridiculous. Check that out, and it'll
be a great encouragement for ya to pay as much as ya can. Enough about credit cards. Number eight. Clothing. Clothing. This is the girls' favorite topic, (laughter) and some stylish guys. That pen is not working. Clothing. Really, we have two categories when it comes to clothing. This may sound a little funny. The first one is must haves. What's a must have? – [Student] Underwear. (laughs) – Thank you for sharing. That's not what I had in mind, (laughter) but it's a good answer. Must haves are things like nursing uniforms or business suits. (laughter) I can't believe your said underwear. That is so funny. (laughter) It's stuff that you have
to have to do your job. If you are a construction worker, steel-toed boots. Those are the kinds of things you've gotta have to do the work that you are doing. That is the must haves. The second category, which actually doesn't fit here, it fits later, is entertainment related. Now you're going, that sounds really bad. Entertainment related. (laughter) Entertainment related
is basically stuff that, I gotta have that cause it's so pretty. I really want a new skirt because I'm going out to dinner and I wanna look. Well, not me personally, but (laughter) you get the idea. It's clothing that is, really fits in a different category. It fits into a category later on. In this category, we're
really talking about must haves. Entertainment will come
up a little bit later. Next is savings, savings. There are two types of savings. There is long term and there is short term. Let's talk a little bit
about the differences here. Savings is putting away for future needs or retirement or purchases that you know are coming up. This is a consideration
before entertainment. If you leave this to the
last, it won't happen. Here's my advice in this area of savings. Put something away every month, even if it's small. Remember when we talked about compounding? Same principle works here. If you put a little bit
in, even if it's 10 bucks, five bucks, put something into savings, and it will be compounding. It will grow, it will
continue to grow for ya. Long term, (coughs) excuse me, is retirement. Retirement. It's that income that you're gonna need at
some time in the future that you're not accessing right now. Short term are things like I need tires for the car or I know I'm gonna have to make an insurance
payment in a while or I'm saving to buy a whatever it is. That's the short-term savings. Two differences. This could be long-term care, too. With my mom, we bought a
long-term care for her. When she hit a certain age, we knew that if she couldn't live at home, she needed to go into a care center. An insurance policy would
basically pay for that. She lived to 88. When she was 87 1/2, she finally got to the
place where she needed this. We moved her in. She was there six weeks. (laughs) I don't remember what we paid. It was craziness. But it's an insurance policy. Is insurance good to have? Yeah, 'cause it could have happened at 70, coulda happened a lot earlier, and we would have utilized it. We didn't need it, but
it was there if we did. That's the long-term care. – [Voiceover] We hope you
enjoyed this messages. Biola University offers a variety of biblically-centered degree programs, ranging from business to ministry to the arts and sciences. Learn more at biola.edu. (upbeat music)

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