Credit Sesame’s conversation about credit score and why it matters with Irene Renee, credit repair specialist.
Twitter Space recorded July 7, 2022. Conversation starts at 2:30 mins
Credit Sesame @creditsesame All right. Let’s go ahead and get started. Hi everyone. Welcome to today’s Twitter Space! We’re going to be talking about why your credit score matters. We’re joined with Irene Day, aka the Credit Queen Irene.
Irene’s a licensed and bonded credit repair specialist and you can learn more about her by following her on her social channels. She’s @theirenerenee on Twitter and @creditqueenirene on Instagram, So, without further ado, Irene, welcome. Do you want to start off by talking a little bit more about who you are and how you got interested in credit?
Irene Renee @theirenerenee Sure. So, how did I get interested in credit? Like everybody else, I fell on hard times. Credit was crazy. I think the lowest credit score I had was 410. I think that was rock bottom for me.
I had heard about credit repair and everybody that I saw who were doing credit repair were people that, like, I would not trust with walking my dog, let alone my personal information. So, I just started doing research on what credit repair was … the legality around the credit repair industry.
One of the things a lot of people do not know is that credit repair is an actual financial service, so you have to be licensed. You have to be bonded to legally perform these services. So I just started doing a bunch of research. I officially started my company in March of 2017, and a few months later, in July, actually five years from today, today is my five year quit date anniversary. Five years.
Credit Sesame @creditsesame Happy anniversary.
Irene Renee @theirenerenee Five years ago I quit my job of 13 years, to pursue entrepreneurship full time, and that’s what I’ve been doing ever since.
Credit Sesame @creditsesame Amazing. Well we’re happy to have you, and we’re excited to listen in and hear more about everything that you’ve learned, and hopefully, you’ll drop some knowledge on us. So we’re going to start off talking about just how credit scores work?
Irene Renee @theirenerenee So, a credit score is basically a numeric value of how you have been able to prove yourself financially. So a lot of times, I hear people all the time saying, “I don’t really know, I got a bad credit score because I don’t use credit.” No, you don’t have a bad credit score because you use credit. You have a bad credit score because you don’t know how your credit score works.
So, typically your credit score is made up of five parts, and this is either your FICO or your Vantage Score Payment History.
If you have a friend that you know likes to borrow money from you and does not like to pay you back on time, they’re gonna have – they should have – a bad credit history with you. Same thing with lenders, and because banks don’t know who you are individually, everybody has a number. Everybody has a score based on your financial habits.
PAYMENT HISTORY is 35% of your score.
CREDIT UTILIZATION is 30% of your score.
One of the ways that I see people lose out a lot in this category is being afraid to actually have credit. I tell people all the time. Just because you have credit, like just because you have open credit cards, that does not mean that you have to have debt. And I think a lot of times people coincide having debt with having credit, and that’s not the case.
INQUIRIES are roughly 10% of your score. I see people a lot complain like, “Oh, you know, I got all these inquiries on my credit score. I mean, on my credit reports, and that’s why my score is low.” That’s not why your score is low. You can have 400 inquiries on your credit reports. You can have 4 inquiries on your credit report and it’s still going to be less than 10% of your score. So if you are ever in the situation where you need to figure out why is my credit score so low, it’s not your Inquiries.
CREDIT MIX is extremely important. What is credit mix? Having installment accounts. So those are things that you pay a fixed monthly payment on.
Have a good mix of installment accounts and revolving accounts. One of the things I see a lot, especially on the internet, you’ll see somebody like, hey, what did y’all do to fix your credit score? Now what I would need to do to fix my credit is not going to be the same thing that Ashley would need to do to fix hers.
Credit mix, so making sure you have installment accounts, which are those accounts that you have fixed, you make fixed monthly payments on. And you have revolving accounts – these are going to be your Visa cards, your Mastercards, your American Express cards, your Capital One cards like any open revolving credit cards where you have a set credit limit.
Those are going to be your revolving accounts. Those are the things that you need to focus on when you are in the process of either building or rebuilding your credit.
Credit Sesame @creditsesame Awesome. Thanks for breaking it down like that. So what is considered a good credit score?
Irene Renee @theirenerenee Umm… So the word “good” is relative right. So it just depends on what you’re trying to do.If you are trying to get a car, maybe, 680 – 700 might be considered good depending on the type of car you’re trying to get, like the actual cost of the car.
If you’re trying to get a house, I know some lenders can approve you as low as 580. Of the things to keep in mind about credit scores, especially when it comes to things with fixed APR’s like your mortgage or your car loan, you want to have as a rule of thumb, 720 plus. 720 plus is good.
Right, so seven anything, 720-up ideally is considered good credit, and anything 760 and up is considered excellent. Once you hit that 760, you’re good to go. A lot of times I see people like “Oh my gosh, I need to get an 800 credit score”. You’re going to get the same interest rates with a 760 credit score as you do with 800. Same interest rates.
Credit Sesame @creditsesame So it depends on what you’re trying to accomplish. It’s all relative based on that?
Irene Renee @theirenerenee Yep.
Credit Sesame @creditsesame So, let’s get into the five reasons that your credit score matters, and I think this one is probably one of the most surprising ones. How can your credit score potentially impact your employment?
Irene Renee @theirenerenee So, your actual employment history is not reported on your credit reports. However, if you have a job where you need a security clearance, like if you’re in the military, or if you do anything in the financial space, like work in a bank, or if you work in a credit union, you cannot work in these areas or in these spaces with poor credit.
They actually pull your credit reports. We recently had a client, she was on the verge of losing her security clearance because she was a victim of COVID, and her credit score dropped 130 points. So, once she enrolled in credit repair, we were able to give her documentation to show that she was actively working on repairing her credit, so she didn’t lose her security clearance and in turn lose her job.
Credit Sesame @creditsesame That’s insane, that’s crazy. You don’t think about how your credit score can impact your employment, but it does.
Irene Renee @theirenerenee Car insurance #2. A lot of people think our car insurance is based solely on our driving history or whether or not we’re in an at-fault or no-fault state. Your credit, your personal credit score, is one of the factors that is going to determine how much you pay in monthly insurance premiums.
If you get a cell phone, we all wanna have the latest iPhone, the latest Samsung, getting approved to be able to lease a phone or do the monthly payments or even for services is reliant on your credit score. I remember when I got my very first phone line in my own name.
I had no credit. So, no credit, bad credit – they are the same thing. I had no credit. I had to give a rise in the $400 deposit – for a cell phone.
#4 Renting. Right, apartments. Depending on where you live, or if it’s through a property management company. If it’s a private landlord depending on their actual process, your credit matters.
Me, personally, being somebody who owns rental property, as long as I don’t see any evictions on your credit and you got a stable income – you’ve been on your job for a year or two – I will probably rent to you.
But a lot of high-end apartments, like I’m in Cleveland, a lot of the high end apartments downtown, if you don’t have at least a 700 credit score, you’re not moving into any of those areas. And that’s with a good income or without a good income. If your credit score is not considered good, you’re not moving into these spaces.
I think a big misconception about the way credit works is people just assume that if you make good money you should have good credit and that’s not true at all. I’ve seen a study that came out that said 70% of people that make over $250,000 are living paycheck to paycheck.
Credit Sesame @creditsesame Wow!
Irene Renee @theirenerenee So just because you make a lot of money, that does not correlate with you having good credit.
Credit Sesame @creditsesame Right?
Irene Renee @theirenerenee Or having good financial habits. Did I do five or did I do four?
Credit Sesame @creditsesame I think you did four, but let’s talk about buying a house. so, how does your credit score factor into buying a house? And can you talk about the different mortgage loans and what credit score you need to qualify for them?
Irene Renee @theirenerenee So, the minimum score that you need is going to depend on the individual lender. If you do a qualified mortgage, (a qualified mortgage is anything that is backed by Fannie and Freddie). So the VA loan, USDA loan, FHA loan, conventional loan are all qualified mortgages.
Each lender is going to have different guidelines for you. One of the things when it comes to homebuying, they’re going to take your debt-to-income into consideration. And they’re going to take your actual income into consideration, like the money that you have, how much is the house that you’re trying to buy, and they are going to take your credit into consideration.
I’ve got an outstanding income, right… but my credit might be kinda shaky. You’re gonna have higher approval odds because you’re very strong in other areas.
So buying a house in general is going to be a tandem of the three. I’ve seen people with low incomes and a high credit score get phenomenal rates.
One other thing to keep in mind when you are home buying: You don’t want to just get approved, you want to be able to get a mortgage and have a reasonable rate – especially with everything that is going on with the economy right now. You don’t want to be that person who got approved for a house but now is cash poor because a lot of the money that they make monthly is going towards the home payment or mortgage because they got approved with a crappy interest rate. Interest rates matter.
Credit Sesame @creditsesame Yeah, for sure.
So, here’s a quick little mathematical situation. Someone who has a 620 credit score, they end up getting a 4.35% interest rate on a house for a 30 year fixed loan. The house is about $432,000. Their total payments made will end up being $855,000. Someone with the same fixed loan, same house price with a 760 credit score will end up getting an interest rate of 3.9%, so their total payments made will be $769,000. It makes a huge difference.
Irene Renee @theirenerenee It’s a huge difference
Credit Sesame @creditsesame Yeah.
Irene Renee @theirenerenee It’s a huge difference. And a lot of people don’t think about that on the back end: How much will I end up paying overall? They think about it for the moment, but when you get a mortgage, this is going to be one of the biggest – if not the biggest – purchase that you make in your lifetime.
Credit Sesame @creditsesame Absolutely, yeah. So let’s talk about buying a car. So how can you get better loan terms with a better credit score, especially when buying a car? And what kind of credit score do you need to end up getting qualified to buy a car? And what’s the optimal one?
Irene Renee @theirenerenee So two things that you need to know about car buying when it comes to your credit, one is that you’re going to get a better interest rate with your credit union. So if you are somebody who banks with a credit union, I would start there. You can actually ask the bankers at the credit union what credit scores you will need to get approved for a car loan there.
You’re always gonna get much more favorable interest rates on your own versus somewhere else unless you have 760-up credit. So, unless you are going to Mercedes with top tier credit, you would be better off trying to get funding on your own, through either your credit union or your bank. So that’s one thing.
And each lender, again, they’re going to have different different guidelines. So, GMAC or Allied, they might have a minimum 620 requirement if you make $50,000 a year. And then if you make less than that, they might have a minimum 680 requirement. So, it’s going to depend on your credit and your finances when you’re done. When you’re doing subprime limit lending, and that’s basically when you’re not in that top bucket of credit, when you’re not in that premium credit score category. Anything under that is considered subprime.
So what options, or what approval guidelines are there? It’s going to vary lender to lender and consumer to consumer based on what you have going on. So that’s one thing. Two, you have the right to shop around when it comes to interest rates. So when you buy a house or when you buy a car, you can actually shop around different lenders for rates. This is why if you ever go to the car dealership and your credit wasn’t top tier, and they ran your credit, this is why a lot of times we’ll have like ten inquiries, or even fifteen inquiries from the one credit pool, because they tried to shop you around to see who would pick you up and who would give you the best rate.
One of the things to keep in mind about that, because you went to the car dealership, and you got fifteen inquiries on your credit, because you got those fifteen inquiries within a thirty day time period, they’re only going to be scored into your credit score as one inquiry.
So it might not look the best on your credit report, but from a credit scoring standpoint, it’s only one account. It’s one inquiry. And that’s for homebuying and for auto buying.
Credit Sesame @creditsesame Yeah, that makes sense. So you had brought this up a little bit earlier, but I thought it was a really interesting take, and I wanted to learn more about it. Why do you think, with everything going on with inflation and the impending recession … Why is having access to credit so important, especially right now? And why should having a good credit score matter with everything going on with the economy?
Irene Renee @theirenerenee During recessions or depressions, like the recession in 2008, that was the biggest transfer of wealth that we’ve seen since the Great Depression.
The way that people get rich is by using other people’s money. So you want to make sure that you have as much access to other people’s money as possible. So, when these opportunities arise, you can take advantage of them.
I tell people that even if you are not trying to be a full time investor, even if you are not trying to be a full time entrepreneur, you need to have some type of other income outside of your nine to five. Because, with the way the inflation is going, all of that money we printed last year and before that, the value of the dollar is going to continue to drop. But, your job is not going to give you raises based on the rate of inflation. So, it’s like you’re going to feel the bacon going up to $8 a pack instead of $5 a pack… you’re going to feel that.
So you need to make sure that you are doing what you need to do to get other streams of income outside of your primary source of income.
Credit Sesame @creditsesame Super important, yeah for sure. Do you have any side hustle recommendations or things that you would recommend to people if they want to expand and diversify their income?
Irene Renee @theirenerenee Uh, no! I tell people when you are a jack of all trades you’re a master of none. And I like being the master of the things that I’m master at, even with the real estate that I own.
Credit Sesame @creditsesame I love that
Irene Renee @theirenerenee I have friends and people in my network that have assisted me with being able to own six houses.
I was like, yeah! I have the capital and I have the credit to be able to maneuver this type of way, but I know nothing about real estate. I just know as a landlord I’m supposed to make sure you’re not living in an old crappy place and I’m taking care of the stuff that needs to be taken care of. But as far as rehabbing properties, flipping properties, stuff like that, that’s not my lane. I don’t want it to be my lane.
Credit Sesame @creditsesame Right.
Irene Renee @theirenerenee And I also feel like, as individuals, we all have different things going on, so I wouldn’t say to you that you could go and do this for a side hustle, as you might not even like whatever that is that I suggested. So I think it’s very important to be very self-aware of what works for you, what interests you, what connections and resources you have available to you, and then go from there.
Credit Sesame @creditsesame That makes complete sense. So, let’s kind of shift gears here a little bit into credit repair.
Irene Renee @theirenerenee OK.
Credit Sesame @creditsesame What’s a credit repair tip that you’d like for everyone to know, or you think everyone should know about?
Irene Renee @theirenerenee So, one of the biggest misconceptions about credit repair is that credit repair is debt relief. So people think once I sign up for credit repair, if I get accounts deleted, I no longer owe those debts. That is absolutely false.
I see people use this as a marketing tactic, and every time I see people use this as a marketing tactic, they have no license to do credit repair. They are not bonded as a credit repair organization, or even as a business. It’s just stuff that they got off of YouTube. It’s not anything that people actually need to know.
I think when it comes to finances, it’s a lot easier to tell people what they want to hear instead of what they need to hear. And that’s why so many people have been able to be manipulative when it comes to what credit repair services actually are.
So, if you decide to sign up for credit repair, just know any debts that are removed from your credit reports, if they are still within the statute of limitations, they are still your debts. You are still legally responsible for those debts. You are still legally responsible to settle or take care of those debts.
And, I think that’s something that’s very important to know coming into the credit repair space.
Credit Sesame @creditsesame One-hundred percent! And I don’t think a lot of people realize that, so that’s super interesting to know. Well, those are all the questions I had Irene. Is there anything else you’d like to mention that you think people should know about credit or credit repair?
Irene Renee @theirenerenee I think in finances, if it sounds gimmicky, if it sounds like too good to be true, it is! Trust your gut. Especially as a woman, I think our intuition is unmatched … our feelings to be able to scope out something that’s not right. Trust yourself. If it sounds too good to be true, it absolutely is. And men, if something sounds too good to be true, tell your woman, and she’s gonna tell you like, “Nah, don’t even get dropped off into that!”
Credit Sesame @creditsesame One-hundred percent great advice. Well, Irene, thank you so much for joining us. Do you wanna give a little shout out to yourself, let everybody know where they can find you again before we sign off?
Irene Renee @theirenerenee Oh my God, you guys, I’ll be on Twitter. But listen, I’m just, you know, I’m a whole mess on Twitter. I’m talking about my personal life, I’m talking about my dog… I love my dog.
I’m talking about this bruise that I got from the Fourth of July on Monday, from doing this DIY slip and slide in the backyard, and I talk a little bit about credit and taxes on here.
But I do a lot of the financial stuff on Instagram. So if you guys wanna follow me over there at creditqueenirene, I’m smiling real big in my profile picture. Or you guys can follow me here on Twitter at @theirenerenee. Just know that it’s a lot of personal stuff over here too.
Credit Sesame @creditsesame As Twitter is, as Twitter should be, right there.
Irene Renee @theirenerenee Yes.
Credit Sesame @creditsesame Thank you so much Irene. This space will be recorded if any of you guys want to go back and listen to it. We’re going to be doing these twitter spaces every Thursday in July, so we’ll see you guys back here next Thursday for another one.
Thanks again, Irene.
Have a great day everybody!
You may also be interested in:
- Low Income and High Credit Score: Is it Possible?
- Ten Ways to Build Credit on a Budget
- How to Develop Good Habits for Building Credit Score
- The Challenges of Having No Credit or a Low Credit Score
Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for formal professional advice.