Webinar: Overlooked essentials for credit wellness

Now I'll turn it over to today's presenters. Take it away, Anna.

Thank you, Courtney. [INAUDIBLE]. I've been in the financial industry for 30 years, the last 13 with U.S. Bank. And I'm very happy to be here with you today.

And hi, I'm Marnie Rainford. I'm a product manager for the U.S. Bank. I've been with the bank for 17 years, supporting products like [INAUDIBLE] and Free Credit Score.

And hi, I'm Shaundra Turner Jones, and I'm delighted to be here today. I'm the Director of Consumer Credit Education and Communications with TransUnion. And we partner with U.S. Bank on the [INAUDIBLE] program.

Thank you, panelists. It's time for a poll. Do you know your credit score? Please use the radio buttons on the bottom right side of your Webex screen to answer. You'll have about five minutes to complete the poll, and then we'll share the results.

Like mental or physical wellness, financial wellness is a journey. You start where you're at at this moment, and you take steps to learn and grow towards confidence.

Many of us get anxious when we think about our credit, and that can bring strong emotions sometimes. If you've found yourself standing at a store, a bank, or a car dealership and heard the words, let's check your credit, maybe it gives you a sinking feeling in your stomach. And you're not alone. If credit stresses you out, we're even more glad that you're here with us today. We're going to give you some tools that will make it less stressful.

Credit is complex and can be confusing if you don't know much about it. We'll help take some of the mystery out and give you some easy tools for keeping track of your credit score and feeling confident that you're on an upward trajectory.

Credit wellness isn't about a perfect credit score history. [INAUDIBLE] the best wisdom comes from bad events, whether they were your own choices or situations beyond your control. The best thing you can do is learn from the past, know yourself and what affects you, and then forgive yourself and just move on. We'll also talk about managing your debt and taking control of your financial future. We got our poll results in, and the most popular answer was yes. We do know where we're at on our credit score. Marnie?

As Anna said, it feels good to be confident and secure in your money, but there's also some very practical benefits. The higher your credit score, the more options you'll have to get credit when you need it. For example, getting a mortgage to buy a home or a loan to finance a car. Lenders like banks use credit scores to help them determine how likely you are to pay the money back that you borrow.

You may also be more likely to get a lower interest rate. And if you have a higher credit score, a percentage point here or there can add up to a lot of money over time. And if you're not using that money to pay down debt, you can spend it on things that bring you joy or invest it for the future.

And there are factors beyond just money. Landlords often pull credit reports for renters, and if you have a low or spotty credit history, you might be asked to pay an additional security deposit or not get the housing you want. Employers might also look at your credit report and use this as a way of determining whether you're reliable.

Now thankfully, we don't know of any dating apps that pull credit scores, but it is something to think about, because it can affect your relationships. If you're married or merge households with someone, your credit will be connected as well. And this is especially important if you want to make a major purchase like a home where you both need your incomes in order to qualify.

Today, we'll be talking about the five essentials for credit wellness as you see on your screen, and we're going to start with knowing your starting point.

All right. Knowing your starting point. Thank you so much, Anna and Marnie. As I said before, I work for TransUnion, which is one of the three credit reporting bureaus. These are companies that maintain credit reports and provide that information to creditors, insurers, and others that are permitted under law for the purposes of evaluating someone's financial responsibility.

You're entitled to a free credit report from all three bureaus every year at the website that's listed right on the screen. And breaking news, you can now order your credit report on a weekly basis. Because we've seen such an increase in fraud since the start of the pandemic, we want to make it as easy as possible for people to get this important information about their finances.

To order your credit report, it's simple. You'll need to fill out and verify some personal information, and your report will be available to you right away to either print, download, or simply view on the website.

When you get your report, take some time to take a look at it. Go through it carefully and check all the details. Look for things that you don't recognize, lenders that you don't remember doing business with. And if you find something incorrect or suspicious on your report, you should report it immediately. Anna?

As we talked earlier about how credit can be stressful for a lot of people, the idea of sitting down and looking at a detailed report of your finances may stress you out. Here are a few ideas that you might find helpful.

Schedule time in advance. Block your calendar for an hour so that you can focus on it. It probably won't take you that long, but it's good to have that time to set aside. Go ahead and schedule it right now if it's on your mind. If you use a calendar app, you can even make it reoccurring on a yearly basis.

You can do something nice for yourself on the same time. One of my coworkers eats Oreos whenever she's working on our budget, and she makes it a little funner for her. You can also listen to your favorite music or even plan a little celebration afterwards. This is especially helpful when you are on a credit wellness journey along with your partner. Next, Marnie will talk to you about credit score, which is an abbreviated version of your credit report, and many lenders use it for credit decisions.

Yeah. So your credit score is different from your credit report, and that is a number. And what goes into that number is the same information that's on your credit report. Think of it like your grades in school. Your credit report is a detailed printout of every assignment you've turned in, while your credit score is like finding out you got a B plus.

So a little bit of trivia. The number is sometimes called a FICO score, referring to the Fair Isaac Corporation, the company that developed the original credit score model.

So what goes into your credit score? There's five main agreements-- ingredients. First is payment history. Let's face it. If someone has a consistent history of making payments on time, they're perceived as less of a risk than someone with an intermittent history of on-time payments.

Next, outstanding debt. This is the amount owed, the total across all lenders that report to credit bureaus. So no-- so credit cards, bank loans, mortgages. Utilization of, how much of your available credit are you using? Ideally, trying to use less than 30% of your credit limit.

Credit type and history. Yes, history again. All else equal, someone with a longer, more diversified credit history is typically seen as a less risky borrower. The fact reinforces the importance of establishing a solid credit foundation as early as possible.

And lastly, recent inquiries. Each time someone authorizes a lender or business to make an official inquiry in connection with taking credit, the score typically drops a little bit, so it's important to apply for credit in moderation.

So there are a lot of factors that go into your credit score, which people often overlook. There's also a lot of myths going around as well. A high credit score means that you've had a long, consistent history of using credit responsibly and paying back your lenders. Paying your bills late can show up on your credit report and bring down your credit score.

Lenders also want to know that you're not borrowing more than you can afford to repay, so getting too close to your limit or maxing out your cards can also hurt your score. It's the same reason that opening too many credit accounts in a very short time period [AUDIO OUT] bring your score down. So be thoughtful and strategic about how often you apply for credit and what types of accounts you choose.

There's a term called a hard pull, which is when you have applied for credit and the lender pulls your report from the credit bureaus. Too many of these in a short period of time can affect your score. And this is different from a soft pull, which is where you look at your own credit score or a company pulls your credit information without your permission so that they can market to you. Soft pulls will absolutely not affect your credit score.

Other things that don't affect your credit score, I'm sure you're wondering about that. Financial transactions that don't go through a bank. Payday lenders do not report to credit bureaus, so those short-term loans do not helped you-- do not help you build your credit history.

Cancelled transaction [INAUDIBLE] involve your credit or checking-- or excuse me, your checking or your savings account also do not affect your credit score. If you use a debit card that's tied to your checking account, even though it may look like a credit card, your activity on that card does not get reported to the credit bureaus, and doesn't help you build your credit history.

Banks don't report overdrafts to the credit bureaus either. There is a perception that every mistake in your life down to parking tickets get reported to a credit bureau, and that's simply not true. Your credit score is about how you use your credit, money that's loaned to you by a bank, your credit card, or a loan.

Collection agencies also report to credit bureaus, so if you have unpaid bills that get turned over to collections, whether it's child support, a utility bill, or something else, then we'll see it on your credit card-- on your credit report, and it will bring your score down. But relax. Those parking tickets you promptly paid are not going to affect your credit.

Well, that's good news. [LAUGHS] Checking your score regularly is a great way to monitor changes of your credit worthiness. And watch out for unexpected impacts caused by reporting errors or fraudulent transactions. Sometimes it may even be a tip-off that your identity may have been compromised.

I had a client who was very surprised to be turned down on a credit application, even though he had had a long history of making his payments on time. When he looked at his credit report, he saw that he had months of overdue bills from one particular lender, even though he was paying them regularly. It turned out he was paying his bill, but he was sending it to a complete different company altogether. If he had been more aware of his credit score, he probably would have been able to catch it and realize that there was a problem a lot sooner.

The good news is with a few phone calls and a lot of patience, he was able to untangle the situation and eventually repair his credit. The bad news is that he was a mess for a little bit. You can avoid this by checking your credit score regularly. Once a month is pretty good.

And as Anna mentioned, everyone should know their credit score and have the tools to understand it better. U.S Bank has a free credit score tool that can let you view your credit score through the mobile app and online banking. It's easy to enroll, it's easy to use, and free to U.S. Bank credit-- excuse me, U.S. Bank customers.

A lot of banks and credit card companies offer similar tools, but what I like about ours is this embedded right in the online banking dashboard, so your credit score is right there when you log into your account. It makes it easy to monitor your score, track how you're doing, and really take control of your credit wellness.

You can view your score any time. There's no cost. And checking it will not affect your score. And you'll get alerts when there are changes to your score. Plus, there's tools and educational articles to help you learn more about how credit scores work.

Now, one of my favorite parts of the free credit score tool is the score simulator. The score simulator estimates how different actions could impact your score. For instance, if you pay down a credit card or add a new loan. So you can model out what credit factors are limiting your score and determine what you can do to improve it in the future. This helps you know what your score is today and then chart a path forward to a better score tomorrow.

The-- Marnie. I'm sorry. Sorry, Anna. I was going to say, Marnie, the simulator is great, because it helps you answer questions like, what if? And if you don't-- and you don't have to learn through any mistakes. So I would definitely recommend [INAUDIBLE].

Yeah.

Yeah, I was going to share that. I spent a lot of time playing with this tool when I first discovered it myself.

Yeah, I do as well.

All right. So now that you know your starting point, how do you build your credit? If your credit score isn't exactly where you want it to be, start small and secure. Secured credit cards or loans are accounts where you're getting credit, but it's tied to a cash deposit that the lender can easily collect if you don't make your payments. This can be a great way to start building your history. If you pay your secured time card on time, eventually you will be able to qualify for unsecured credit.

Another option might be to co-borrow with a person who has established credit history. It's common for younger adults to co-borrow with their parents who have a longer credit history. Or a new American, you might have a relative who has lived here longer co-sign for you on a loan or credit card to help you get established.

I worked with a college student who didn't have any credit history and co-borrowing with his parent was just not an option for him. And he worked with a banker here at U.S. Bank to explore other options. He had cash in a CD, and he was able to use that to secure a loan through the bank. He made his payments responsibly and on time, and he built enough credit history. By the time he graduated, he was so excited to share with me that he qualified for a loan for his vehicle by himself on his own name.

So it is an important part of building credit history to be responsible with your credit. Always make your payments on time. Keep your credit balances low if you can. And if you run into a situation where you can't afford to make your payments, reach out to your lender. You don't have to have late payments or even collections go on your credit report. If it feels scary to make that phone call, you've got to remember that the lender wants their money back, and they will almost do anything to figure out a way to help out and make an arrangement for you.

Friction is a behavioral science term for the small amount of effort that can stop someone from doing something. When it comes to paying your cards on time, you want to reduce friction and make it as easy as possible.

One way to do so is to schedule automatic payments for all of your credit accounts. If you're worried about overdrafting your account, you can always schedule them for a payday. Remember, you don't have to wait until the due date to pay your bills. As long as the money gets on or before the due date, you're good.

Here's a neat psychology trick. If the money leaves your account the same day that you get paid, you don't really miss it. If you're the sort of person who needs two alarms to wake up, then set up a back-up reminder on your phone, and that will remind you to check your credit and your bills to make sure that they are current. And this is a great way to also check your credit score, how Marnie demonstrated earlier.

I know that I said it already, but I'm going to say it again, because I feel it's really important. If you miss or can't afford a payment, reach out to your lender. Make it easier for yourself by having the phone number already saved on your phone.

If you're uneasy about making the phone call, a neat little trick is to write a script before you pick up the phone. And remember that you want to be successful. They want you to be successful. And ultimately, they want you to pay them back. So they will work with you, especially with everything that's going on right now. You're not alone in that situation. And always remind yourself that you're on a journey towards credit wellness, and there may be some stumbling blocks along the journey, but you always keep your chin up and you always keep on moving forward.

And finally, chip away at your debt. If your debt feels heavy, you're not alone. The average amount of credit card debt held by balance-carrying US households is more than $16,000, according to Federal Reserve figures for 2017.

So here are some strategies to help you achieve your repayment goals. A debt repayment plan is a detailed schedule of how much and when you're going to pay down your debt. You can find calculators and resources for this online, or you can work with your banker to make a plan. Knowing when and how much to pay back is really helpful.

And here are a few tips to keep you going. Try to pay high-interest credit cards first. This will save you money in the long run. When possible, pay more than the minimum payment each month. I liked Anna's suggestion of scheduling your auto pay for the minimum amount on payday so you don't risk overdrawing your account, but that's just-- that's the minimum. You'll pay off your debt much more quickly if you can set aside a little bit more, and you can make multiple payments in a month.

Something many of my clients do is apply extra money towards their debt. Sometimes they make a change to their budget, cancel a streaming service, and add that savings directly into their credit card bill. I have clients who also do what we call their side gig. You know, get work on the side, either delivering food or groceries. And all the money that they earn from the second job, they put directly into their debt.

That's a great idea. Another tip would be if you've got debt across multiple places, look at consolidating. Talk to your banker for options. It's an opportunity to consolidate higher interest rate debt into a lower interest rate. And you may be able to save on interest and get out of debt faster. Paying off debt may take time, but it will be a sound investment that pays dividends and improves management skills.

And don't forget to celebrate. When you make your debt repayment plan, whether it's on your own or with your banker, always celebrate the little milestones. Find an inexpensive way to reward yourself and enjoy that feeling of accomplishment, because it's a big deal. And this will keep you emotionally connected to your goal and will help you keep moving.

One of my college clients worked doing the side gig thing, and his goal was to pay off one of his credit cards. And with focused effort, every time that he worked overtime and all of that extra money that kept on coming in, he's super disciplined, and he put everything towards the credit cards. And he was able to pay off his debt five months earlier than what we had planned. So--

Oh, my.

And now it's time to share some additional resources that will help you with your credit wellness. U.S. Bank offers one-on-one goals coaching and no cost. Goals coaching is a great way to get started on your journey towards credit wellness. We start the process by discovering and prioritizing your goals. What do you want from life? What do you want to do?

Your coach will also assist in identifying habits and actions that will help you reach your goals. Coaches cannot give financial advice or recommend products, but they are there to connect you with a banker to explore options should you need to. To book an appointment, you can scan the QR code on your screen. We'll give you a minute to do that. Or you can go to usbank.com/exploremygoals.

In addition to the credit--

Sorry. Go ahead, Anna. My screen is locking up. [LAUGHS]

In addition to the credit score tool we talked about earlier, you can also find informative articles and resources at usbank.com/freecreditscore.

That's great. Thanks, Anna. And you'll also find resources on credit and all kinds of topics at usbank.com/financialiq.

Also U.S. Bank is offering a chance to win up to $20,000 in scholarships by completing online financial education lessons. They're powered by EVERFI, and you're eligible to win either $5,000 or $20,000 in scholarships. The more you learn, the more you could win. You can also scan the QR code with your phone's camera from the slide, or visit us at usbank.com/scholarships to get started. I wish we had this when I went to school. [LAUGHS]

OK. As Courtney mentioned earlier, today's presentation is compliments of U.S. Bank. You have an opportunity to enter to win a $1,000 cash prize at complimentsofusbank.com. It's easy as entering your name, email address, and the event code, which is invest in yourself.

While you're there, you can send any compliment card to your family and friends and give them a chance to win a prize too. And you can also share it on social media, hashtag #ComplimentsofUSBank.

Whether you're just starting out with credit, had some credit issues, or you're working to maintain it, always remember that hard does not mean impossible. Where there's a will, there's always a way, and you will find your way. Stay the course.

You absolutely will. And I would recommend just to make sure that you go and get your free weekly credit report at annualcreditreport.com. And stay on top of what's happening on your report. So make a habit to check it frequently.

And watch your spending, and always pay on time.

That is really great advice. Thank you to our amazing panelists today. We received some fantastic questions during the registration process. And if you still have questions following today's session, please book your appointment with a banker at usbank.com/book.

Our first question comes from Eva. She asked, how do I even get started with credit? Anna, can you please help provide details as to how you work with clients who have a goal of establishing credit?

Thank you, Eva. I'm so glad you asked that question today. One of the first things I recommend to clients is that they take advantage of educational resources and that they learn how credit works. And we might connect you with a banker so that you can discuss options tailored to you.

There are product design-- there are products designed specially for new borrowers like secure cards and personal loans. And as a goals coach, I can't recommend a specific product for you or any of my clients, but I can work with you to set some personal goals and milestones along your way so that you can establish credit. For example, using your card responsibly, paying it off consistently while you build your credit history. Thank you for the question.

Thanks, Anna. That's great information and very valuable. Our next question comes from Karen. She asked, how do I repair my credit score on a very limited income? Shaundra, can you please help Karen with her question?

Absolutely. It's a great question, Karen. First, I'd say take a look at why your score is so low. What's driving that? If you have any accounts that are in collections or past due, address those immediately. If you can't afford to pay those right away, talk to your lender about the options available to you.

Once you've resolved any open issues and caught up on your payments, give it a little time. Just be patient. You don't need a lot of money to build your credit score, but you absolutely need a consistent history of paying your accounts on time. Use your credit cards for small, everyday purchases, and pay the balance in full every month. If you don't have a credit card, work with a banker to explore the options that are available to you. Thank you so much for the question.

Thank you, Shaundra. That's really helpful. We received several different questions about credit cards and how they impact your credit. Carol asked, how does your bank balance affect your credit score? And Robin asked, can credit cards be paid off through loans, and is this a good idea? We received another question from John. Is cash king, or should I just use a credit card and get the rewards? Marnie, can you help address some of these questions for us?

Yeah, absolutely. They're really great questions. Let's start with how bank balances affect your credit score. Your bank balances do not affect your credit score, but they play a vital role in getting credit. Lenders use information about your checking, savings, and assets to determine whether you have the capacity to take on more debt.

The next question, I think they're asking about debt consolidation, which combines all your debts into one payment or one loan. Debt consolidation can bring down your interest rates you're paying on each individual loan and help you pay off your debt faster.

There are a couple of different ways to do it. One approach would be to get a credit card with a low or zero interest rate that allows you to do a balance transfer. Balance transfers allow you to move debt from one credit card or multiple credit cards to another, putting all your debt in one place so you don't have to pay interest on multiple cards. But watch out for cards with high balance transfer fees.

Another approach would be taking out a fixed rate debt consolidation loan. A debt consolidation loan is calculated by the amount you owe across all your cards. You can use the money your bank lends you to pay off your debts much more quickly. And rather than paying back multiple debts and interest rates, it's one loan with a fixed interest rate, one payment, which can make your monthly bills more affordable and easier to keep track of.

Definitely talk with your banker about debt consolidation to determine if it's right for you. It's a good option if your credit score is high enough to qualify for a low-interest credit card or a fixed interest rate loan. Make sure you're sticking to your budget and your financial plan that prioritizes your monthly repayment.

And then lastly, credit cards are easy to carry and use. And card holders who have rewards gain additional benefits. Rewards credit cards might offer perks, access to discounts, or even give you cash back on your purchases.

But then they're becoming more and more common. Before you sign up for a rewards credit card, decide what type of rewards you want. Your choices will likely include travel, retail, merchandise, points, and cash back. All of these cards have advantages, and finding the best card for you will depend on your personal spending habits and needs.

Your goal is to choose a credit card with the most relevant rewards for you. Many rewards credit cards charge an annual fee for the benefits that come with the card, and that amount may vary, so it's important to consider these fees when evaluating which rewards card might be right for you. And if you anticipate earning more rewards than the cost of the fee, the expense might be worth it. Like any credit card, just remember to stay within your means. Make sure your credit limit doesn't exceed the amount of money in your savings account.

Thank you, Marnie. That's really helpful information for addressing all the questions for our attendees today. And thank you for everyone on the call for joining today's presentation. Please use your phone's camera to register for our next webinar, Why We All View Money Differently, on April 22 at 1:00 PM Central Time.

As a reminder, we'll post the recording from today's presentation at usbank.com/wellnesswebinars in the next week. Please remember to provide us with your feedback in the post-event survey session following today's call. This concludes our webinar. Have a wonderful afternoon, everyone. Thank you.