Your Credit
What is Credit?
Credit is your proven ability to make payments over time.
Your Credit History
Your Credit History consists of all the loans you have taken out or applied for and your payment history on those loans. Your Credit history is collected and maintained by the three Credit Reporting Bureaus (Equifax, Experian, and TransUnion). Lenders will use your credit history to estimate your potential for making payments on time in the future.
What is difference between your Fico Score, and your Credit Karma Score?
Your FICO score is a number between 300 and 850 that is calculated using your reported credit history. FICO is the Fair Issac Company that first came out with a numbering system to rate your credit worthiness. They are one of the credit history rating systems.
The Vantage 3.0 scoring model is used by Credit Karma. The Vantage 3.0 score will be fairly close to your FICO score.
There are a few different credit rating systems that banks and lenders use to evaluate your credit.
Why is your Credit Important?
Many transactions in your life are impacted by your credit score.
Your car insurance, apartment insurance and even your ability to rent an apartment in many states can be affected by your credit score.
Your ability to get a low interest rate on your car purchase depends on your credit score.
How large of a down payment required to buy a car or house will be affected by your credit score.
Landlords and virtually all property management companies will check your credit score before renting you an apartment. Landlords would much rather rent to someone with good credit.
Signing up for utilities. With bad credit the utility companies will require a larger deposit to turn on your gas, electricity or pickup your garbage. With good credit you may not even need to pay a deposit.
Life is easier and less expensive with good credit.
An acquaintance of mine had the engine in his truck go bad. He had to have his truck to get to work, he lived 20 miles from work. He had horrible credit. He could not borrow the money to get his truck fixed. He pawned everything he had of value, guns, stereo, and went to a PayDay Loan company. He got his truck running however he was unable to pay the pawn shop and lost everything he pawned.
With good credit he would have been able to pay for the motor repair with a credit card or a loan from his local Credit union.
Cosigning a Loan
If you cosign a loan, you are responsible for the payment when the person you cosigned for does not pay. If they have bad credit they will miss a payment. Plan on it. Their missed payment will count on your credit history just like you missed the payment yourself.
Cosigning for his Daughter
A friend of mine cosigned a loan for his daughter and her husband. His daughter was 28 years old andhad a good job and so did her husband. However they had horrible credit, they had a history of missing payments. She promised him that they would never miss a payment on this cosigned loan.
My friend was trying to get his credit score up so he could buy a house. A few months after co-signing the loan he checked his score with Credit Karma. He had a new missed payment from the cosigned loan for his daughter. This missed payment knocked 100 points off his credit score.
Instead of Cosigning
If you really want to help them, pay for the repair or whatever it is they have to have and then make a contract for them to pay you. It is likely they will miss making a payment to you but at least it will not mess up your credit.