Transcript
CFPB FinEx Webinar:  Building and Maintaining Your Credit During the Coronavirus Pandemic
Wednesday, April 7, 2021
Presenter:  Heather Brown, Ed.D., CFPB FinEx Lead

>>Ms. Susan Funk:  Hello and welcome.  My name is Susan from the CFPB Events Management Team.  I'm going to go over some logistics before we start "Building and Maintaining Your Credit During the Coronavirus Pandemic."  If you are having any issues regarding your audio, please click the audio button near the bottom middle of your screen.  There you have the option to have the WebEx platform dial your telephone number, and you can receive audio that way.  The closed captioning link is available in the chat box in the bottom right-hand corner of your screen.  During this event, if you have any technical issues, please send me a message through the chat box by selecting "host," and now I will turn it over to CFPB's Heather Brown.

>>Dr. Heather Brown:  Thank you so much, Susan, and welcome, everybody.  I'm so glad to be here today again.  Some of you may have come last year to the presentation I did, which I enjoyed very much, and it's an important topic that we're touching on now.  So I think you'll get a lot out of it and be glad that you came.

I first want to run through some preliminary information before we get going.  My disclaimer is one I'm sure you've seen, being government employees as well, but this presentation is being made by a Consumer Financial Protection Bureau representative on behalf of the Bureau.  It does not constitute legal interpretation, guidance, or advice of the Bureau.  My opinions and views that are stated are my own, and they may not represent the Bureau's views.  The inclusions of links or references to third-party sites does not necessarily reflect the Bureau's endorsement of the third party, the views expressed on the third-party site, or products or services offered on the third-party site.  The Bureau has not vetted these third parties, their content, or any products or services the may offer.  There may be other possible entities or resources that are not listed that may also serve your needs.

The mission of Consumer Financial Protection Bureau is that we're a 21st century agency helping consumer financial markets work by making rules more effective by consistently and fairly enforcing those rules and by empowering consumers to take more control over their economic lives.

I actually work in the Division of Financial Education—actually, it's the Division of Consumer Education, and I work in Financial Education.  It's an office, and as a result of that, my role in that is to run a program called the CFPB Financial Education Exchange.  We actually target financial practitioners, those that provide coaching, counseling, and other services to consumers to try to leverage our resources.  So we teach those financial practitioners about all of our resources, all of the research we have, share tools with them, have conferences, and run webinars.  I look at federal employees also as an informal financial practitioner because most federal employees know their way around government, and they have vast networks.  So we hope that you'll also help us spread the word.  In addition to learning and hopefully helping you yourself with what you learn today, I hope you'll also go back to your churches, synagogues, mosques, faith-based programs, PTAs, speaking at school, and in your homeowners associations, wherever you can get a voice wherever people want to hear about financial topics, and usually, that's everywhere because everybody can learn from these and especially the one we're covering today, "Building and Maintaining Your Credit During the Coronavirus" and really beyond that time, and the things you'll learn today will be beneficial to many people.  So we encourage you to use resources that we have for practitioners.  You can download slides form our website and use any of the materials we have to go out and spread the word about building strong finances with your network as well.

This page, the link to it is on the top right.  This is the landing page for the Financial Education programs for adults, and you can see that we list the webinars that are coming up, the public webinars.  This is obviously just for OPM employees, but we do monthly or every other month.  Probably, next year, we'll be doing webinars for financial practitioners that want to join, not just based at a particular organization.  

Under that, in that box, you can see View Details and Access Previous Webinars.  That's where you can go to find the webinar recordings and listen to past webinar topics on many things.  Identity theft.  We have one on bitcoin.  We have it on budgeting.  We have something on managing financial stress.  There's lots of things that we've done.  So you're free to look at those, and you're also free to download the slide deck and use it if you're doing some work in your organizations in your community.

And then if you want to join our mailing list, you can fill your email address into the box on the right in the middle of the page, right above "Sign up," and you'll get notifications of new research, webinars, everything that we do that comes out. 

Then on the bottom, we do have a LinkedIn page, where it says at the very bottom on the right, "Join Financial Education Discussion Group."  If you click that and request to join, then we'll admit you when we go through every couple weeks and admit people that have requested to join.

So you know your way around our Adult Ed web page now to help yourself, help your family members, your adult children, and we'll move on to point out a couple of things.  I'm going to show you our coronavirus web page in a minute, just the landing page for that, but the link is at the top.  The second link is to order copies of our publications that are bound or printed in four colors.  You can order just one for yourself, and you can also order bulk copies if you're going to go speak to your classroom or another group of people.  You can ship them directly to your home or to other locations.  We ask that you do that and feel comfortable.  As long as you're using them and getting them out, that's what they're for, and because we're a small agency of less than 1,500 people, we really have to leverage our resources and get others to spread the word as well.  The third bullet is the email that you can send a note to if you would like to receive a copy of the slides.  I think we already have, if you haven't, send a copy to Joy, and thank you, Joy, for inviting me and arranging this.  And she can also get some to you, but feel free to send an email to me, and we can send them to you directly.  The LinkedIn is the second from the bottom, and the last one is the landing page that you saw for the Adult Ed page.  So that's a quick page you can take a picture of or you'll see it on your slides when you get them.

This is our coronavirus landing page.  It's a very robust content.  It can be a one-stop shop for any of your questions on issues around coronavirus and things that relate to your finances.  You can see that we have four main portals, if you look sort of at the bottom section, under the green bar.  Mortgage and housing assistance, we have a very, very informative mortgage and housing assistance page.  It talks about what to do if you're getting behind in your mortgage.  It talks about forbearance programs, how to interact with your mortgage servicer, what your rights are with them, and it's done in tandem with HUD.  We got the experts in housing to come with us and to help build that page.  So it's a really great page for you to refer others to if you know of people that are struggling, as many, many are now to keep up with their mortgage or their rent.

On the right, we have all of our specific CFPB things under "Managing your finances," and then if you go to the second row on the second left, "Student loans."  That page also talks about what to do if you're behind on your student loans.  Of course, all student loans should be in forbearance now until the end of September.  So we'll talk about that.  It should not be on your credit report at this point, and you should be getting zero interest and nothing capitalized until that time when it ends, but all those details are there.  And then we also have a really strong page on avoiding scams because we know that scams are up significantly, like triple from what they were last year, because everybody is doing things online, e-commerce, and so cyber criminal recognize the opportunity and are scamming and practicing identity theft.  So it's more important than ever to check your credit report and stay vigilant about your finances, and we'll talk about that some more.

Appreciate it if you'd put any questions you have in the chat, and I will get to all the questions at the end or as many as I can.  That way, I can stay on track with timing, but if for some reason I can't get to some questions, I'll try to get them answered and send them to Joy so she can share them.

All right.  So we're going to jump right in, and again, I would like you to be aware that what we're going to through with credit reports and scores is Module 7 in "Your Money, Your Goals."  This is a slide deck that you can download from our web page at that location I showed you earlier if you want to use these slides in the future to teach what you've learned to others, which I hope you will.

Okay.  So the first thing I want to talk about is what is credit, and everybody has a different idea of credit and what that means.  So I'd just like to get to a common denominator on it before we move forward.  Credit is actually—when we talk about it, it's your ability to borrow money and repay it later, and so that's a wide definition of credit.  When people talk about credit, sometimes they're speaking of a credit card, and that is, in fact, credit, but credit can also be borrowing from a family member and paying them back.  They've given you some credit and some financing.  Usually, you don't pay interest, but sometimes you might if it's a large amount that you're borrowing.  Sometimes you can get a favorable interest rate from a family member.  They're happy to get something extra later, and it's still less than what you would pay a finance company.  And we actually have some resources coming about, how to borrow from family members, that if you join our mailing list, you'll see, and it talks about how to write an agreement and make sure that you do it in a way that preserves your family relationship and it preserves the agreement as well.

Then debt is the money that you have to repay when you use credit.  So, if you're using credit robustly, then you're going to have a lot more debt, but you can have credit available without having debt, and we'll talk about that, and so we'll talk about ways to improve your credit report and also improve your credit score.

So, when you use credit, that actually creates a credit history, and there are people that don't have a credit history in the United States.  There's millions—we did a study on it at the CFPB—millions of people that we call "credit invisible," meaning that if they went pull down a credit report, they wouldn't get anything.  Why?  Well, because they probably have never had a credit card.  They've maybe never had any credit accounts.  They may  have bought one of those prepaid mobile phones and not use the phone account, and so it happens quite a bit.  Particularly for newcomers to our country, oftentimes they will not have a credit history, although that is changing.  There are some companies that are starting to have international credit bureaus.  They are trying to track it.  It's going to be a long time before it's going to be, I think, relied on, but I think it's coming.  Maybe in the next 5 years, we may see it being used more, but for now, typically, it's within the country that credit is tracked, and if you move to another country and reestablish, you start over, and you're credit invisible in that country.  So that's what happens to some newcomers, and there's other reasons, young people that maybe never had credit and didn't have a need to because their parents got their phone and took care of some of the things you normally would get credit, and so they don't realize that they're credit invisible until they start to try to move out and may not have credit established.  So once you create your credit history, that's all of the ways that you have borrowed money and your pattern for paying it back.

That gets compiled into credit reports, and the way that happens is they have individuals they call "loan furnishers," and those are basically the lenders that you deal with, your mortgage company, the person you have your auto loan with.  If you got new windows and you did it on credit, your retail credit for clothing stores, all of those, what we call "trade lines," those lenders—I mean, those people that you are borrowing from, they are lenders—or using their credit, report to credit bureaus, and they let them know at a periodic time whether you've paid on time, whether you've paid late, how much your credit is, what amount your credit line is, and how much of that credit you've used.  And that information is what makes your credit report, and then the credit reports are used to calculate your credit score.  So the information in your credit report is what drives your credit score, and I'm sure as many of you may already know, that FICO, Fair Isaac credit organization is a company, and their names become known basically synonymously with credit.  So people say, well, your "FICO score" instead of "credit score," but there are some other smaller companies that are running algorithms as well.  But, basically, FICO takes all the information, and they do analysis, and they determine what are the things that are most likely to determine how likely a person is to pay a loan back, and they even have them product-based—and we'll talk about that—where how likely are you to pay back an auto loan, how likely are you to pay back a mortgage loan, how likely are you to pay back retail loans.  Each of those can be a different type or version of a credit report.  Typically, your FICO score of an individual ranges from 300 to 850, being the top, and 670 to 739 is what is considered a good credit score.  So your credit report will show some of your bill payment history, and also, it will show a record of how often you've applied for credit.  And it will show how much credit you have available to you and also whether or not debt collectors have reported that they're attempting to collect debt that you owe.

Why does a credit score matter?  Most of the time when I'm talking to people in Federal agencies, I don't have to say too much about this because I'm sure most of you know that you went through a credit check in order to get your public trust clearance, which is the lowest-level clearance that you can have in the Federal Government.  The more robust your clearance level is, the more checks you've gone through.  That's one of the things that people often don't think about.  Some people may say, "Well, I don't have to worry about my credit because I'm not thinking of getting a loan."  Well, it's getting more and more common to have employers run a background check on individuals, and that includes a credit check.  It can impact your ability to get a job, and that's particularly true if you have a security clearance, like you're either a contractor with a security clearance or in the government, and also, of course, the military.  In fact, the military reports that they, unfortunately, have to discharge over a thousand people a year because of credit issues, and that's one of the ways that is pretty easy to get discharged from the military.  So, even if you're doing everything right, if you run into those kinds of issues, that's a problem, and they perceive that as a threat to the security because people that have financial trouble usually are more easily influenced about money and bribes and things like that.  And that's why all businesses tend to do some sort of a credit screen, the ones that do.  So it's definitely a readiness issue for the military, and they actually have invested a lot of money.  They have conferences where they have—they're certified.  They have over 300 certified financial practitioners that help the individuals that start to get into trouble to get their credit straight, and so it's just important to understand how credit just runs through every fiber of what we do in life.

Of course, getting an apartment, often they're going to run a credit check on you, particularly if it's a property management company, but even now individuals are doing that.  So, when they run that credit check, if your credit doesn't come back strong, they may choose not to rent to you, or they may just choose to make you pay a higher deposit.  So where they may ask for one month's deposit for somebody with good credit, they may ask for two.  If you have moderate credit, they might ask for three or more if your credit is not good.  Of course, to purchase a mortgage, you typically have to have a credit score of around 620.  I think FHA says that lenders can go as low as 520, but most don't go that low because the risk is higher, and the underwriters often won't clear that.

Getting insurance now is becoming very prevalent.  They will often do a credit check for auto insurance and homeowners insurance and other types of insurance. 

Also, if you have a low credit score, it can impact the amount of deposit you have to pay on your utilities, your electricity, your landline and your cell phone plans as well, and sometimes you have to pay a pretty substantial deposit for gas and electricity if your credit is not strong.  Of course, if your credit is strong, oftentimes if you're just moving within the area, they don't charge you anything.  Of course, getting credit cards, they're going to check your credit.  So improving your credit score is really important because a low credit score costs you money.  You can still do a lot of the things you need to do, but it costs a lot, and you end up with less favorable terms on interest rates and deposits.  And there's been some research that shows it's anywhere from $3,000 to $5,000 difference in what people pay per year if your credit is low.

What is in a credit report?  I'm going to talk to you about how to download your credit report for free shortly, but let's just talk about what's in it for a little bit.  First of all, there's header/identifying information.  Your credit report should include your name, and your name should be spelled correctly, and it should be your full legal name.  If it's not, that can be a problem.  You might be a victim of identity theft, and somebody is using a different version of your name and buying things on credit.  So don't overlook small details like that.  It's really important, and so once I tell you about downloading your free credit report, hopefully, you'll go through and check some of these things.  And we do have on our web page some resources to guide you through what to check, so checklists.  If you go to our credit portal, basically, you can go to our consumerfinance.gov page and then do a search on "credit scores," "credit reports," and you can get some of those fliers and things to help you.

At any rate, you're going to check your name, your address, your Social Security number, your date and place of birth, and your employment history, and make sure that all of that is correct.  Some people are surprised to learn all of that is just part of the header on the report, but there is a lot of information about you on your credit report, and you definitely want to take the time to check that at least every couple of months and make sure it's accurate.

Your employment history may not have every job.  That tends to be the weaker part of it, but what's listed should be correct.  You don't have to add things necessarily because you may not necessarily want to add more information about yourself, but what you want is what's there to be accurate.

It also contains the credit report public record information, and that means things that have occurred in the public domain like bankruptcies and judgments.  There used to be Federal and State tax liens on the credit report, but that was removed a couple year ago.  If you check your credit report and there's any State or Federal tax lien on your credit, you need to call that credit bureau and ask to have that removed because that should not be there.

The credit report does not include records of arrests or convictions.  There are some special consumer reports now that are being generated by companies like LexisNexis, which have a lot of information on your.  You can also get free copies of those.  You're entitled to one of those a year, and it's worth checking some of those also to see what's there.  And they have a lot more information than some of the other reports that it's not legal to do.  So they gather things sometimes from the public domain to do that.

Marriage records or adoptions should not be on your credit report and civil suits that have not resulted in judgments.  When we say judgment, we mean you were sued.  The court said you were found guilty of whatever the complaint was, and as a result, that you had to pay compensatory damages or something to someone.  That amount that they require, they put it on your record and call it a "judgment."  Civil suits that haven't resulted in a judgment should not be on your record either.

Those are the main things I wanted to talk about regarding what's in your credit report.  Of course, the account information, we already talked about.  It will have every trade line, meaning every credit card, every mortgage, every auto loan should be on that report, and they will go back for a long time.  You may have something that you haven't used in a long time.  Maybe you've enclosed it.  It will often still be on your credit report as closed.  It probably is having no effect on your credit report because the older things get, the less influence they have, and over time, they pretty much fall off or are no longer important, but at the same time, it's good to check and make sure even the older things are reported accurately.

Of course, it also has inquiries made to your account, and that means who has actually been checking your credit.  When you check your credit, it will not impact you, and so I think I gave away one of our questions now by telling you that.  But just be aware.  A lot of people have a mistaken feeling that if you check your credit yourself that it hurts you.  No.  But it does matter how often your credit is checked, and we'll talk about that in a little bit.

I did just happen to see somebody ask, "Talk about soft hits and hard hits."  Basically, if a lender is downloading your credit because they're planning to give you a loan, that's called a "hard pull," and that means that is going to be reflected on your credit.  As a result, it will impact your credit score.  It's not a significant impactor of your credit score, but it does impact it.  So, if you're running around applying for every credit card you can, that's going to drive your credit down, if you're running around applying for a lot of different things.  If you're applying for a mortgage and you want to shop around, then you want to do it within about 2 or 3 weeks.  They say anywhere from 2 to 4 weeks if you're checking different mortgage rates.  It's only going to have one impact.  It's going to be considered one check, but if you spread it out and you check one month and the next month you're checking, then that's not a good idea.  Let's say you're applying for mortgages.  They're checking your credit every time.  They should be able to give you interest rates generally without doing a hard pull on your credit report until you decide who you want to work with for a mortgage company or an auto loan.  So don't allow people to—if they ask to check your credit, say, "Is this going to be a hard pull or a soft pull?"  If it's going to be a hard pull, don't do it unless you're really planning to go forward with the loan with that individual.  If you're just shopping, that's not ideal, and if they say they can't provide information until they do that, then you probably want to go on to somebody else that can at least give you a general idea of rates.  If you can come to talk to these lenders with your own credit scoring report and you could say, "I know what mine is.  So can you give it to me based on this score?" they'll tell you, "Well, we have to check it ourself when it comes to the final agreement, but based on the score you've told me, this is about the interest rate we'd be offering you."  So that's the way that you would be shopping around for that.

So let's do a true or false.  Everything falls of your credit in 7 years.  True or false?  You guys can just stick it in the chat, T or F.  That is false.  Yeah.  Basically, everything negative, most negative things will fall off your credit report in 7 years.  However, bankruptcies can take 10 years to be removed from your credit report, and positive information can stay on indefinitely.  If you filed a bankruptcy, it may take some more time to get off, but I take heart that I know of people that have filed bankruptcy and still get credit card offers.  The interest rates aren't the greatest, of course, but at least they're still able to do that.  A lot of people are really afraid and discouraged.  Of course, nobody wants to have to go through that, and it can affect your employment and other things as well.  So we should do everything we can not to, but sometimes it's unavoidable.  You have medical debt that was not expected or some other things happen that give—sometimes you just have life takes a bad turn for people that either you can recover from bankruptcy and have a strong credit later, and it may seem to take—it takes a while, but you'll get there.  And it's always hard when you take a new start.  So keep that in mind if you are experiencing it or someone you know is.

Negative information can appear on your credit report for about 7 years.  We said bankruptcies can take up to 10.  Civil suits and judgments, if you've had a suit and it became a judgment, it can be reported for 7 years or until the statute of limitations for your State expires.  So, if you have some sort of a judgment or civil suit on your credit and it's been a while, you might want to find out what the statute of limitations is in your State, and sometimes you have to ask to have these things removed.  They don't just come off.  In fact, most of the time you do.  So, definitely, check and see if any of those things are on there. 

Additionally, medical debt is a fairly recent one—I think within the last year and a half—should not be on your credit report unless it's more than 6 months old.  So, if it's older than 6 months, it can go on the credit.  They try to give you a grace period because they understand there's challenges with whether the insurance paid or you paid or what your doctor paid in full, and so a lot of people are having inaccurate credit things on their medical record-wise on their credit, and they decided to say, "Okay.  That can't be reported immediately.  It can be reported 6 months after if it has not been paid or collected."

Okay.  Let me see if I missed any other things.  Somebody else asked me did I say to check the credit report monthly, "The Eventbrite description says participants will learn how to check their credit report weekly," and that is correct.  So we're going to talk about that.  Normally, you can only get three.  Each of the three major credit bureaus will provide you a free credit report every year.  So what we recommend is that you pull down one in January, and then 4 months later, you pull down the second bureau, and then 4 months later, you pull down the other bureau.  That way, you can spread your free reports out but still monitor your credit over time.  Fortunately, one good thing that's come out of the pandemic is that the credit bureaus are allowing people to download their credit reports weekly from all three bureaus.  So now you can literally go into—and you'll see this link in a minute.  So you don't have to rush to write it down, but you can.  It's annualcreditreport.com, and you can pull your credit report down weekly.  That won't last indefinitely.  Last time I checked, it said until the end of April.  My guess is they've probably extended that now, but at any rate, yes, you can pull it down weekly now.  But that won't be ongoing.  But it's always been at least annually.

Okay.  Fact or fiction.  True or false.  I only need to look at one credit report annually because they all have the same information.  We've just answered that.  False.  Correct, Denise.  The idea is that we want to look at all of them, and they all could have very different information.  Different credit reporting agencies often have multiple products.  Like, one credit reporting agency can have an auto loan credit report, a mortgage credit report.  They may have a special employment credit report that they give to employers that has different information and a different algorithm for the score.  So the scores can also change with the reports and usually do.  They also have versions like one year they had it and they made a change, small change, and there's version two.  I think the mortgage credit reports have up to nine versions now, but HUD only underwrites or approves certain versions for underwriting.  So some of the newer ones aren't really used as frequently yet because they haven't had that stamp of approval.  So it's really complex.  There's many more credit reporting agencies than the big three:  Equifax, TransUnion, and Experian.  Those are the ones we've most heard of, but there are more, and so they have smaller credit reporting agencies that have their own different algorithms. 

There's also some predatory stuff.  I shared with the group yesterday that I had went to buy a car, and one place I went gave me a credit report and said that my score was way longer than what I knew it to be, because I went in knowing what it was, and they gave me a crazy high finance charge.  And the payment was going to be double what it should have been.  So I asked what credit they were using, and they have to let you know.  They don't have to give it to you at the moment, but they're supposed to at least mail you—if it's an adverse credit decision, the law says they have to mail you a copy of what they used to make that decision.  So I found out they used a credit bureau I had never heard of, and they were basically, probably doing that because they know that they can charge more for lower credit scores.  So it was in their benefit to charge more and to show me a score that was lower.  So you never want to walk in and let someone tell you what your credit score is.  You want to know what that score is going in.

Okay.  Let's see here.  Let's move on.  We just mentioned the top three:  Equifax, Experian, and TransUnion.  This is the website where you can actually download your free copy, and again, every week during the pandemic and in traditional times it's once a year for each of these.  So, again, rather than—when this ends, the once-a-week opportunity ends, we encourage you to spread them out, and rather than download them all at once, download one every few months, unless you know you're getting ready to try to get a mortgage or something and you really need to see each one.  Sometimes you can ask your mortgage company which do they use.  You can have a lot of communication around this that people don't often realize, and so my refinance, I was told that I should—there was something that was on one of these credit bureaus on my report that shouldn't have been, and I called them and asked them to take it off.  And they took it off immediately, and then they rescored it immediately once it was removed, which put me where I needed to be for my refinance.  So there is some flexibility.  It's not you sitting there taking whatever comes.  You have rights.  It's your information, and your information is their product.  So you need to make sure that you stay involved and watch it so that you can protect your rights.

Okay.  If you are under 18, you typically don't have a credit report unless you are an authorized or joint owner on an account, you're an emancipated minor.  In other words, you were in foster care and decided to not go into foster care and just live on your own, or sometimes people get emancipated from their parents because it's not a healthy situation for them.  So you've gone to the court and you have that, then you'd be considered an adult.  That's more rare.  If you live in a State that allows you to enter into contracts below the age of 18—there are States that let 16-year-olds enter contracts and so on—in those cases, if you have entered into a contract, then you would have a credit history, and also if you have student loans, you would have a credit history.  Student loans are often the first way many people get a credit history.  Sometimes it's with a cell phone.  They want their own phone.  They pay for it themselves.  They're in a State where they can have a contract to get a phone, and so that gets reported to the credit bureaus.

Someone asked me yesterday if a person didn't have—they wanted to help someone establish credit.  Could they open a joint owner account?  And I said I can't really give them advice.  I don't know their individual situation, but I typically encourage people to stay away from joint owner accounts because I've seen so many things happen from those.  Typically, you go into something like that with somebody in one situation and somehow the situation may change later, and then you're responsible for what's going on with their credit.  Even I've known situations with parents and kids where the kid has started making bad decisions going in the wrong direction, substance abuse, the result is their credit gets damaged too, and then they can't help their child as much when they need to because they can't get the loans and things they need to get them help.  So it's not a mean thing if a parent says no.  It's really a protective thing.

I was shocked years back when I saw a study that showed that most seniors end up in bankruptcy or in severe financial difficulty because they help their children and family members too much, to their detriment, and so it's important to learn to say no and to be able to let people stand on their own feet.  It's also good, if you can't help them.  So there are credit-builder loans that most major banks offer, and it's like a $500 credit card.  What you can do is put $500 of savings in an account for them, and then they will give them that credit card.  And they have to pay that card every month, and if they don't keep up, they can pull money from their account, and that ruins their credit.  So what they should do is pay every month, the balance, or pay off what they used.  Just use a little bit.  You don't want to ever charge the full amount, but it helps them learn to use credit more effectively, and it makes sure that you don't risk your stance, your credit stance by trying to help somebody else, getting dragged down.

All right.  We talked about this:  If I pull my own credit score, it will impact my score.  We know that is false now.  You pulling your own score does not impact your score, but we do know that how often you get a score pulled by others, hard pulls do.  Soft pulls don't.  So remember that, and the only difference between those is that the soft pull is done by a lender that says we're not really going to pull it, and they'll tell you it's a soft pull, as if we're doing a loan, "We're just going to check it to see about where you stand."  If they're actually pulling it in the process of underwriting a loan, it would be a hard loan, and you have to sign something for that to give them permission to do it.  So, as long as you don't sign or give a verbal permission for them to do a hard pull on your credit and if they say they want to check it, say, "I'll only allow a soft pull at this time," and if they say, "Well, I can't do that," then move on to somebody else that will.

And we talked about the fact that you have many different credit scores.  So, even when you go and look at your credit score probably at your bank or some of the services that offer it, you often will get a VantageScore.  Vantage was a newer score.  It is a joint venture between Experian, Equifax, and TransUnion to develop an algorithm that creates a credit score that is educational, mostly, and so it gives you a general range of where you are, but it's unlikely to be exactly what the person that's offering you a loan is looking at because they probably have a specialty report for mortgages or auto, and you don't know what version they're using.  So you may go in knowing a credit score that you got online and that may be Vantage, but at the same time, the person that you're talking to may have a bit of a different one.  But it shouldn't be far off.  So it should be close.

This is a very instructional chart.  I think it's very helpful.  What it shows you is the percentages of how much each category determines what the outcome of your FICO score is, that Fair Isaac Company score, and I actually got this off of their website.  You can got o FICO's web page and look at their information yourself and learn more.  They have a really robust website as well.

Payment history is the most important thing.  In other words, the thing that you can do to keep your credit score the highest is to pay your bills on time.  Paying your bills on time—and that means within the due date cycle of the 30 days that's required—will keep a high credit score for you.  In fact, it's been fairly new that I've learned that as long as you pay your credit card off in full each cycle, it really, really helps your credit score.  Let's say you make $500 in a week and you have a $500 credit card.  You could charge everything on to that card that you would spend, which would hopefully not be more than $500 at the time, because that's what you make, and then pay that off fully each month, and you would have a strong credit.  But if you carry balances over, that's where you start having trouble.  When you pay the minimum balance and you're carrying a really high balance on your card, that is a very big ding to your credit, and I've seen credit scores jump as much as 60 points by just not doing that, like paying that card down and not carrying that heavy balance.  Many times, people feel like at least you're paying it on time if you pay the minimum balance, at least you're timely, because that's also important, but the history is critical.

Then the next is the amounts owed, and we'll talk about this some more, but amounts owed sort of leads us to credit utilization, how much of the credit are you using, what percentage of your credit card are you using, and we'll talk about that, but that is 30 percent of what makes up your credit score is how much you owe.  So it will look at what you owe on each card and in comparison to what amount of credit has been offered to you and will give you a score because of that, and of course, the higher your balance is and the longer over history you carry them, the lower your score it.  You can see if you just combine those two items, that's the majority of your credit score.  So those two things are very important.

The length of the credit history.  So, if you have a long credit line that you've had for 20 years and paid it off on time, that's going to have a strong positive impact.  If you have all new credit—sometimes you see people that have maybe gone through a divorce, but one spouse had all of the credit under their name.  Then they start establishing their own.  Their score drops quite a bit at first while they're building their credit back up, but it can also build up really quickly.

Then types of credit.  Typically, retail store credit is the worst in the algorithm.  People frown upon it because the interest rates are typically 16, 24 percent, which is very high especially now when rates are so low.  So you're much better off using a traditional Visa, Mastercard, Discover Card, even American Express and paying it on time very month than using a store credit card.  People often say, "Well, should I close it?"  If you start closing accounts too, that can also have negative impact because it can impact the amount of credit available to you.  So the best thing you can do is have it open.  If you have a retail one, pay it off and leave it open.  If you want to use it, just use it a little bit.  Only use it enough that you know that you can pay it off every month in full, and that will help build your credit.

And the new credit, that goes back to the whole credit checks.  Looking at the number of credit inquiries on your account indicates what kind of new credit you're after, and that's at 10 percent.  You can see even if you are doing it a lot, it's not the biggest hit, but it will have an impact on your credit.  But, again, checking your own does not have that impact, and if you're shopping for an auto loan, if you shop within a 2-week period and it's only going to be hit, considered like one hit, but if it's over every month and you're hitting retail accounts, car accounts, trying for this, applying for that, that will drive your credit down.

Okay.  So let's see what else we have here.  Credit utilization.  We're just showing a calculation.  It's really easy, really.  In this case, this person has $5,000 of total credit available on their credit card.  They charged $3,500 of that.  So we basically divide 3,500 by 5,000, and we came up with a 70 percent utilization rate.  That's a high utilization rate, and that's going to impact the credit every month when it's re-scored.  It's going to be lower than it needs to be and probably quite a bit lower because you're using too much of that credit, and if you're not paying it off each time,  you're carrying it, that's not idea.  The target people say—and none of this is hard and fast because different bureaus use different algorithms, but these are general rules of thumb—is 30 percent credit utilization.  So, basically, if your total available credit is $5,000, then you would want to multiple that by 30 percent, .3, and you'd have a $1,500 balance on your account.  So, with the $5,000 credit card, you'd want to have around a $1,500 balance or just a third of whatever your credit card total available credit is, and you can see your total available credit on your credit card statement or loan statement, and you can see what's currently due or how much you've used, and you can run those numbers yourself.  And you'll be surprised.  That will make a big difference.  So maybe you can't pay something down all the way, but if you can work to getting it under that 30 percent, you'll see a boost in your credit score.

All right.  So we talked about requesting the free credit reports already.  Go to annualcreditreport.com, and fill out this online form.  I think online is the best way to do it.  You can call, and there's a number there, and that takes a little bit longer to get.  And sometimes you have to also be on hold, and you can also write them and ask for it.  Of course, that takes the longest amount of time.

Recently, my husband and I were downloading ours a couple weeks ago, and for some reason, one of the bureaus would not allow him to download his report.  It said something didn't match.  Well, when you go in and you start doing it, they'll ask you a bunch of questions, and what they do is they go to public records, and they find out things about you.  So it may ask which of these addresses have you lived at in the last 5 years, and you may be—"How did they know that?"  All of it, they've gotten somehow through public records.  Have you ever owned a home in this area?  What is the finance company you pay your car to?  And it will have choices.  Sometimes you have a hard time answering them for yourself because you may not remember, but if you miss one of those, they may not let you download it.  That's to protect your identity.

Another thing is if you get offers when you're there, get your score because you're going to get your credit report when you do this download.  There will not be a score on it, and a lot of people don't understand that.  But you're getting your credit history, and then improving the things on that report are the things that improve your score.  In this case, I suggest using online is best, but you can call if you want to.  You can also write a letter, and the instructions are all on that same website for you to get your car.  But know that you may actually have to get it mailed to you if you can't answer all the identifiers, the questions, the security questions around things from your public record.

Okay.  So this, again, is just telling you what we've already talked about around the free credit reports, and you can save the PDF version on your files.  

The other thing, I don't remember if I mentioned—I'm starting to wonder what I said yesterday and today—but I do think that a lot of people don't realize that every month, your credit gets re-scored.  Sometimes people hear they have a bad credit and they can't get something.  That doesn't mean you can't get it forever.  You can actually improve your credit score significantly in 1 month, and you can improve it radically in 6 months if you're doing the things you need to do.  So, even though somebody may say no, that's not a permanent no, and also, you might want to shop around because just like one mortgage lender may require a 640, another one will do a 620, some may do only 700s.  So you just need to know you have to probably pay a higher rate for the lower your score is, but don't assume that the door is closed on those things, and don't assume that you can't influence it.

All right.  Talking about debt a little bit, good debt and bad debt, the idea really around debt is if it's debt that you can manage, it's a reasonable amount and you're able to pay it off each month and you're able to use your own money and leverage it for other things, then that's usually a good type of debt.  Debts that also have collateral behind them or become an asset like property—because most people with a mortgage, that's usually people's biggest asset, and over time, values of property always go up, but then we know there can also be significant corrections in times when you lose equity and things go down and you even get underwater.  But in the end, that property is still there, and if you look at the long-term trend on property, it goes up.  Most people look at that as a good debt.

Auto loan is not the worst, but most cars depreciate significantly once you drive them right off the lot.  Almost never can you go back and take a car that you bought and a month later trade it in for something that ends up being a good deal for you because it's depreciated so much so quickly.  It's good because there is some collateral there, but typically, auto loans aren't really—you don't really have equity, and it's not really an asset.  That's why a lot of people go to other forms of getting a car, and there's a trend toward not owning cars too now.  So you have to think about those.  So other things, any loan that is a very high interest rate—and right now, interest rates are extremely low and lower than they've been in many, many decades, and so your loan should not be in the—the credit interest rates that you get shouldn't be up in the 20s and 30s if you have reasonably good credit.  Maybe on a credit card, it will be around that, but other things, it should be much lower.  So, definitely, shop around and make sure that you don't get ripped off. 

If the only credit loan—let's say a car, the average rate people are paying, let's just say it's like 3 or 4 percent and yours is 7.  That's not bad if your credit is not good and you got one, but if somebody is asking you to pay 20 or 30 percent, maybe it's better not to have a car than to pay that kind of interest because if you add up what the payments are over the life of the loan, you realize you'll be paying twice as much for the car.  So that's sort of a way to figure that out quickly.

Okay.  We recommend that you keep a debt log if you're trying to manage your finances.  Make sure you have a list.  It could be a simple spreadsheet:  what's the organization you owe money to, how much do you owe them, what's the monthly payment, and some general information on their address so that you can track it and know quickly every month where you're at.  A lot of times, people don't even know that, and that means that they've got way too many—too much credit, and it's all over the place, and it's very hard to rein in and manage.  So the first step in trying to fix a situation like that—and I've been in those situations, so I understand it—is to actually get an accounting of where everything is, what's owed, and what it looks like, and from there, when it's all in one place, then  you can start creating a plan that's manageable or go to a financial coach or counselor to help you create a plan.

Okay.  So there's two ways to reduce debt, and one method is paying the smallest debt first and then paying the next largest and the next largest.  Some people call that the "snowball technique."  The other is paying the highest interest rate first.  On paper, typically paying the highest interest rate is probably going to be the best bet because when you pay that high interest rate loan down, that's going to free up the money you were paying on interest to pay other loans.  So, over time, it may take you longer to get that first thing paid, but over time, you're going to be able to pay everything off more quickly.  But sometimes that big one is so big that it's overwhelming, and it's discouraging, and people don't feel like—it's almost not worth trying.  So paying smaller ones and knocking them off can encourage you enough that you can start to tackle the bigger ones.  So you figure out the pros and cons.  We actually have a booklet on managing debt and another little booklet on credit, and if you go to that link I showed you where you can get copies of bulk and print things, you can order that.  It will walk you through every step of a debt log and figuring out.  It talks about this method of paying for debt.  It gives you a little sheet to put everything in.  It's really quite helpful, and so these are just sort of a high brush on this.

Dealing with debt collectors.  Just know that a debt collector should never be rude to you.  They cannot harass you.  They cannot threaten you.  You cannot go to jail for debt unless it's criminal debt.  You owed money for restitution or you had traffic tickets.  You can go to jail for that.  So that would be the highest priority if you have that type of debt, but outside of that, we've heard of many stories of people threatening to put people in jail because of a credit card, and that cannot be done.  First of all, there's also a lot of—I won't say a lot, but there are unethical collection companies that will call and say you owe money that you don't owe, and they may have a previous legitimate debt that you had.  Maybe you paid it off, or maybe they escalated the amount on it.  And there are companies that sell their bad accounts, even though maybe you paid it, but they sell it as bad accounts because they get money from the collection company.  And the collection companies pays them 80 percent, and then they collect on it.  So, unfortunately, that does happen sometime.  So make sure that you know that you paid something.  If you're wondering like, "I don't remember this" or "I don't feel like I owed this" or "I thought I paid that," don't pay a collector without checking to make sure that you haven't paid it, because a lot of times, it may not beg true.  But they can be very convincing, and they can also be intimidating.  So sometimes they'll frighten people into paying something just to get them off their back or to protect their score.  You can also tell people not to call you and put things in writing only, and they're not supposed to call you any longer, and if they do, you keep a record. 

On this page you see with the red page and the lion, on the very bottom, you'll see the cfpb.gov/complaint in blue.  That is where you can register a complaint if you're being harassed by a debt collector or a financial institution is not doing what they are supposed to do.  Our agency does collect complaints, and we keep a public record of those in a database, which you can also go check.  So, if there's a mortgage company and you want to know if they're good or not, you can look and see if they have a lot of complaints.  If you're having a problem with a company, you can look and see, "Oh, have other people had  the same problem with the bank?" and many times, they have.  So, at least you can help, you know that you're not alone, and you can also call them and say, "Don't say this is inaccurate and this doesn't happen because I've seen that you have a thousand cases of hits occurring."  So it gives you some leverage as well.

Okay.  You can dispute any claim on your debt if somebody says you owe debt, and we have instructions of how to do that in this booklet dealing with debt.  This is from "Your Money, Your Goals," actually, dealing with debt collectors, but we have something that says "Debt Getting In Your Way," and that booklet, if you look that one up on debt, it will also walk you through this.

We also have letters on our website in the credit portal on how to dispute something on your credit that's not correct, and if you call, call them or write them to dispute it, they will take that off immediately and research it.  If it's correct, they'll put it back on.  If it's not correct, it says off, and they take that very seriously.  So, when people dispute things, they usually get a bump up on their credit, but if it's accurate, it will come back on.

All right.  So there are laws around how people collect debt from you and how they deal with you, and here are some of the guidelines that they can't do, and you can tell them, "I'm aware of the Fair Debt Collection Practices Act, and you should not be talking to me in this abusive manner," and that straightens people out quickly.  And they're usually being recorded, so they'll back down if you let them know that you know your rights.  And don't just pay the squeaky wheel.  Make sure that, in fact, what you owe is correct.

Okay.  We're running out of time here.  I'll probably have to cut this from the future because I didn't make it to here yesterday either, but identify theft is a big issue.  If anything is weird on your credit report, it could be identity theft.  So, definitely, look into it.  You can put a freeze on your account.  We recommend you do that if you have young adults that really don't have credit yet, so nobody uses it, because the identity theft folks look for credit that hasn't been used a lot so they can take it and start to run things up.  You can also have a credit alert, which means that they have to notify you anytime someone checks your credit.

The FTC is in charge of identity theft, and they have an identitytheft.gov site, and you can check that out.  And that site can tell you how to file a report too.  If you are a victim of identity theft, you should file a report with identitytheft.gov, and they will take a report.  And that's like a police report, and that will give you the right to have, like, the extended security alert and things like that.  So just be aware that if you ever run into that problem, that's the site to go to, identitytheft.gov.

All right.  This is the link to our Consumer Complaint.  You can call them and file a complaint.  Usually, you've tried to resolve it yourself.  It doesn't work.  So you can reach out and file the complaint, and we keep a record of all those complaints.  Also, we send the note to the company.  The company has to respond to us within 2 weeks, and then we can get back to you.  So, if you've got stuck, people won't listen, you can't get anywhere, this can really move things.  There's been some amazing success stories where people have recovered hundreds of thousands of dollars that was taken from them that shouldn't have been, and they couldn't get anywhere until they filed.  So we encourage you to use our complaint line.  We're getting a surge in complaints.  So be patient as a result of the coronavirus and things going on, but definitely continue to reach out.  The best way to do it is to file it online.  It's quick.  You don't have to hang on, and you get a response back.  And these do get moved.  We have a great consumer response team, and they are there to help you when you run into those kind of challenges.

Okay.  So we have, like, 2 minutes, and I'm just trying to see if I missed any questions.  It doesn't look like I did.  Predatory practices.  Can you report them, like your car company?  Yes.  And this page is the information.  Just take a picture of this, and email.  The easiest way is to go to our website.  In the top right corner of every page, you can click the complaint link and get right to the quick form you fill out online to ask about your complaints.  You can even upload, I think, some information or documents.  Be careful of what you upload.  Don't upload credit reports and private information.  If someone needs that, they'll get it another secure way.

I've heard issues with stolen identities of children.  Yes.  They usually go after children because they don't have a lot of record, and people aren't watching it.  So they can get away with it longer.  That's why a lot of people are putting freezes on their children's credit.  I should have done that for mine.  I, fortunately, didn't have any trouble, but it's a good thing to do automatically.  If somebody doesn't need to do credit, if they're not going to be applying for any credit for years, put a freeze on.  A lot of people do it for their own so nobody can mess with their stuff.  You just have to remember to take it off before you apply for something.

Okay.  Thank you, Susan, for letting them know where to email, and thank you for the—let's see.  Can you go back one slide, just to write something down?  Yes, I can go back a slide.  I'm not sure what slide.  Is this the place?  Yes or no.  Or if you know the number?  I guess they're not numbered, are they?  No.  Okay.  I don't know where it is.  One forward, she said.  Okay.  I don't remember where I was.  That's what she wanted, I think.

Okay.  So thank you guys for being with—okay, great, that's the right one—being here today.  Please spread the word to your colleagues.  This is such important information, and hopefully, you found something that you can learn and use in the future.  Please feel free to sign up on the web page that I gave at the beginning, and I look forward to maybe seeing you at some of our webinars virtually in the future.

Joy, did you want to have any comments before we wrap up?  I'm not sure if she's—Tracey or Susan, I don't know if we need to unmute Joy in case she wants to say something.  

[No audible response.]

>>Dr. Brown:  Maybe not.  I don't think I can do it.  Let me see.   Okay.  Joy, you've been elevated if you wanted to say anything.

>>Ms. Joy Fisher:  Hi.  Can you hear me?  Hi.

>>Dr. Brown:  Yes, I can hear you.

>>Ms. Fisher:  Okay.  Yes.   Thank you so much, Heather.  I really appreciate it.  That was a wonderful presentation.  For all that are registered, I will send out those slides that Heather has already provided to us.  So I will send it out to you on email from the OPM Benefits Box and also with the survey as well, and if you have any questions or our contact information or anything that she shared, it should be already on the slide, but you can always email us at opmbenefits@opm.gov.  So thank you again,  This was great, a lot of great information.  I appreciate it so much, Heather.

>>Dr. Brown:  Oh, it was my pleasure.  Thank you for having me.  Everyone have a great day.  Take care.

[End of recorded session.]