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Basics of Credit

We want you to understand that a good credit score matters in very real ways. Let's review the basics of credit. What is credit? What factors make up a credit score? How do you build good credit? Be sure to obtain your Free Credit Report at www.AnnualCreditReport.com to review your history and correct any mistakes.

Hello and welcome to this week’s edition of The Genisys Money Fit Series

Today we are reviewing the basics of credit, like:

  • What is Credit
  • What Factors Make Up a Credit Score
  • And How to Build Good Credit

Let’s start by discussing the basics of credit.

Credit is the ability to borrow money and access goods or services with the understanding that you'll pay later.

Lenders, merchants and service providers grant credit based on the confidence that you can be trusted to pay back what you borrowed, along with any finance charges that may apply.

So What Factors Make Up a Credit Score?

Most people believe if they make all of their credit card and car loan payments on time, they can expect their credit score to be great. However, focusing on your payment history alone will not give you a complete breakdown of what actually goes into your credit score. There are numerous factors involved in determining a single credit score, including:

Payment History:35%

Amount Owed:30%

Length of Established Credit:15%

Types of Credit:10%

And New Credit:10%

But why is a good score important?

Good credit is necessary if you plan to borrow money for major purchases, such as a car. A higher credit score can mean better interest rates and terms on loans and credit cards. It’s important to note that lenders aren't the only ones who concern themselves with your credit reports and credit scores:

  • Landlords may check your credit when deciding if they'll rent you an apartment or determining how large a security deposit to require.
  • Insurance companies may use your credit scores as factors in determining your rates and,
  • Prospective employers may use information found in credit reports to make a hiring decision.

We want you to understand that a good credit score matters in very real ways. The following example will help illustrate the difference your credit score makes when paying for loans.

Meet Amy, Barry and Chris.

Amy has excellent credit. [FICO: 850]

Barry has fair credit. [FICO: 670]

Chris has poor credit. [FICO: 630]

Let’s say they each finance the same car for $26,500. Amy pays $5,300 for her car. Barry pays $5,800. And Chris has to pay $6,300 a year to drive around.

Each of them has the same driving record. Amy gets her insurance for $1,240 a year. Barry pays $1,700 a year for his, and Chris has to pay $2,160.

Each carries a $3,000 credit card balance. Every year, Amy pays $327 in interest. Barry pays $594, and Chris pays $649.

So, in a year, Amy saves $4,242. Amy can buy lunch everyday. Barry saves $2,515. He can buy 4 new video games a month.

Don’t let the first warning of your credit be a giant bill. The team at Genisys Credit Union is available to help build your financial future today.

Now that we know the basics of credit and how your credit score can impact future loans, lets see how we can build good credit.

Start with a credit card limit between $500-$1,000 so it’s easy to manage. Take into consideration the tips we’ve already learned on how to use your credit card responsibly and you’ll be on your way to building a solid credit score.

Consider a Credit Starter Loan to help build your credit if you have no credit history. When it’s time for your first auto loan you will have proven that you are a responsible borrower. This will help ensure you receive the best rates available.

A Genisys Credit Starter Loan is offered to 18-21 year olds with no credit history and includes a maximum loan amount and term.

Not only should you make sure you are making your payments on time, but you should also be aware of all factors that are impacting your credit score. Obtain your Free Credit Report at www.AnnualCreditReport.com to review your history and correct any mistakes.

Now that you’re familiar with credit, what steps will you take to improve your score or begin building credit?

You can view this video and all past videos on the Genisys website.

See you next time!

Setting Up a Successful Budget

Learning to set a budget as a young adult is more important than you think! It will help you develop good financial skills, like being more frugal, saving money and potentially staying out of debt. At Genisys Credit Union we’re here to set you up for success and make it as easy as possible. Here are our 3 steps to help you set up a successful budget.

Hello and welcome to this week’s edition of The Genisys Money Fit Series

Today we are learning 3 steps to help you set up a successful budget.

We know what you’re thinking, why is a budget important?

Well, learning to set a budget as a young adult is more important than you think! It will help you develop good financial skills, like being more frugal, saving money and potentially staying out of debt.

Starting these habits early can also help with future expenses you may have down the road, like:

  • Saving for college
  • Planning for large expenses, like your first car or laptop
  • And Spending Less Overall

At Genisys Credit Union we’re here to set you up for success and make it as easy as possible. Here are our 3 steps to help you set up a successful budget.

1. Set Financial Goals

What are your short-term goals? Do you want the latest pair of shoes? Or maybe you’ve had your eye on Apple AirPods? Starting with a short term goal helps alleviate pressure to save for big ticket items - which we’ll discuss in a few minutes. You can set a plan to purchase those shoes or electronics in a few months, rather than years.

So, once you’ve accomplished your short term goals, we can think of long-term goals. Though it’d be nice, you can’t be chauffeured around for the rest of your life, so purchasing a car might be a long-term goal. Don’t worry, saving for a car is a goal that you’d want to focus on achieving over the course of a year or longer.

Take a few minutes to think about all the financial goals you have and how long you think it will take to reach these goals.

2. Understand Your Income, if any!

We know many young adults might be consumed with extracurricular activities and unable to hold a part-time job where they’ll have steady income. For those who don’t have a job, you might be wondering, “How can I budget?” Well, saving any money you make for helping out around the house or the money you received from grandma and grandpa on your birthday are perfect for budgeting.

If you have a steady income, layout whatever potential expenses you have coming your way for the month in question. Include car-related payments like gas and insurance, cell phone costs, food and drink, haircuts or makeup purchases. We understand that some young adults might not have a ton of expenses while living at home, but the key to creating a successful budget is to think about anything you spend your money on.

And if you’re uncertain on your goals, consult with your parents. They can help guide you in the right direction and even provide an idea of how they budget.

3. Monitor and adjust when necessary

There you have it, you now have your first budget as a young adult! How does it feel? Great? Well, unfortunately, you aren’t completely done just yet. You’re still going to have to monitor and adjust your budget when things aren’t working or when you want to change your goals. And don’t be discouraged, life is unpredictable so don’t get discouraged when plans change!

Start by adjusting when necessary and know that the more time you spend working hard on your budget, the easier it will be to make changes and the better you’ll be with your money.

And here’s a bonus Money Tip for You Guys

Your credit score is important!

One of the best things you can do for your future self, is to understand your credit score before beginning to establish credit. This is very important when deciding on your first loan or credit card.

So, what steps will you take to create your first budget?

Want to learn more? Check out our Credit Basics video and all past videos on our website.

See you next time!

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