As a podcast host, I've had the privilege of engaging in enlightening conversations with experts from various fields. In a recent episode, I had the pleasure of hosting Varney Jallah, the founder of Structured Credit Solutions and the author of "The Not So Secret Guide to Boost Your Credit Score." Our discussion revolved around credit repair, down payment assistance, and the home buying process.

The Importance of Credit Scores

Varney emphasized the significance of credit scores in various aspects of life, such as job applications, mortgage approvals, and business financing. She shared a quick presentation on how to boost credit scores and gain control over 550 points.

Breaking Down Credit Scores

Varney broke down the different factors that contribute to credit scores and the number of points associated with each category.

Payment History

Payment history, which accounts for 35% of the score and offers 192.5 points, was the first topic of discussion. Varney advised listeners to write down all their bills and set up auto payments to avoid late payments, which can significantly impact credit scores.

Utilization

Next, he discussed utilization, which makes up 30% of the score and offers 165 points. Varney recommends keeping credit card utilization under 10% and explains how to determine the reporting date and due date for credit card balances.

Credit Age

Credit age, accounting for 15% of the score with 82 points, was discussed briefly as a factor that naturally increases over time.

Revolving Credit

Varney explained the importance of having revolving credit on your credit report. He mentioned that revolving credit makes up 65% of your credit score, so not having any can significantly impact your scores. He advised against relying solely on debit card usage or bill payments to build credit and recommends adding a revolving credit account to your credit report.

Building Credit with a Secured Credit Card

To build credit, Varney suggests applying for a secured credit card at a local bank. With a deposit of $200, you can get a credit card with a limit of $200. He advises using the card wisely by setting up a small subscription payment, like Netflix or Spotify, and setting up an auto payment to pay it off in full every month. By following this strategy, she has seen clients' scores increase by 60 to 90 points or even more.

Educating the Young on Credit

During our conversation, I raised concerns about people, especially college students, not wanting to take on debt or making mistakes with credit cards. Varney emphasized the importance of education and parents' role in educating their children about credit. He advises college students to get one credit card and use it responsibly, making small payments and avoiding maxing it out.

The Limitations of Credit Karma

Varney discussed the limitations of using Credit Karma as a credit tracking tool. While many people find it helpful, Vani is not a big fan of it. He pointed out that Credit Karma only provides two scores: one from TransUnion and one from Equifax. This means that if you're trying to repair your credit, you're not getting a complete picture by relying solely on Credit Karma.

The Importance of FICO Scores

Varney highlighted the importance of considering the third score that Credit Karma doesn't provide. Many people make the mistake of solely relying on their Credit Karma score, thinking they're ready to apply for a mortgage based on that number. However, Credit Karma provides what is known as "vintage scores," while most banks use FICO scores.

To get a more accurate understanding of your creditworthiness, Vani recommends going to myfico.com and pulling up your FICO scores. Specifically, he suggests checking your FICO 5, FICO 4, and FICO 2 scores. These are the three scores that mortgage lenders typically use. For example, if your FICO 5 is 680, your FICO 4 is 650, and your FICO 2 is 620, your lender will use the middle score, 650, to determine your creditworthiness.

Understanding and managing your credit score is crucial in today's world. With the insights shared by Varney Jallah, you can take control of your credit score and improve your financial health.