Disclaimer: This is a sponsored post by TransUnion. All opinions are my own.
I often get asked a lot of questions about how someone can improve their credit health. The reality is most people could probably use a little help in this department.
According to a March 2019 report from USA Today, Americans owe $1.04 trillion in credit card debt. This is due to the fact that Americans are using more credit versus cash than ever before.
This means they are paying hundreds if not thousands of dollars in interest charges and they could be negatively impacting their credit score.
Why do we struggle with credit?
While several experts might make the assumption that people just aren’t managing their money properly, I would like to provide an alternative view.
Part of the reason why Americans struggle with credit is because it’s a confusing concept to begin with. Take these examples:
- Everyone has a different journey with debt. They also have different kinds of debt which can impact their lives in various ways.
- The one-size-fits-all advice that’s out there is pretty generic and doesn’t take into account someone’s personal financial situation.
- Some financial experts just take things to extremes saying you should never use credit ever – which can actually do more harm than good. No credit might as well be the same as having poor credit.
- Most people simply just aren’t educated on the basics of credit.
Heck, I talk about money for a living and even I’ve been confused about credit, so I can only imagine how the general population feels.
What happens when we don’t know how credit works?
Because credit plays such a big part in our overall financial health, it can have a huge impact on our everyday lives.
Here are the facts:
- Your credit score is used to determine your creditworthiness. (AKA: the risk the lender would be taking on if they let you borrow money)
- A credit score is one of many factors lenders use to help determine how much money you’ll be shelling out in interest payments. A better score, among other factors, could mean you’ll pay less interest.
- Your credit is a major consideration when making big purchases like a house or a car. It’s can also be a consideration when renting.
- Employers can sometimes check your credit report when making hiring decisions. They may not be able to see your score but they can see your history.
As you can see, your credit can affect just about every area of your life. It could even affect your self-perception if you’re feeling lost and unsure of where to begin. That’s why it’s important that you establish healthy financial habits, starting with improving your credit health.
My personal story of learning about credit
I remember getting started with credit as a young 20-something and not knowing what was fact from fiction.
You see, I had this friend who traveled all over the world. One day I asked him how on earth he afforded all of this travel and he told me all about credit card points.
“You mean you use credit cards, rack up the points and then exchange those points for flights?” I asked.
He nodded his head. And then he suggested I should try it.
Now, at this point, I was a credit novice.
The good news was I didn’t have any credit card debt. My parents had warned me about the slippery slope of debt. In fact, the only credit I had at that time was attached to them because of a credit card they co-signed and monitored.
The bad news was I was terrified of using credit cards because I never wanted to get into debt. I didn’t want to become one of those horror stories I’d started reading about while I was learning about personal finance.
I fought him, saying there’s no way I’m going to manage multiple credit cards because I don’t want to get into trouble.
At that moment, my friend broke down how this world worked. He explained that credit is just a tool you can learn how to use. There’s no reason to be afraid of it if you know how it works.
And that’s when I proceeded to get my first credit card that was just in my name. Since then, I’ve built my credit up to a 783 score and have been able to book free flights for years thanks to my credit card perks.
I also have peace of mind knowing that if I ever have to borrow money, that I’m an excellent candidate.
Where can you learn how to improve your credit health?
I was lucky enough to be friends with someone who taught me all about credit, but I would venture to say most people aren’t that fortunate.
The good news is there are now products available that can empower you to take control of your credit and help you understand these concepts.
One of my new favorites is CreditCompass by TransUnion. I’ve been recommending it to friends, family and social media followers since I learned about it.
Here’s why CreditCompass is so cool:
- You put your goal score into CreditCompass. For example, let’s say you want a 750 credit score. You would put that into CreditCompass.
- CreditCompass then provides clear recommendations to help you reach your goal score that are based on your credit information and the experiences of millions of Americans who successfully improved their score in similar situations, so it’s a unique plan that fits your specific financial journey best.
- It tells you which actions will have a high, medium, or low impact on your credit score.
- The clear and actionable steps recommended with the product help take the guesswork out of building your credit health, so you no longer need to rely on generic credit advice. It’s very easy to use and everything is spelled out in plain English.
CreditCompass gets rid of all the confusion surrounding credit by giving you easy to understand suggestions. It’s powered by VantageScore 3.0 which is a widely used model used by various financial institutions to determine someone’s credit worthiness, so you know it’s legitimate.
How I would have used CreditCompass when I was learning about credit
In order to have even qualified for travel credit cards I needed good credit. I would have used CreditCompass to set my goal score at 700 and then let it show me the easiest way to get there.
This probably would have been way easier than what I did, which was basically take my friend’s advice and then learn by trial and error. Not exactly the most trustworthy way of figuring it out.
Now, if I were in a position where I was in a debt repayment journey, I would use CreditCompass to help guide me. There’s often a debate in the personal finance community about the best method to build credit health. Rather than guessing or theorizing I would have just plugged in my goal score into CreditCompass and let it tell me which actions would make the most impact in improving my credit health. The product really helps put the power to improve your credit health, and your life overall, back into your hands.
How do you get CreditCompass?
It’s easy! CreditCompass comes with a TransUnion Credit Monitoring subscription. This is a product I use myself to keep an eye on things and I highly recommend it.
Follow these simple steps to get started:
- Sign up for TransUnion Credit Monitoring here.
- Once you have an account and have verified your identity, TransUnion Credit Monitoring will give you an overall picture of your credit health.
- On the right-hand side of the page you’ll see CreditCompass.