Budget Credit Boost

Interactive Video

[A couple sitting on the couch, staring intently  at a piece of paper the woman is holding. The man is holding a tablet and an open laptop is on the table in front of them.]

Narrator:Did you ever think about how numbers and algorithms are used to rate how good we are with money?

[A meter showing a range of credit scores. As the arrow underneath slides across the meter, text is revealed at each stage: “poor 300-579”, “fair 580-669”, “good 580-669”, “very good 744-799”, and “excellent 800-850”.]

Narrator: Back in 1989, the first broad-based consumer credit scores were introduced, which were designed to take a comprehensive look at your financial situation.

[A timeline moves from present day backward to 1989. An image of a credit report appears above 1989 on the timeline and a magnifying glass moves over the image.]

Narrator: Lenders, property owners, and employers can use these scores as a basis for decision-making about applicants.

[Icons for a bank, a for rent sign, and a building under construction appear one at a time.]

Narrator: Before then, lenders relied on things like a prospective borrower’s reputation in the community or a visit to their home to determine if they were trustworthy enough to lend money or give them a job.

[A timeline moves back to the year 1960 where there is a silhouette of a person above the timeline.]

Narrator: So, credit scores can have a direct impact on your life’s choices like a job or housing.

[A woman reading a document has a concerned look on her face. A loan application appears with a rejected stamp across the front of it.]

Narrator: Even if you have an excellent credit score, and then you’re 30 days late on a single payment, it can knock about 100 points off your credit score. Such a negative mark on your credit report can stay there for up to 7.5 years!

[An animation shows missed payments decreasing a credit score from 800 to 700.]

Narrator: That’s where a budget can provide structure to help you avoid financial mistakes that can follow you for years.

[A couple sitting on the couch, staring intently  at a piece of paper the woman is holding. The man is holding a tablet and a laptop is on the table in front of them. A paycheck appears and a bomb labeled “debt” rolls in from off screen. The bomb then chases the paycheck off screen.]

Narrator: If you use a budget to map out your monthly income and expenses, you’ll know how much money to allocate for each expense, and when it needs to be paid.

[A budget table divided into three sections shows money earned, expenses, and expenses labeled “other.”]

Narrator: What factor do you think is the most significant in calculating your credit score? Select an option.

Answer option 1: total debt owned

Answer option 2: length of credit history

Answer option 3: payment history

Answer option 4: mix of credit types

Narrator: Actually, payment history carries the most weight on your credit score at a whopping 35 percent! 

[A pie chart showing a value of thirty five percent.]

Narrator: That means paying bills on time is critical. Many creditors report payments that are 30 or 60 days late. First and foremost, make sure your payments are on time.

[A person paying bills online using a QR code.]

Narrator: Next, consider using a budget to work towards a more stable financial situation. If you have debt, you can lay out your monthly budget to prioritize your expenses and regulate your spending.

[A table with 3 columns: Expenses (house, groceries, gas icons), debt (credit card and hospital icons), wants (a computer icon)]

Narrator: Lower debt and on-time payments will boost your credit score to enable the things you want to happen in your life.

[A pointer moving from the fair range of credit scores (580 to 669) to the good range of credit scores (580 to 669).]

Narrator: Lila's looking to get her finances in order and boost her credit score using a budget. What should be her plan of attack? Prioritize the actions she should take.

[Onscreen text]: 

Lila’s looking to get her finances in order and boost her credit score using a budget. What should be Lila’s plan of attack to boost her credit score?

Prioritize the actions in order by selecting a task from each drop-down.

Plan of Attack Answer Options:

• Pay her bills on time.
• Pay down her debt.
• Set up a budget.
• Set aside money for savings.

Narrator: It’s important to get a budget set up to map out payments, pay expenses on time, and then start working on lowering debt.

Answers:

1. Set up a budget.
2. Set aside money for savings.
3. Pay her bills on time.
4. Pay down her debt.

Narrator: Less debt equals more opportunities for savings. More savings can mean money for a future goal and overall peace of mind. And your credit score won’t restrict you from the things you want - that dream job, a great place to live, or a loan for something important.

[A man thinking. Three thought bubbles appear containing icons: a man at a desk, a car, and a house.]