Didn't know April is Financial Literacy Month? Well, now you do. And what better excuse to get your finances in check or figure out how you'll add to your already lit bank accounts? Let's get into some knowledge about credit. It's an issue we all face as we look for ways to reach financial freedom and the best road to where the money resides. Sadly, the stats reflect harsh realities for many of us. Fifty-four percent of Black adults report having no credit or a poor to fair credit score (below 640).
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Carmen Perez, Varo Bank's personal finance advocate and creator of MakeRealCents.com, a financial fitness platform, shares the good, bad and ugly on credit. Perez, an award-winning professional who's worked for Citi and Morgan Stanley, successfully paid off $57,000 of her own debt in less than three years.
"My finances were a hot mess up until I was able to commit to a plan," she shares. After facing a lawsuit from a private lender, she had to use her last bits of savings to hire a lawyer. She readjusted her budget, completely cut out luxuries like eating out and investing in cable, and reinvested her time into a photography side hustle to bring in more cash. She also kept a close eye on her finances and savings via the cash envelop system, and by the end of 2018, she was debt-free.
It's always good to know where you are before creating a plan to get to where you want to be. So, let's get into some credit 101:
Your Credit Score: The Basics
A credit score, also referred to as your FICO score, is a number that lets lenders know how much of a risk it would be to lend you money. The score ranges from 300 (the lowest) to 850 (the highest). "It is a benchmark that lenders use to gauge how likely a person is to pay back what they owe based on past data. The more you pay things back and on time, the better your credit can be, which can help you borrow money at a lower rate for things you may need," Perez says.
There are three major credit reporting bureaus, TransUnion, Equifax and Experian, and each uses different reporting methods, thus you could have up to three different scores.
"The misconception is that we have one credit score, which is inaccurate. We have multiple, and it depends on what we're applying or aiming for," Perez says. "Your bank, for example, could be showing you a FICO score that might be conducive to opening a credit card, but your score might be different when applying for financing for something else."
Also, various things can impact your credit score, from late bill payments or rental debts to outstanding medical bills and tax liens. On the positive side, a long history of maintaining accounts in good standing, or taking on debt that you're able to manage and pay back consistently over time, are all actions that can contribute to a great credit score.
You can access your credit scores for free via AnnualCreditReport.com, and each report will have specifics on the types of accounts you have on record (such as credit card, mortgage, and student or car loans), the date those accounts were opened, information on your credit limits or loan amounts, as well as details about your payment history. Credit reports also have history on where you've lived and sometimes where you've worked. You'll want to make sure all information is up to date and accurate, especially since some information could be from fraudulent activity, a reporting misake, or an old debt of more than several years that should have dropped off.
For more information on your credit reports, look into resources offered by the credit bureaus, including apps that offer weekly updates on your credit score, credit report information, and credit products available to you. Other easy-to-use and super-helpful websites on understanding your reports are CreditKarma.com and USA.gov.
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Your Credit Score: The Good
The benefits of having a "good" credit score, which is one that falls generally at a 700 or above, is access to more housing options, more confidence when applying for a loan, and lower interest rates when you get approved. "Good credit allows you to secure better housing and, in some cases, will enable you to bypass having to put a deposit down if you rent," Perez adds. "If you plan on owning, good credit can help you secure a mortgage with better financing terms for you in the long-term. The lower your interest rate, the less you'll pay in interest over time."
"You'll feel less worried about getting denied, which can help you focus more on the things that matter, like negotiating a good interest rate."
But what about if you have no credit at all (i.e. no active accounts being reported to the credit bureaus or your credit history is so limited that there's no score)? Perez recommends getting a secured credit card, one that requires a deposit but offers other great benefits for people who haven't built credit.
"Get one at bank or financial institution that you're looking to have a long-term relationship with---one that offers access to other products. You might put up $500, for example, to open the account, and it will give you access to other products later that you might find beneficial such as home and auto loans."
She also urges women to put some serious thought and research into making decisions about what cards might be best for them. Looking to resources like Nerd Wallet or reading up on your current bank's credit card options (along with the fine print) are your best bet. Be sure to get details on annual fees, card closure policies, and payment protocols.
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Your Credit: The Bad
In some cases, with a credit score that is below 640, a lender sees you as a higher risk for default or nonpayment of a loan. "If you haven't been good at paying back the money you've already borrowed, lenders will be more hesitant to lend you money," Perez says. "Since they are lending you the money, your loan terms, whether it be a mortgage, car loan, or credit card, will be more favorable for the lender than they will be for you. And since the lender is taking on all the risk, their reward is being able to charge you with a higher interest rate. Interest over time can add up and take away money that could be going toward your future self, like investing for retirement."
Though cash is king, when it comes to buying a home or even renting an apartment, you may need a cosigner to vouch for a loan. "Getting someone else to cosign on anything can be pretty tricky, especially when you already have bad credit," she continues. "You may also be subject to paying high deposits, which can deplete you of cash that could be going toward things like your savings or retirement."
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Your Credit Score: The Ugly
In Perez's case, she was sued for an outstanding debt, and this is a common practice for some lenders as well as medical service providers and property management companies. Accounts that have reached collections stages and wage garnishments can not only deplete your pockets, but they can indeed negatively impact your credit score. A bad credit score can even affect your employment opportunities. "Sometimes employers will run a credit check on you before giving you the job," she says. "If your credit isn't in a good place, they may not extend the offer."
But you can take bad credit and turn your situation around. Perez recommends looking at all your credit reports and disputing anything that might be out of date or inaccurate. Then address the open accounts with balances that are past due. "Get on the phone with your lender. Explain your situation. See if they have a hardship program, and get the information on what that actually looks like. Get those details up front first, and then go from there." Perez also suggests freezing your credit card and pausing on use versus closing them, something that could negatively impact your credit. If possible, remain in communication with companies or lenders you owe to negotiate a plan for resolving your debt. "If you get the no the first time, continue to call to see if you can get yourself on a payment plan. That's better than [the lender] hitting up your credit because you're not making payments."
There are also credit-card debt relief options offered with the understanding that many are facing pandemic-related hardships, and community resources to get help in building budgets or exploring other debt-relief options.
Perez is also a big advocate of finding a way to earn more income via a side hustle and paying down at a pace that takes into account your current lifestyle and necessities. "Make sure you're prioritizing your bills. If you're in a hole and trying to make it out, it's time to put a budget in place and figure out where your money is going."
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'Power Book II: Ghost' Star LaToya Tonodeo Talks Breakout Role And Shooting Her Shot At 50 Cent For An Audition
Actress LaToya Tonodeo demonstrated the power of speaking up as she recently recalled how she secured her breakout role in Starz's Power Book II: Ghost.
The hit show, a spinoff of the original series Power, follows the journey of college student Tariq St. Patrick (Michael Rainey Jr.) as he tries to escape his father's tainted image while running a drug operation.
In Power Book II: Ghost, Tonodeo portrays the role of Diana Tejada, the daughter of former kingpin Lorenzo Tejada and Monet Tejada, played by Mary J. Blige.
The series debuted in 2020 and became an instant hit as viewers were glued to the screen weekly due to its captivating storylines. Power Book II: Ghost is currently in its third season and has been renewed for a fourth.
Although Tonodeo has been a part of the entertainment industry for over a decade by appearing in various television shows and films, the 26-year-old's star shined a lot brighter after landing a role in Power Book II: Ghost.
In an IG Live with xoNecole, Tonodeo opened up about how her dream opportunity came to fruition and the rumor that she boldly asked Power's executive producer, Curtis "50 Cent" Jackson, to participate in one of his projects.
LaToya On Previously Working With 50 Cent
In last month's discussion, Tonodeo revealed that before landing Power Book II: Ghost, she was already working alongside Jackson for his Sony/Crackle series The Oath.
In the show, the actress played the character Tara Byrd. Tonodeo shared that as the red carpet premiere for the first season of The Oath occurred in 2018, she missed her opportunity to connect with Jackson because she was working on another project. But as fate would have it, The Oath was renewed for a second season.
In 2019, as Tonodeo reprised her role in the show and attended the red carpet premiere for the second season, she briefly chatted with Jackson, who at the time acquired the rights to the BMF story.
"Well, what's crazy [is] I was already on a 50 Cent show. So at that premiere, it's called The Oath. It was the season two premiere of The Oath on Sony/ Crackle, and he was there," she said. "Season one, there was a premiere, and 50 Cent attended. I wasn't there because I was doing The Fosters, and I'm like, 'man.' When I got to go to the season two premiere, I saw him, and it was around the time when he got the rights for the BMF story."
The Bold Move That Helped 'Powerbook' Star LaToya Tonodeo Land the Role
LaToya On Asking 50 Cent To Audition For a Role And Landing 'Power Book II: Ghost'
Tonodeo explained that during her conversation with Jackson, she congratulated the mogul on obtaining the rights to the BMF story and expressed her interest in wanting to be a part of the project.
Tonodeo added that although she is unclear if Jackson remembered their encounter or "if it meant anything," when a Power Book II: Ghost role came along, she auditioned and landed the job.
"I was like, 'Oh my God, like I want to be a part of it.' But I don't know why I did it. I just walked over there, and I was like, 'Hey, congratulations on getting the rights. I would love to audition.' I don't know why I did that. I don't even know if it meant anything or if he remembers or not. I do know that I did my thing in the audition, so yeah, we are here now," she stated.
Either way, with that story, Tonodeo has displayed the perfect example of "closed mouths don't get fed."
Power Book II: Ghost is now streaming on Starz.
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Feature image by Jamie McCarthy/Getty Images for STARZ