Money$marts Podcast – Credit with Anastasia Polda
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Matt: Welcome to Bellingham Technical College’s Money$marts Financial Wellness Podcast. I’m your host, Matt Benoit and each episode I’ll talk to BTC students, staff, community professionals, and financial experts about financial literacy and wellness in order to help listeners navigate resources in the community and empower themselves financially. I’m here with Anastasia Polda, the Financial Stability Coordinator from the Opportunity Council, how are you doing?
Anastasia: I’m well. How are you?
Matt: I’m doing great! Now, today we are going to talk a little bit about credit. First off, credit is the ability to obtain goods or services before payment based on the trust that payment will be made in the future. Building and establishing good credit can help lead you towards financial goals like buying a house, buying a car, or making other large purchases for your future. So first off Anastasia, how does someone establish credit?
Anastasia: Sure, so everybody, if you’re an adult you have a credit report. Even if you’ve never had a credit card, never had a loan, never had anything you still have a credit report. The way you begin to sort of build that report is by taking out loans, by getting credit cards, by living in the world. There are some things on there that are not just financial related, things like civil judgements are going to appear on your credit report. Most of the time people start building credit – if you’re in school it’s going to be student loans probably, it might be a credit card that you were walking through the airport and somebody was like “fill out this” and you’re like “I should get a credit card, I’m an adult.” Something like that. Most of those are the ways people start building credit. It’s important to know, sometimes people think you can build credit with a, those prepaid cards, where you put money on the VISA card, that does not actually build credit. A lot of the things that you do in your daily life that feel like they should be on your credit report aren’t so like paying your rent – not on your credit report, paying your utility bills- you might do that on time every month, that’s not going to be on your credit report.
Matt: What are the kind of things that are going to build your credit score in a positive direction?
Anastasia: Okay, so I think the first thing to know, if we are thinking of what might be positive for your credit report, is you want to know what your credit report is in the first place because you can’t really know what’s going to be the most helpful if you don’t already know what’s on there.
Matt: Okay.
Anastasia: The reason I say that is because most of the time when people talk about building credit they talk about getting a credit card, getting a loan, or something like that – one of those things where you’re going out and seeking credit as a way to build your credit. But equally important is knowing what’s on your credit report, paying down your debt – if you owe debt, or letting debt fall off your credit report. Those are two equally good ways to sort of build your credit.
Matt: So how does bad credit just fall away? How does that work?
Anastasia: Sure, so let’s say for example you got in trouble with a credit card. Didn’t pay your debts and in the end it went to a collection agency and let’s say you paid it off. That’s going to be a bad mark on your credit for a while but after seven years anything that’s on your credit report from the last date of payment, seven years later it will fall off, for the most part. There are some exceptions. Some really important ones are student loans never fall off your credit report, but most consumer debt is going to fall off your credit report after seven years. That includes even if you haven’t paid that debt. So, if for example you owe the credit card still $1000 but the last time you made a payment was eight years ago. That debt is not going to appear on your credit report.
Matt: Okay.
Anastasia: However, you do still owe the debt but it doesn’t appear on your credit report.
Matt: Right. They will still attempt to collect that debt but it won’t be on the credit report.
Anastasia: Right. And it’s very important to know if a debt – somebody’s trying to collect a debt it’s very important to know if that debt has fallen off your credit report it’s called time barred and it basically means you still owe it technically but it’s not on your credit report and they can’t sue you for it because it’s been too long. So it’s very important to know that about your credit report and the only way to know that is to pull a credit report.
Matt: What are the ways people can see their credit report if they don’t know where to go to find it? 
Anastasia: We usually recommend annualcreditreport.com. Annualcreditreport.com is free, it will give you all three credit bureaus or you can choose to look at one at a time. So, what we typically recommend – if you’re interested in sort of resolving credit issues, and you’re looking at “I would like to know as I pay down debt or as things fall off I’d like to be able to monitor” because annual credit report you can only get once a year. But you might want to check every six months, right? If you go on annualcreditreport.com you can choose to take only one of your credit reports, because you have three, you can choose to take only one. Let’s say you take your Experian report now, in six months you can now pull one of the other two credit reports you didn’t pull in the first place. Because it’s one for each reporting agency. 
Matt: We talk about, obviously, not paying your debts or going to, at least temporarily, certainly sink your credit score so I guess, what are the things that are absolutely going to create bad credit? 
Anastasia: The ones I really strongly recommend is don’t go into debt against the federal government, or go into a bad debt situation.
Matt: And obviously, federal student loans are one way to do that.
Anastasia: Federal student loans can be a great way to build credit if you’re able to pay them back. I’m not saying don’t get student loans. But if you go into default on a student loan that really hurts your credit so you want to make sure if you’re getting notices from your student loan servicer, you want to not ignore that. Because the worst thing you can do for credit is put your head in the sand and try to ignore it. It’s really important to call them back to try to figure out what to do. Most of the federal student loan servicers are pretty good about working with people but once it’s in default, you’re kind of in a tough spot. Obviously, you want to pay your bills on time. One thing that I think people aren’t as aware of: one is diversity in your credit report. So you don’t just want to have student loans, you want to have some student loans and some revolving credit. So like a credit card. You also want to make sure that you-if you have a revolving credit card line that what you are doing is putting about more than about 30% of the balance, or sorry, 30% of your limit into your card. So you always want to keep your average card balance below 30% of the maximum on the card. A lot of people think “it doesn’t matter if I spend all the way to the limit or not.” Really, really hurts your credit score to spend more than 30%.
Matt: How can building credit help you work towards a financial goal?
Anastasia: It sort of depends upon what your financial goals are. To me the biggest advantage to building credit is that it helps protect you against emergencies. Everybody’s had an emergency. You can’t really predict them. And there are lots of ways you should be preparing for them and one of those ways is by saving, that’s very important. But credit can also be a way to handle an unexpected emergency that you do not necessarily have the savings to cover. So that’s one reason. If you want to do something like make a big purchase, like an auto loan or a home loan, at some point you’ll need credit. If you want to open a business you’re gonna need good credit. Those are all really important planning things. The other reason is sometimes people think “it doesn’t matter if I don’t have credit, I’m never going to use credit.” But people use it for things other than just banking. So landlords use it to check credit history. And they’re going to use it to decide whether or not you can live in a certain apartment. And some employers will also check your credit to make sure that you’re sort of going to be trustworthy. Particularly if you’re going to be handling sensitive information or money. Most bank jobs are probably going to check your credit so if you want to become a bank teller they’re going to check your credit. 
Matt: Okay. Do you personally have any, not necessarily anecdotes, but if you have any experiences with credit good or bad that you think, or just a good example of what to do or not to do?
Anastasia: Sure. I think that one thing people feel like “oh, I have bad credit or I’ve had all these loans and I can’t really pay them off. It’s hopeless. So there’s not really anything I can do.” And I think that the real magic of credit is that there is actually a lot you can do. Even if you can’t pay anything right now. So for example, maybe you can’t increase your income right now, you can’t pay more than you’re already paying to the debt that you owe. Okay, but you can still pull a credit report. That’s free. You can dispute your credit report. So, you can dispute things that you think aren’t accurate, you can wait until things fall off your credit report. As a personal anecdote, I had a lot of difficulty with responsibility and using my credit card when I was much younger. And I got in a bad situation, I figured out how to get out of it but then my credit was terrible. But, it’s been more than seven years, that all falls off and I get to kind of try again. So you don’t have to feel like, you know, there’s no hope and your credits going to be the worst forever. It’s really important to know what’s on that credit report so you can start making a plan. It’s not going to get better over night, it takes time. But there’s always something you can do with your credit report. 
Matt: Okay. Now are there any, you might have already mentioned this just briefly, but are there any things that will not fall off your credit report after seven years. Is there anything that’s just going to stick on there and you’re going to have to deal with it.
Anastasia: Yeah, certain types of bankruptcy, last for 10 years. The big one is student loans, doesn’t matter what happens with your student loans they’re going to be on your credit report until you pay them off. Nothing you can do about that. Tax leans are another one, not going away. I think those are the three big ones. So, there are some things that just stay there. But obviously if you’re making payments on things that are going to be there, that will also be reflected on the credit report.
Matt: Right. If that balance you owe is going down. That’s positive progress. Alright. Now, in addition to just talking about credit in general, you are involved with – you work for the Opportunity Council and you have a hand in the financial literacy classes that they offer there. So just in general, tell me about what those classes are and who can take them.
Anastasia: Sure. So we’ve got two main class offerings the first is called F.L.A.R.E. which stands for Financial Literacy and Renter’s Education. That’s a six week class, it’s offered once a week for six weeks, we offer it three to four times a year. That class covers budgeting, credit, debt, savings, but it also has two weeks devoted to renter’s education. So it covers landlord tenant law, how to talk to a landlord, how to try to get a landlord to rent to you – maybe if you had some barriers keeping you from getting into housing. That class, we alternate it. We will teach it in the afternoon and then we’ll teach it in the evening. When we teach it in the evening we usually have childcare. Both afternoon and evening F.L.A.R.E usually have food. So that’s a nice perk. It’s two hours. It’s usually on Tuesdays. It’s a good class, what you’ll do in that class is have homework where you’re tracking your spending for all six weeks and that can be extremely valuable. Because it’s very hard to come up with a realistic budget unless you kind of know where your money’s going right now. So that’s what we really focus on. We also spend a lot of time in that class and in both of our classes focusing on financial empowerment rather than just literacy. Because I think we all know it’s one thing to kind of know what you’re supposed to do and it’s quite another to actually do it. So we have that. And then we also have our On the Money classes and those are independent classes so they’re each two hours long and we usually offer them back to back. But we don’t always necessarily offer them back to back. And you’re not required to attend all four. And they focus on budgeting in a crisis, credit, debt and navigating financial services – which is sort of about how to deal with small loans, auto loans, zombie debt, some of those that are more dangerous financial products. 
Matt: Where can people register for this and is there any cost? 
Anastasia: Sure. Both classes are free. The On the Money classes you can register for just by giving me a call at the Opportunity Council line. Usually we also try to publish that on the WABC website.
Matt: What does that stand for?
Anastasia: That’s the Whatcom Asset Building Coalition and they have a very helpful website which is whatcomabc.org. Our F.L.A.R.E. classes. We usually put flyers around the community about one month before we’re planning a session and those will have registration instructions. You’ll have to fill out a little form or you can literally call me and I will fill out the form for you on the phone. We try to keep it pretty informal and we usually take registration right up until the day we start class.
Matt: Based on your experience teaching the F.L.A.R.E. classes, do you feel like credit is an often overlooked topic of financial literacy?
Anastasia: I think more people these days are understanding that they can check their credit. I think that that’s a thing people are interested in. One thing I’ve noticed more recently is that I’ve gotten a lot more people feeling like any debt is bad debt. Or feeling like it’s better to have no credit score than taking out a credit card. People have lost a lot of trust in a number of financial institutions. There’s been a lot of things in the news lately where you’re kind of like “do I want to give these guys money?” But the reality is your credit score is there. And for some people debt it not a great choice, some people are not able to manage debt and it’s just not going to be a productive tool for them but for some people debt can be a tool. It can be a tool to get your education, earn a better job. It can be a tool to bridge a month of crisis so you don’t lose your housing in that month when you know next month it’s going to be okay. So, I think that’s the biggest trend I’ve noticed with credit is that there’s sort of an increasing fear of credit. Of all the things that hurt financial stability fear is the biggest one. Just being afraid of looking. Being afraid of being thought to be a less good person or a less worthy person because you got in debt once when you were 22. So, I think those are kind of the big things. 
Matt: Yeah. Anastasia, is there anything else you’d like to add about the concept of credit especially in the Opportunity Council financial literacy classes that are offered.
Anastasia: I think the thing that I want to make sure people get out of any financial literacy class and what they know about credit is that there isn’t really one way to do financial literacy. There isn’t one piece of financial advice that is going to suit every person. The most important thing you can do is to know as much as you can about what’s going on with your finances which means understanding where you’re spending money, where your money’s going, knowing what’s a need for you vs. what’s a want for you,  and also understanding what’s your credit report, what’s your banking history look like. Knowing all of that, and then coming up with a plan based on that. A lot of times there’s a lot of information available on the internet about financial topics and people get really freaked out because they read the article and they’re like “oh my gosh I can’t pay off my debt in 12 months. There’s no point in trying at all.” And that’s really not the case. Every person’s got a different financial situation and every person has to learn how to make better financial decisions for themselves and that’s a really long process and it can be an intimidating process and I strongly recommend people get involved with the program here at BTC, get involved with F.L.A.R.E., get involved with Whatcom Dream, any of the, Love Inc., any of the financial literacy options that are available to you. You can learn a lot. And once you have that information you can make better choices that fit your particular situation. People sometimes, they hear advice and then they try it, they’re like “yeah I’m going to pay off all my debt in one year” and then it doesn’t work and then they think “Oh, I’ve failed.” And then they don’t try again.
Matt: So, financial literacy, it’s kind of, it’s a marathon not a sprint. 
Anastasia: Yeah. It’s a marathon not a sprint and not one size fits all.
Matt: There you go. Alright, I think that about does it here for this episode of the Money$marts podcast at BTC. I want to thank guest Anastasia Polda for being here from the Opportunity Council.  I think we’ve all learned a lot, I know I have. We’ll catch you next time on the next episode of Bellingham Technical College’s Money$marts Podcast.