From bad credit to credit consulting CEO – Tierra Bonds is on a mission to help others overcome their own credit battles while highlighting racial disparities in the credit system along the way. In honor of Financial Literacy Month, Bonds sat down with KIRO 7 to share her knowledge on all things credit, from construction to maintenance to rebuilding.
Applying for a credit card, buying a house, starting a business, taking out a loan – all are big life moves that require credit to complete.
At its most basic, credit lets you get the things you need now (like that house or that loan), based on your promise to pay it back later; and your credit score predicts how likely you are to keep that promise.
But that three-digit number can have a big impact on your life and your financial future.
“People realize their credit is in a bad state once they really, really need it,” said Bonds, credit specialist and CEO of Take Charge Credit Consulting.
Bonds were not always in line with his credit. In fact, it was her long and hard battle with bad credit that brought her to where she is today.
“I grew up not knowing much about credit,” Bonds said. “I knew enough I was scared of it, it was something my parents said just to stay away, for no reason, no idea why, and so I immediately got bad credit.”
Bonds explained how she gave away a towed car. The charge was sent to collections, which was later reflected in his credit report.
“Since I didn’t know much, I kind of ignored it, went on with my life, and then it just kept getting worse.”
Later, her bad credit came back to haunt her and ultimately prevented her from being approved to buy a house.
“I remember being there and being afraid to look at my credit rating,” Bonds said. “It’s a very scary feeling, for me it was really embarrassing.”
This was his motivation to study credit and learn its importance.
“I knew if I was going through that a lot of other people in my network were, so friends and family. So I eventually started a business because of my personal experience with bad credit,” Bonds explained.
Today, she is a Certified Credit Consultant and CEO of Take Charge Credit Consulting. His company uses the Fair Credit Reporting Act to challenge negative items in his clients’ accounts. She also helps her clients build and rebuild their credit.
Recently, Bonds has made it her mission to highlight racial disparities in the credit system. She reached out to a Seattle-area mortgage lender to try to put a figure on how much people with lower credit scores will pay over time, based on the average interest rates they’re paying on their mortgage.
“I’ve been doing this for over four years, but getting these actual numbers has been very eye-opening and heartbreaking,” Bonds said.
According to a report on credit scores by race, compiled by the Federal Reserve in 2010, white and Asian Americans had the highest average credit scores, while black and Hispanic Americans had the lowest average scores (see graph below).
Black Americans had an average credit score of 677, while white Americans had an average credit score of 734.
According to FICO, anything above 670 is in the “good” range, but better credit scores impact the interest rates a lender will offer.
Based on a $625,000 home in Seattle’s 98108 area code, Bonds found that the average interest rate given to an individual with a credit score of 734 (the average white credit score) was 3.5% – while the average interest rate given to an individual with a credit score of 677 (the average black credit score) was 4.125%.
This means that the person with the lowest credit score would pay an additional $2,877.61 per year and $76,107.60 over the life of the loan.
“It’s not a ‘you’ thing, it’s a product of the systems we live and operate in,” Bonds said.
While Federal Reserve data is more than a decade old, these exact average credit scores were also reported in the 2019 FICO score data, calculated by payment processing firm Shift Processing.
Credit score disparities by race are also reflected in a 2021 Credit Institute survey. However, Asian Americans are not represented in this data.
These statistics were backed up by a 2021 Credit Sesame survey of 5,000 Americans which found that black and Hispanic Americans are hit harder by the credit system.
“(The) missing piece is knowing the importance of why you need credit, that part is completely missing in the black community,” Bonds said. “If we don’t have the privilege of our parents teaching us that, of our parents buying a house, then it’s really hard for us to understand the importance of it; and that was my experience, my parents never bought a house, my grandparents never bought a house.
“It will definitely take all of us together to narrow these credit gaps which in turn narrow the wealth gaps,” Bonds said.
Bonds believes it starts with general credit education — including a basic knowledge of what credit is, how to build it, and what goes into each individual score.
“The system may not have been created for us, but if we do what we have to do…we too can use it to our advantage,” Bonds said. It starts with establishing credit.
This can be done through installment accounts (like a car loan, personal loan, or mortgage) and revolving accounts (like credit cards and other types of lines of credit).
If you have credit, you can apply for a beginner’s credit card.
If you don’t have credit, you can apply for a secured credit card.
You can also become an authorized user on a family member or friend’s credit card, allowing you to piggyback on their good credit.
You can also create credit without revolving accounts or installment accounts, by signing up for credit creation tools through financial institutions that allow you to create credit to pay your bills on time, such as Experian Boost.
Keep in mind that for FICO credit scores, you need an account that’s at least six months old and has been active for the past six months.
Next, Bonds thinks understanding your credit score is crucial.
“Knowing what counts in those triple numbers and playing the game is what we need to do to have good credit,” Bonds said.
FICO credit scores are determined by five factors.
- Payment history: 35% >> Making payments on time will help your score. Conversely, missing payments, having an account sent to collections or filing for bankruptcy can hurt him.
- Amount due: 30% >> This is your credit usage. It includes how many accounts have balances, how much you owe, and how much of your credit limit you’re using.
- Length of credit history: 15% >> This is the average age of all your credit cards, from oldest to newest accounts.
- Credit mix in use: 10% >> This includes the types of accounts you use (installment accounts and revolving accounts). Having a good history with both types can usually help your score.
- New credit: 10% >> These are all recent credit card applications or newly opened accounts.
Once you understand how each of these five things impact your credit score, Bonds said you can identify areas that need work and find ways to fix them or give your credit score a boost. pointing.
She advises making at least the minimum credit card payment each month, keeping your balance low, not letting collections affect your credit report (paying your debts on time), and keeping your accounts open – as long as they don’t cost you extra money.
Changing your credit score takes time and effort, but taking small steps can go a long way for your financial future.
“If you’re in a position with bad credit, it’s not your fault, the blame is not on you. Just get to the point of knowing you need help, then take charge and go from forward, and release that blame and embarrassment that we usually have on ourselves with bad credit,” Bonds said.
Bonds recently launched a program for individuals and businesses to sponsor a family or community member who needs credit help but cannot afford it.
If you would like to become a sponsor of a credit program or request to be sponsored, you can do so on the Take Charge Credit Consulting website.
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