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Financial impacts of the Covid-19 pandemic being felt at home

James Garvey, Self Financial co-founder and CEO joins Yahoo Finance Live to discuss the financial impact being felt from the pandemic and what we need to do to stay on top of our credit.

Video transcript

ALEXIS CHRISTOFOROUS: Welcome back. Approximately 16% of Americans have very poor credit or a FICO score of between 300 and 579, according to Experian's Consumer Credit Review. Of course, that makes it harder for them to get loans and to build wealth. And the financial impacts of this pandemic have caused yet another layer of financial stress for a lot of folks. Joining us now to talk about it is James Garvey, co-founder and CEO of Self Financial, whose mission is to make credit and savings accessible for everyone. James, welcome to the show. Let's begin with these credit reports. And why do so many Americans struggle with having a good credit report?

JAMES GARVEY: Well, part of the problem is in order to have a good credit score, you need to get access to credit. And in order to get access to credit, you need a credit score. And so for millions of Americans, people are stuck in that catch-22. What we've seen is the number of people that don't have a credit score is around, as you said, 16% of the population. The number of people that have a low credit score is even larger. And all in, we're looking at about 108 million American adults that either have a low credit score or no credit score.

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And as you can imagine, it's really, really tough. Whether you're trying to get a car loan or a credit card or insurance or pretty much anything, your credit score plays as this really big factor in your life. And because you can feel powerless sometimes because you have this three-digit score, but yet, it's so important in your life. Many Americans just feel like they can't take control, but they can. There are ways to do it.

KRISTIN MYERS: So let's talk about that. Because I think so many people talk about what a bad credit score is that we don't talk enough about what a good credit score actually is. So what is, at least, at minimum, that magic number that folks should really be striving for and trying to target? And if you are below that number, how can you get there? What is the way to improve that score and to boost that number?

JAMES GARVEY: Yeah, so the highest number is 850. And typically a good credit score is 670 and higher. The most important thing is payment history. Being able to pay your bills on time is such a critical component. It's about 35% of your credit score. And it's tough, you know? And even in my situation, I started Self because I had this credit card that was on AutoPay. And two months in my billing cycle, I realized that it wasn't on AutoPay. So a mistake like that can be on your credit report for the next seven years.

So, number one, you need to pay your bills on time. Payment history is so important. Number two-- and this is counterintuitive-- but it's about building some emergency savings, being able to put aside a little bit of extra money such that in an emergency, you can pay some of these other bills. And that's really, really important.

The third thing is there's a number of really interesting solutions that are now digitally available, whether it's Self or whether it's other companies, that can help you build credit. And it's really, really important. And so, the last piece is patience. It takes a while. One mistake can take a long time to roll off your credit report. And so it's so important to realize that it's not going to be instantaneous. It's going to take a long time to rebuild your credit score.

ALEXIS CHRISTOFOROUS: And what about keeping tabs on your credit report? I mean, I would imagine that there are errors there and that you need to be on top of it so that you can advocate for yourself. What's the best way for people to do that, and how often should you check your credit report?

JAMES GARVEY: Yeah, so you can get your free credit report from all three credit bureaus at annualcreditreport.com. This is a totally free service. There's no ads. It's a requirement that the credit bureaus give everybody the ability to get their free credit report once per year. And in that, you can see, are there people looking at your credit? Are they trying to apply for loans? Or are there mistakes? Millions of Americans have actual mistakes in their credit report. And those mistakes don't belong on there. And they can be remedied.

ALEXIS CHRISTOFOROUS: All right, we are going to leave it there. James Garvey, co-founder and CEO of Self-Financial, thanks for stopping by.