From bad credit to credit consulting CEO — Tierra Bonds has made it her mission to help others overcome their own battles with credit while highlighting racial disparities in the credit system along the way. In recognition of Financial Literacy Month, Bonds sat down with KIRO 7 to share her knowledge on all things credit, from building, to maintaining to rebuilding it.
Applying for a credit card, buying a house, starting a business, taking out a loan — all are big life moves that require credit to make them happen.
At a basic level, credit allows you to get the things you need now (like that house or loan), based on your promise to pay it back later; and your credit score predicts just how likely you are to make good on that promise.
But that three-digit number can take a big toll on your life and your financial future.
“People realize that their credit is in a negative state once they really, really need it,” said Bonds, credit specialist and CEO of Take Charge Credit Consulting.
Bonds wasn’t always in tune with her credit. In fact, it was her own long, hard battle with bad credit that led her to where she is today.
“I grew up not knowing much about credit,” Bonds said. “I knew enough that I was scared of it, it was something my parents said just to kind of stay away from, no reasoning for it, no information on why, and so I immediately had bad credit.”
Bonds explained how she gave away a car that was towed. The charge was sent to collections, which was then reflected in her credit report.
“Since I didn’t know much, I kind of just ignored it, moved on with my life, and then it continued to get worse.”
Down the road, her bad credit came back to haunt and ultimately prevented her from being approved to buy a home.
“I remember being there and dreading to look at my credit score,” said Bonds. “It’s a very scary feeling, for me it was really embarrassing.”
That was her motivation to study credit and learn the importance of it.
“I knew that if I was going through it, many other people in my network were, so friends and family. So I eventually started a business because of my personal experience with bad credit,” explained Bonds.
Today, she is a certified credit consultant and CEO of Take Charge Credit Consulting. Her business uses the Fair Credit Reporting Act to dispute negative items that are on her 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 number on the amount people with lower credit scores will pay over time, based on the average interest rates they pay on their mortgage.
“I’ve been doing this for over four years, but getting these actual numbers was very eye-opening and heartbreaking,” said Bonds.
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 graphic below).
Black Americans had an average credit score of 677, while white Americans had an average credit score of 734.
According to FICO, anything over 670 is in the “good” range, but better credit scores impact the interest rates that a lender will offer.
Based on a $625,000 home in the Seattle area code 98108, Bonds found the average interest rate given to an individual with a credit score of 734 (the average white credit score) was 3.5% — whereas the average interest rate given to an individual with a credit score of 677 (the average Black credit score) was 4.125%.
That means the person with the lower 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 that we live and operate in,” Bonds said.
While the Federal Reserve data is over a decade old, those exact average credit scores were also reported in 2019 FICO Score data, calculated by the payment processing company Shift Processing.
The disparities in credit scores by race are also reflected in a 2021 survey by the Credit Institute. However, Asian Americans are not represented in that data.
Those statistics were further backed by a 2021 Credit Sesame survey of 5,000 Americans which found Black and Hispanic Americans are being 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,” said Bonds. “If we don’t have the privilege of our parents teaching us this, of our parents buying a home, then it makes it really challenging for us to understand the importance of it; and that was my experience of it, my parents never bought a home, my grandparents never bought a home.”
“It will definitely take all of us together to reduce those credit gaps that, in turn, reduce the wealth gaps,” said Bonds.
Bonds believes that starts with widespread credit education — including a basic knowledge of what credit is, how to build it and what goes into each individual score.
“The system maybe wasn’t created for us, but if we do what we need to do … we too can use it to our advantage,” said Bonds. That 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 credit lines).
If you have some credit, you can apply for a beginner credit card.
If you have no 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, which allows you to piggyback on their good credit.
You can also build credit without revolving accounts or installment accounts, by signing up for credit-building tools through financial institutions that allow you to build credit for paying your bills on time, like Experian Boost.
Keep in mind, for FICO credit scores you need an account that is at least six months old and has been active in the past six months.
Next, Bonds believes it is crucial to have an understanding of your credit score.
“Knowing what accounts into those three digits 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 on-time payments will help your score. Adversely, missing payments, having an account sent to collections or filing for bankruptcy can hurt it.
- Amount owed: 30% >> This is your credit usage. It includes how many accounts have balances, how much you owe and the portion of your credit limit that you’re using.
- Length of credit history: 15% >> This is the average age of all of your credit cards, from your oldest accounts to your newest.
- Mix of credit in use: 10% >> This is comprised of the types of accounts you have in use (installment accounts and revolving accounts). Having a good history with both types can typically help your score.
- New credit: 10% >> This is any recent credit card applications or newly opened accounts.
Once you understand how each of those five things is impacting your credit score, Bonds said you can pinpoint the areas that need work and figure out ways to fix them, or to give your score a boost.
She advises making at least the minimum credit card payment every month, keeping your balance low, not letting collections hit your credit report (by paying your debts on time), and keeping your accounts open — as long as they are not costing you extra money.
Changing your credit score takes time and effort, but taking small steps can go a long way in 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, and then taking charge and going forward, and releasing that blame and embarrassment that we typically have on ourselves with bad credit,” said Bonds.
Bonds recently started a program where individuals and businesses can sponsor a family or community member who needs help with their credit but can’t afford it.
If you are interested in becoming a credit program sponsor, or applying to be sponsored, you can do so on the Take Charge Credit Consulting website.
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