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Credit Cards 101: How to build your credit score ASAP and leverage your money

credit card credit score
credit card credit score

what’s up you guys it’s Graham here so this is probably one of the most important videos I’ve made so far and it’s how to get a good credit score now. I have a bit of a confession to make I’m a bit of a nerd when it comes to credit cards so I’m going to be sharing with you why this is so important why you need a credit card right now and how this can make you money so I used to believe the credit was stupid I thought that you should only buy something if you could actually afford it and I thought that people who needed credit cards to buy something were totally irresponsible

I mean that’s just how I was raised so when I came time that I wanted to buy real estate even though I had a six-figure incomesix figures saved up cash in the bank and I’ve never needed a loan before in my life because I’d pay for everything incash that said banks would love me

for that base disagreed and no one wanted to give me a loan because I had zero credit history and I’ve never had a credit card or any sort of loan of my name before ever that is a mistake by the way that probably cost me over five hundred thousand dollars in lost real estate because they couldn’t leverage my moneywhen I was buying properties in 2011 and 2012 so that’s what I decided to make a change get a credit card at 21 years old and then spend the next five years building my credit score up to its 780 I now have over a hundred thousand dollars in available credit I got the lowest rate possible on the loan I got last year on a home I purchased and I will continue to get the best rates possible on every single loan I get because I have a good credit score

so to start your credit score shows Bank how responsible you are paying back money that you owe your credit score ranges from about 300 to 850 with the best rates being given to credit scores above 740 it’s kind of like getting a grade in school except your credit score shows banks how likely you are to default on the loan that they give you so the lower thescore the more likely you are to default on a loan that they give you which means that they have to charge you a higher interest rate to make up for that or worse case they just say nah and they want nothing to do with you because if you’re like me you didn’t have any credit score to begin with likewise if you have a high credit score you’re less likelyto default on the loan and you’re a safer bet for the bank and they will charge you less interest because of that saving you money so if you want to invest in real estate get business loans your money grow your wealth you’re going to need a good credit score it’s not so much about getting in debt by the way it’s just showing banks that you’reresponsible with the debt that you’re given and can pay it off on time every single month as a Greek so they calculateyour credit score based off several factors now the first factor is how long you’ve had credit for it the longer you’ve had your credit the more history you have and the higher the score you’ll get that’s why it’s so important if you don’t have a credit card right now get a credit card because you’re able to start the history earlier than if you had waited another year or so the next is how much credit you actually use compared to how much credit you have available toyou this is called the utilization rate and generally speaking they like to see a low utilization rate which means you only use a small percentage of the total amount of credit that you have available to you the next one is obvious its on-time payments you want to make sure that you pay off your credit card on time every single month and that will helpyou score the next one is a diversity and mix of credit cards and loans that you have they generally like to see differenttypes of credit cards and different types of loans which show to the bank that you’re responsible not only paying off a credit card but also an auto loan a lease or a mortgage so by showing this generally you’ll get a higher score so the last one is total credit inquiries which means that every time you go and apply for new credit card or loan it’s marked on your credit report as an inquiry banks don’t like to see a lot of inquiries in a short amount of time because get some nervous that you’re out there seeking as much money and credit as possible and you’re seeing is a bit of a risk but I wouldn’t worry about this too much because credit inquiries only lower your score temporarily for about six monthsso I wouldn’t be too concerned about this and for everyone starting out it doesn’t really matter anyway because you really don’t have any credit to work off anyway so if you’re just starting out right now and you have the zero credit the first thing that you need to do is go to a local bank and get what’s called a secured credit card this means that you putdown a few hundred dollars and in return they give you a credit card with your deposit that you given them ascollateral against the credit card which means if you don’t pay off your credit card they hold the deposit from you thatthey can pay off the credit card with generally I recommend a 300 to $500 limit which means that you put down 300to $500 in in return they give you a three to five hundred dollar credit card this is the best and easiest way for anybank to accept you as a first credit card now one thing I want to make very clear is do not spend money you wouldordinarily spend just because you have a credit card treat the credit card exactly as you would cash by putting normal expenses on as little meals guest whatever it is keep minimal expenses of the credit card and make sure you paid off infull every single month there’s a myth out there that says you should pay interest and carry a bit of a balance toincrease your credit score which is totally false you don’t need to pay any interest or any money to try to increase your credit score that’s false just pay it off and pull every single month and use it responsibly I’d recommend doing this for about four to six months and that should give you enough time to build up some credit history so after this you’ll have established a bit of printed history and you can go and apply for an unsecured credit card I recommend the capital one card or a bank of American cash rewards card I have both of these and in fact the Capital One was the first real unsecured card I got I think I’ve got a $500 limit at the time but it really doesn’t matter what limit you get just get something and then again do the same thing but minimal expenses on it and paid off in full every single month it’s very important not to get carried away by having a limit and spending more money than you would otherwise that defeats the purpose of having credit you don’t really need to do that just keep it minimal and make sure you’ve paid off in full every single month just remember all of this is just showing the banks that you’re able to pay off your debt ontime a degree so after about a year of building your credit and hang it off on time in full every single month it’s time that you can apply for a charge card and this is a card where you don’t carry a balance at all but you paid off in full every single month this is great because charge cards don’t show a limit on your credit report which means that if youspend $5,000 on it it doesn’t impact your utilization rate because it doesn’t show a top end limit now my favorite of the charge cards is American Express I personally have the gold card which offers amazing rewards and points I’ll go into more detail in a future video but essentially I’ve been able to travel to and from Canada to visit family we’re totally free just paying with points which is pretty cool so now from here you can just continue to add to your mix of creditcards pay it off on time and continue to get some credit history behind you eventually you can start getting more advanced and start signing up for credit card reward bonuses which essentially you sign up for a credit card to get a whole bunch of points for signing up for it and you can use that for free airfare trips hotels rental cards even thoughthese are more advanced techniques you can totally do this and take advantage of them when you have a good creditscore if you’re interested in learning more about this I recommend googling credit card churning and reading moreabout it because it’s pretty cool and I definitely take advantage of as many credit card offers as I can you can now also begin applying different types of debt to your mix such as getting a mortgage getting a car loan a car lease all of these things help diversify your credit report and help improve your score so now these are a few credit card myths that I want to debunk you don’t need to pay interest to increase your credit score you also don’t need to carry a balance to each month to help improve your credit score just pay off in full every single month and that will be sufficient the next is that it does not hurt to check your own credit score I personally checked my score every single month and I use Credit Karma I like to check in just make sure everything is there and everything is as it should be the next one is that it’s also false that having too many credit cards will decrease your score in fact the opposite is true the more creditcard you have the more credit you have available to you which lowers your utilization rate so as an example let’s say that you spent three thousand dollars and you have ten thousand dollars of available credit to you your utilization rate is 30% now instead let’s imagine you have a hundred thousand dollars but you still spend three thousand dollars now your utilization rate is three percent that is a huge difference between three percent and 30 percent so I recommendhaving as much credit available to you as possible because that lowers your utilization rate and that helps increaseyour score of course I just have to disclose spend responsibly don’t use a hundred thousand dollars because you have itavailable still keep your spending to a minimum but having it available will help your score now this one I want to make very clear to you do not close a credit card especially if it’s an old account now when you close a credit card it also closes off all that credit history and credit history is a huge component of what makes up a high credit score themore history you have the higher the credit score so you always want to keep your credit cards open even if you don’t use them because that keeps your credit history intact if you have to pay an annual fee for the credit card still keep it open but see if they can downgrade you to a free credit card instead the last piece that I want to talk about is the mindset that debt is bad because this is false so there could be good debt like a mortgage a car loan or business loan where your money makes you more money being invested than you’re paying off and alone or there could be bad debt like the five thousand dollar Hawaiian vacation that you couldn’t really afford but since you put it on a credit card youcan pay it off in low monthly payments over the next ten years that’s bad debt is a very very very clear distinction between having good debt and having bad debt debt is a great way to leverage your money and have it work for you earning more money than you’re paying in interest so for instance on a rental property if you’re paying 4% interest but the property is making you 10% essentially you can leverage your money and property difference between four and ten and you prop it six percent now keep in mind that a credit card is something to use responsibly now that doesn’tmean you should go and buy that really expensive Hawaiian vacation or that really cool flat-screen TV just because you have the credit available to pay for it use a credit card the exact same way as you would if you had cash or a debit card and treated responsibly put your normal expenses on a credit card instead of paying with cash or a debit card andpaid off in full every single month now if you forget to make a payments on time and you get a late payment keep in mind this stays in your credit report for seven years so you really want to treat this responsibly and make sure you pay it off and fold every single month I recommend you set it up just to be paid off automatically every single month youdon’t even have to think about it but just make sure it gets done and that’s it I mean it’s really that simple put a small amount on your credit card every single month paid off the time and get more credit cards and do the same thing theyoften time in full that’s it it’s really simple do this for a few years adding different credit cards to the mix addingdifferent loans of the mix and you’re going to have an amazing credit score to get pretty much whatever loan you wantlenders will love you people will be throwing money at you to borrow and you’ll be able to take full advantage of allthe great credit card reward travel perks that you can imagine look up credit card churning because that’s what I doand it’s so much fun to get into it as always you guys thank you so much for watching this this has been a really funvideo for me to make because I’m so passionate about credit cards I was in a terrible position when I was younger that it didn’t have a credit card and I up massively so if someone else is in a similar position and doesn’t have a credit card yet I really hope that this would have an impact and you get a credit card now and you just paid off you’d beresponsible with it 20 years from now you’re going to be in a great position with a whole bunch of credit historybehind you and you will definitely be thankful that you did that so as always thank you again for watching if youhaven’t already click Subscribe you know what to do just click that little button subscribe I’ll wait I’ll wait for you todo that do it alright I’m going to trust you I’m going to trust you that you did it feel free to also add me on Instagramand on snapchat I post there pretty much daily if you want to be a part of it feel free to add me there and thank youagain for watching and until next time


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