Why I Cut My Credit Cards Up & Learn The Basics Of Credit Scores


Daniel you're always saying not going to debt or us credit cards What's this video about then

Yes I know and I don't advocate using debt or credit ever if you can avoid it but I know some of you are absolutely not ready to give up your debt addiction This is to help you be a little bit smarter about how you are using your debt and building your credit score and the more educated you are about anything financially the better off you're going to be Primary reason for a credit score being around is to the credit companies can determine how risky an investment you are to them because they really want their money to come back not just dissipate into nothing the reason I say nothing is because these credit companies are giving you something that wasn't there before this money kinda just magically appears they let you spend it and then they still have the audacity to charge you twenty eight percent interest rate Your credit score affects you in two primary ways one it determines how much the lender will give you and then two what the interest rate is going to be High interest rates are slapped on poor investments because they want to get their money back as fast as possible before once again it disappears into the nothingness

Yes you are their investment or to better understand how credit scores work let's break down how they're calculated 35% is calculated on how well you pay your bills 30% is your debt to credit ratio 15% is the length of credit history 10% is diversity of credit and the last 10% is hard inquiries We're going to look at them individually so we get a better understanding of exactly what is expected of us 35% is your payment history this includes everything from your car loans to your regular utility bills just don't be delinquent on your bills and you're gonna be good there 30% debt to credit ratio this is pretty simple so if you only had one credit card and that's all the lines of credit that you had and it had $1,000 credit limit on it and you went out and spent $200 of it you would have a 20% credit to debt ratio

Pretty simple right this is one of the big ones so you want to keep your ratio as low as you can 15% length of credit history this is the average time of all your cards combined for how long they've all been open If you only have one card open and you open up another card it's going to drastically lower that length of credit history Your credit history does not count for cards that are completely closed or loans that are paid off so keep that in mind when you're closing out cards but also really do try to close your cards out In at 10% we have diversity of credit so loans credit cards, student loans, mortgages, car loans the more you have the "better off" you are

Once again it's their game it's not really there to help you The final 10% is hard inquiries so this is any time you actually go and make a request for a new credit card new loan getting that cell phone that you wanted so things like that are hard inquiries There's other ones when they check your credit and those aren't hard inquiries but you know it's all just the game Each hard enquire you can take off between two and five points off your credit score so be careful about how much credit you go asking for They can also see how many of these you've done and you can actually be denied credit for how many hard inquiries you've had over a short period of time

Good things to know is first up local banks and national banks are under completely different laws and national level ones can charge you whatever interest rate they choose and local ones are usually capped out around maximum I think is in California at 15% I haven't checked recently but I do know that your state level laws are going to keep it a lot lower for you College students will see up to a 20-point boost as soon as they receive their diploma as well as individuals that are purchasing alcohol tabacco and I mean any other drug that you can find on the market that you can use your credit card with will decrease your score by up to 10% because it's seen as a high-risk activity and people that die earlier are less likely to pay off their bills The more money you keeping your bank account is looked as collateral and will increase your credit score Please remember as they offer you more credit and more money to go spend before you actually earn it's because they just want you to spend more because it's enriching them it's not because they like you

The best way to grow your credit is to have on your primary accounts one credit card open that has a limit no higher than what you can pay off in a month after your budget has been done so not your entire paycheck but after your paycheck is already gone to pay for things Then go and open an entirely separate bank account with a credit card on it open and then max that thing as high as it will go not spending but the credit limit put that to the roof and then as soon as you get that card in the mail shred it up By doing this it keeps that emotional side of you that wants to spend lavishly all the time from absolutely destroying the side of you that is practical and wouldn't ever do that by using a system So this system protects you and your money and for that matter your budget That's going to give you that length of credit history it's also going to build your debt credit ratio so that you can spend that and it won't look like you're actually spending as much as what you're being allotted

To keep your credit score a little boost when you make big purchases put them on credit so when you make buy that laptop or whatever just put it on some type of credit and let it sit there for at least a week twenty days is good and then 40 days is even better Make sure that you do make that payment in between because you're gonna get hit When you make these purchases though don't just buy them because you want to buy them to improve your credit that's a terrible decision and it's gonna cost you a lot however have the money set aside for it so that you can pay it completely off right then and there if you want If you let a card go dormant it will count against you but not very much it's like two to three points a year that it might be deducted in comparison to what you can't have from the bolstering of having an extra card open Using coupons can improve your credit score because it still gets reported to the credit companies whatever you use your card and a coupon together

Filing your taxes early will help improve your score because it shows financial responsibility Closing an account can affect the overall time length of history that you have so do be aware when you're closing cards that can be affecting your credit score For credit card utilization it is good to keep it under 30 percent and the ideal for the perfect FICO score is about 10% lower lower Remember this game is not there to help you it's there to help them reduce their risk and to make sure that they get paid and they enrich their lives it's their game they make the rules you got to play by their rules so you got to pick which rules you're going to play by None of them are really great but if you want to get that score you gotta you got to do what you got to do and for those of you that still like that debt this is the game you play

Yes having a high credit score does decrease the amount of stress for getting a loan but usually you can end up finding a very good loan if you just know where to look and who to ask So in order to boost my score up from the 640 that it was to the 750 plus all I really did was go and open a couple accounts I only used one Kept the debt to credit ratio really really low and just you know like waited it out and it took about two months So initially there's that hit because you have all the hard inquiries and then you also have the the credit that you're using it pulls down your score a little bit and then it rises significantly afterwards and then I also did a purchase like this watch and it was about five hundred dollars put it away on a 90 days same as cash Which is a terrible deal if you like most people don't pay it but I had the cash on hand that I could have paid it as I was standing there at the register looking at him

I was like okay well we'll do this in credit I had it in my pocket but so from there paid that off that gives it another like eight ten point boost from there and then just watched it grow over the next couple months and then it was it was there you kind of just wake up and you've made it It's not that difficult you just have to it just takes a little bit of time not a lot of time but if you're like oh any right now right now I need that credit I need it then you're Sol and there's not much you can do I used to be a believer in the walk the line pay it off every month increase your credit score have a high credit score you're better off financially because everybody into this hype and no one's really stopped and questioned it other than pretty much like people that listen to Dave Ramsey that's the majority of the group Personal debt is not a good thing loans for businesses are better But went on a business trip for training ended up spending out of pocket for something that I shouldn't have I was supposed to get reimbursed didn't get reimbursed about three grand so every paycheck I was like okay well I could you know start paying all this off or you know I was trying to coordinate with them to get paid for this and it just wasn't happening and five months go by same thing keep calling them next week two weeks from now we'll have it you'll have it all sorts of stuff just gone wrong finally I'm like you know what I've had enough I paid enough interest on this so I went and sold two gold pieces I had so two ounces of gold and paid it off closed out all my cards I'm done personally there's no way I'm ever going back and I also decided that I'm going to be boosting my actual emergency fund up to fill that void that the credit cards were there to be the safety net even though they're it's a very dangerous safety net and yeah so that's why I have stopped using credit and I actually cut my cards

But no matter what you end up doing just make sure you have a system in place that's designed to protect you because they sure do have a system that's designed to ensnare you in debt and make you their slave forever if they can and just suck all the economic wealth out of you they you let them I hope you guys found this video interesting and helpful if you know anything else that I missed that will help somebody else improve their credit score or be responsible with credit throw it down in the comment section don't forget to like the channel pass this video on and go make a day worth remembering! Don't forget to like the page so you don't miss out

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AJ

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