Today, we are talking about credit scores. I know dun dun dun. This is something I wanted to talk to you guys about for a while.
It's also something that's super important that you understand how it works, how your credit score is calculated and how you can raise your credit score, because you need a cut score for things like buying a car or purchasing a house.
So we are gonna go over all that today is going to be an in-depth video with tons of information.
Hopefully, it will really really help you guys out. So let's get started.
Alright, before we get started. I have two things that we need to talk about. The first one is if I need to make a disclaimer to let everyone know out there, that I'm not a professional financial advisor. All of a sudden, I'm gonna tell you guys about today is information.
You can get online it's easily accessible, but I've also had a lot of things talked to me by my husband: who's been in the mortgage field in real estate field for 11 years now, and since he's always doing people's credit scores and helping them raise their credit Score so they can afford to buy houses or qualify to purchase houses.
If you haven't seen my getting out of debt article, I will link you guys to it at the end of the article, but you might want to watch it first.
How Is A Credit Score Calculated?
So right now I'm gonna link you guys to it in the iCard which is up here, and I need you guys to click on that and watch the getting out of debt, first and then watch this article, because I think this article will make more sense if you've already watched that, article first of all, I want to make sure that we are talking about how our credit score is even calculated, because most Americans do not understand how credit scores are calculated.
So let's talk about that first and then we'll talk about things that you can do to help raise your credit score because I know a lot of you guys are probably watching this article because you want to raise your credit scores.
So I'm gonna pull up a little graph for you guys, because I think that will help you guys understand exactly why some parts of your credit are way more important than others. So 35 % of your credit score is actually based on payment history.
You guys can see why it's so important to make sure that you make all of your payments on time because that's a huge chunk and the biggest chunk of your credit score. The second huge chunk, you're gonna see in our little chart is all about outstanding balances.
If you have credit cards that are maxed out or carry high amounts on them, this can look really bad to the credit bureaus and your chance of repaying them, and that's why your credit score can go down, and that is also why paying your credit card balances off in full every single month is such an important step.
Welco burn up seven a minute, but I wanted you guys to make sure you understood how the credits actually calculated before we go into steps to fix your credit score.
50% of your credit score is based on the length of your credit history and also a reason why you might not want to close your credit cards that have zero balances on them.
We talk about that in just a second ten percent of your credit score is based on new credit, and ten percent of your credit score is based on types of credit.
How many accounts you have what types of credit lines you have open things like that, so now you guys have an idea of how your credit score is actually calculated.
HOW TO IMPROVE YOUR CREDIT SCORE
Let's talk about ways to improve your credit score or keep your credit score high. First of all, and the number one thing that every single one of you guys needs to do is get a copy of your credit report
#1. GET A COPY of YOUR CREDIT REPORT
Okay, there are a few different places. You guys can do this for completely free. You please do not pay for your credit score, because there are a lot of websites that will give it to you for free and websites that won't even make you put in a credit card.
So there are a few different sites that I recommend for that.
#2. DO NOT PULL YOUR CREDIT MULTIPLE TIMES
So you guys can do that. Only do this once! Okay, you don't want to pull your credit a bunch of times from more than one of these links.
You just want to do it one time these are considered soft pulls, which basically means that it's a quick poll for you to check your credit score.
It's not gon na deem your credit score unless you've pulled your credit score already in the last six months or you keep pulling it over and over again and then it could possibly damage your credit score for good, but to do a soft poll once a year.
It's not a big deal, so you want to check that first, because most of you guys probably don't know what your credit score is. I would guess you might have an idea, but you don't know exactly what your credit score is so number one have a look to the article description below click.
#3. CHECK YOUR CREDIT REPORT FOR MISTAKES
On the link that I given you, I will link you guys to the best place that will be completely free for you and will not make you put in a credit card. Hey there's a few reasons why you want to do this obviously want to know your credit score right, but you also want to make sure that there's nothing wrong on your credit score. A few years ago, we actually had something reported by the IRS.
That was completely false and it actually ruined our credit score by 50 points. You could have said it's huge if we wouldn't have seen that we definitely would have had a hard time qualifying for the house.
We were about to purchase so luckily we saw that in time that we could get that fixed, but things like that happen.
All the time, there's always mistake, so you're able to pull your credit score your there might be mistakes that you could easily fix. That would instantly change your credit score now.
#4. PAY OFF YOUR CREDIT CARDS IN FULL EVERY MONTH
Let's talk about credit card usage, okay, this isn't - and I've mentioned a little bit earlier, but you want to make sure that you pay off your credit cards in full every single month now, if you're still in debt. This goes back to the article. I just told you about a little bit ago.
You need to go and watch the how to get out of debt. article our family personally got out of debt. We had thirty thousand dollars worth of debt and we've been debt free for years and years.
I want to say: we've been debt free for like five years. It is hard I'm not gon na lie, but now the way that we work things is, we put everything on our credit card and we use a credit card.
That gets us really high points for travel, because our family loves to travel. So choose the perfect credit card for you. If you are out of debt and buy one, that's gon na give you really high cashback, that's gon na.
Do amazing travel, rewards or other rewards that you are really excited about and then make sure that you pay off your credit card in full every single month now remember: 35 % is your payment history.
So you have to make sure that you pay off your credit Card in full every single month to not only help the 30 percent, which is your amounts owed, and your thirty-five percent with your payment history, just paying off your credit card in full every single month, will seriously boost your credit score.
#5. DO NOT USE YOUR CREDIT CARDS IF YOU ARE IN DEBT
Now, if you already have credit cards that are not paid off, you might not be ready for this article, because I personally would not recommend you guys using any credit cards right now.
If you're in debt get out of debt first, you don't even putting more debt onto your credit cards because you want to get everything paid off, so your credit score can start building again.
Okay, so again, I know I've said this before, but I want our hitter II go. Watch me getting out of debt article, so you guys can get out of debt and then come back and watch this one. So you guys will know what to do as soon as you do get out of debt.
#6. NEVER PUT ANYTHING ON YOUR CREDIT CARD YOU CAN'T PAY OFF IN ONE MONTH
I know a lot of people just pay the minimum amount to do on their credit cards, but this is a kind of a big no-no. First of all, never ever put anything on your credit cards that you can't pay off in full unless it's like a crazy, crazy emergency, and you need that money right.
That would be the only circumstance that our family would probably feel comfortable doing that.
But if you pay off only that minimum amount spend your pain interests on anything that you purchased and it's a cumulative interest. You guys it's not a one-time interest.
Its interest that keeps building and building on that amount and interest is one of the things that makes most people go into debt because it's not the amount that they put on the card that they couldn't handle.
It was all the interest that's been adding up over the years, so make sure that you pay your credit card off and full and never put anything on your credit card that you can't pay off in full for our family.
We actually put everything on our credit card leave our checking money alone and at the end of the month, we pay off our credit card in full with the money from our checking account that way.
We are building rewards for travel, which our family loves to do and our credit is still staying high because we're not just paying them in my balance, we're paying it off in full and we're painting on time.
#.7 NEVER MAKE LATE PAYMEN
Remember if you guys pay late. Sometimes, credit cards have huge huge SD fees and then you're paying fees and you're paying interest, and it's just getting crazy, crazy, crazy.
You don't want to get sucked into that credit card trap if you guys are going to pay off your credit cards in full and you're just starting that process.
It's best for you to do that before the credit bureaus report for the month. The credit bureau will see that your debt ratio is low. It will see that you hate it on time and it will see that you paid it off. So guess what happens to your credit score? It totally goes up once you're out of debt.
#8. DO NOT CANCEL YOUR CREDIT CARDS AFTER YOU HAVE PAID THEM OFF
You are gonna be super tempted to cancel your cards after you've paid them off.
Now, I'm gon na say: don't do this 99 % of the time because remember if we go back to our chart, your length of credit history is worth 15 % of your credit score. So sometimes people will be like I'm so excited. I got out of debt.
Let's close that credit card and then all of the credit history they've had on that credit card is gone and their credit score drops and they're like oh, my gosh. What happened? I got out of debt. I don't understand why my credit score drop. Well, that's why you just lost 50 % of your credit score, because you closed that card now.
The only reason why you might want to consider closing a card is because of an annual fee. So if you have a car that has a high annual fee, some some cars have four hundred and ninety five dollars. Haven't you love these? You don't want to pay those anymore, then.
That would be reason why you might want to consider closing your card. Just know that it might do your credit, it might drop a little bit, but if you keep continuing to build credit on other credit history lines, you should be totally fine. Another thing that gets super tricky okay, this is for after you've, actually paid off your credit card.
#9. DON'T LEAVE YOUR CREDIT CARDS DORMANT
You are gonna I paid off a credit card, I'm never going to charge anything on it ever ever again. Well, that's also a big no-no too right, because the credit bureau wants to see that you're using the credit card and that you're paying it off on time, because it shows that you're responsible shows that you're able to handle your money right.
So if you have a credit card that has $ 10,000 on it and you never reused at the balance of 0, it doesn't help your credit score, so I would recommend every once in a while charging something on that card and paying it off immediately.
Remember you want to pay it off, so we don't get interest and we don't getting late fees. Then it shows the credit bureau hey, they use their credit card, they paid it off. They paid it off on time. Awesome they're doing great. Let's raise our credit score.
So let me tell you what we've done with one of our cards. We do have one credit card that literally only has one thing Auto charged every single month and it's our gym membership. It's a small chart, so it's not a big deal, but every month automatically comes out so that way we're still building our credit history.
With that credit line on that credit card, because we didn't want to lose that credit history line because we weren't ever using it, so it is a little bit annoying.
I'm not gon na lie, but I know our credit is benefiting because we've done that over and over again every single month, ok and before we in this article, I want to make sure that you guys know what the credit score ranges are, because you might not Even know, and it's kind of important to know where you stand so when you do go and pull your credit score.
I will link you to the best ones. Then you'll know where you stand and if your credits, good bad or just awful, ok and just remember guys, no matter where out on this scale, you can totally change your credit score. We have had bad credit before.
Ok, I don't think there's a thing: we've had just amazing credit all the time we have had that credit we've had months where we are like negative in our checking account. We'Ve had all that before and I couldn't live like that anymore, which is why we busted our butts to get out of debt.
We work super super hard and why we totally do money different now. Another thing you guys may want to watch if you're brand new to my website is how we budget we do not use the envelope method. We do not use anything else. We use checking and savings accounts.
It's all digital. I believe we have like 9 or 10 checking accounts right now. We do everything digitally it works, so so so so good. You guys have commented that it works amazing for your family. It's way easier for us to handle. So if you guys have not seen that that might really help you guys organize your money, so you have money to pay off your credit cards and you guys can get out of debt and you guys can raise your credit scores.
So 850 is the highest credit score you can have. It is virtually perfect. Anything from 750 to 850 is considered excellent credit. This is the range that you guys want to be so be somewhere in there being in the excellent range guarantees that you get the lowest rates.
When you purchase a house, it gives you the best rates when you purchase a car or any other time that you're getting credit. It's also great for you to have really amazing credit.
When you open up a credit line, if you guys, are going to open up a credit card or something like that, because you're gon na get the lowest interest rates on those as well they're, not that it really matters, because, if you're paying on your credit card In full, every month, you won't have interest to deal with anyway, but I'm just saying 750 to 640 is good to farik, rat and 640.
On your credit, score and below is considered bad credit. If you guys are already out of debt, you probably only need to tweak a few things by doing some of these tips, I shared for raising your credit score if you're still in debt work on that get that taken care of, and then you can do some Of these things to help you raise your credit score as well, if you're in debt right now, one of the things you guys can do to make sure that your credit score stays healthy is to actually pay off all your credit cards on time.
Do not let yourself get any late fees or added interest on any of those cards. You'Ll be able to pay off your debt, a ton and faster. I know you guys all have amazing success stories with getting out of debt and raising your credit score. So please comment below.
If that is you, so everyone else has some motivation and some hope that they can totally do it to share it below in the comment section, so other families can read that and use your tips or even just get motivated. Knowing that it's possible, you guys, might look at me and think, oh, she did it great, but who else has done it too it'd be great to have you guys say: hey guys, I work this hard and we finally got out of debt or we did this Business we worked really hard and we raise your credit score.