How To Get A Perfect Credit Score

all right so today's video is gonna be all about credit and the whole premise this video started because my friend uh ryan behind the camera asked me if it's better to keep a balance on your credit card for a higher credit score and i actually i didn't know the answer to it when he said that i was always taught that the best thing you could do is just pay your debt every single month and just be consistent with it and i've had a great credit score kind of as long as i've had credit just following that rule so i do think that is the best rule to follow but i'm going to talk about the idea of keeping a balance and why that is not true and then everything that goes into actually creating a good credit score we're going to use fico as the metric because i think that's what most people most banks gauge as far as your risk to lend to um so we're going to go into what creates a good credit score before we go in i'm going to ask uh if you guys could hit the like and subscribe button it's huge for us it helps all these videos get out to more people it really helps our mission to just make an impact on as many people as possible and teach them about money and how to be successful with it so going into credit and actually you know what now that i'm saying this uh we're going to do a follow-up video on building credit for the first time because even as i started that was the hardest thing for me was being a kid having no credit and trying to buy a car that i wanted to finance i wanted to rent an apartment with a buddy and i had no credit and couldn't get either of them so we'll do a follow-up piece on initially building credit but for right now we're going to go into how to create or what goes into a good credit score we're going to use the fico example and these are the five metrics that go into it so we're gonna go gosh this is okay so we'll go here go here and then boom and then boom beautiful right so the first thing and a lot of these are going to be obvious when i say them but the first thing that they look at is payment history and this makes up about 35 of your fico score and payment history is obvious how well you've done paying off your debts so really look at it as i'm the bank i'm the credit card and i want to give you money i'm trying to gauge how risky you are and what the chances of you paying me back my money are so if you have a history of paying debt on time and consistent consistently that in my eyes is makes you less risky i can count on you to pay me back because you've done it over a long amount of time so that's a big one and that goes back to how i started make sure you're paying your debts every single month that is by far the best thing you can do the second one is going to be amounts owed and now this kind of goes into what ryan said in the beginning so amounts owed is 30 percent and so amounts owed it doesn't mean that that leaving a balance on your credit card gives you a high credit score what they're really looking at with amounts owed is something called the credit utilization rate and it's what the percentage of your credit limit you actually use so let's say you have a credit limit of a thousand dollars a month they don't want you it's 30 they don't want you to spend over 300 a month so they're looking at what you're allowed to spend and what you actually spend that's your credit utilization rate and having 30 or below is kind of conventional wisdom on what makes that component successful if and credit cards do this if they're not giving you a high enough amount and it's just too hard to live in that 30 window start asking for a higher credit limit and then don't spend more money just ask for it if you're getting a thousand bucks a month ask them to bring up to 2000 and then still only spend the 300 a month and then or if it's 500 per se on a thousand dollars keep it at 500 ask for a bigger limit and keep asking for big bigger limits and keep it at 500 so that's going to be that's going to help your credit utilization rate next is going to be length of credit history and this makes up about 15 and so on the first one the payment history they just want to see that you're consistently paying on length of credit history they they want you ultimately to have accounts open for a long time so the longer you've had an account open the more time they get to gauge you on and they do like that they don't want you opening and closing cards and if you have ever heard this have you ever heard people say if you open a card and then you basically don't want to use it anymore not to cancel or close the card just to put it in a drawer and never use it the reason they tell you to do that is because now you have a length of the time the amount of time that that account has been opened is now for a longer amount of time and that helps this component which is 15 moving into a smaller one this makes about 10 and this is credit mix okay so the bank wants to see you have different types of credit open they don't want it to just be credit card debt so ideally you would have credit card debt that you're paying you'd have a mortgage you'd have a car loan or a vehicle loan so that they're seeing that you have money borrowed in different areas and you're consistently paying so again this makes up 10 as we're going through this you could see the importance of just paying and continuing to pay over a long amount of time but credit mix is a component of it and then the last component is new credit and this is one that i think happens when you're younger because when you get your first credit card you're super excited that you're able to get one and also if it's a small limit well you you just want to get more they pay attention to when when or how often you're opening new cards so you don't want to open a bunch of cards at one time because it makes you seem kind of thirsty for for credit kind of hungry for it and that's a sign of risk and then also don't open a card that you don't think you can be approved for only get a card if you can if you feel confident in it because every time you get denied every time you even open a credit report it dings your credit so be real cautious that if you're gonna apply for one you feel comfortable that you're gonna get approved for it so basically this is everything that goes into the fico score it's pretty self-explanatory but again i think if you follow what i was told pay your credit card every single month you'll be fine you'll have great credit it's more about consistency and discipline than trying to hack the system so follow those rules and i think you will be off to a solid start and we'll see you guys in the next video [Music] you

Channel: Commune Capital

Views: 1,540

Keywords: Credit Score, Commune Capital, Mikey Taylor, Perfect credit score, How To Get A Perfect Credit Score, credit card myths, improve your credit score, debt, pay down debt, fico score, fico credit score, fico credit card explained, Payment History, Amounts Owed, banks, risk, Credit Utilization Rate, Length Of Credit History, credit accounts, Credit Mix, installment loans, credit card, credit cards 2020, New Credit, financial freedom, financial literacy, credit card increase

Id: SvtGiQHLj7Y

Length: 8min 13sec (493 seconds)

Published: Thu Aug 20 2020