How To Build Your Credit Score (Step 4)

Researching how to build your credit score? Duane here with how to go credit TV and this is the fourth video in a four part series on how to build your credit score So this is the first video you're watching in the series I'll put a link right here and you can click on this link and watch the series in the correct order

Okay so this video I'm gonna be talking about how to maximize every single portion of our credit score The third part was about the categories that make up the five parts that make up our credit score and this video is just going to be talking more about how to maximize each category so that you can build your credit score faster and you understand how to do so But before we get started I have a quick message Once again my name is doing with how to build credit TV This channel offers 100% free information about how to build credit, how to get cash back actual cash money using credit cards, as well as credit card reviews

So if this sounds like something in which you're interested be sure to subscribe and click the notification bell so you don't miss a thing Okay so when it comes to trying to maximize each category in our credit score it's very important to understand exactly what it is Knowledge is certainly power, as a matter of fact I've ruined my credit a couple of times This is my third time around rebuilding my credit and I'm way smarter now than I was the first two times right So I decided I wanted to make sure that I share this information is free and as long as you have YouTube or wherever you're watching this you can get information for free

Knowledge is certainly power and the more you inform yourself the more you get informed as to what the details are that make up our credit score the better off you're going to be Okay so in video 1 I talked about you needed to get your credit report you need to get your credit score and so these things both of these things you can get for free and then the step the second step to building your credit score is you need to get a credit card I suggested getting a secured card so once again in this video I'm gonna be talking about the five different categories that make up our credit score This is my third time rebuilding my credit so this time around I'm actually very aware of every single detail pertaining to the credit score and how it's comprised so I want to make sure I share that information because a lot of a lot of people myself included at one point had no clue what my credit score was It was like oh we're gonna put your credit we're gonna pull your credit and I'd be like okay like I had no clue what it was gonna be

I had no proof it was okay and more importantly I had no clue how our credit score was comprised So that is the purpose of this video The first part in the five parts that make up our credit score is payment history Payment history is 35 percent of our credit score so in other words if you're starting off brand new this is actually something that you can maximize very easily right out of the gate So if I have no credit and I finally got a credit card and I've made one payment on time, two payments on time, six payments on time

It's easy to have good payment history because I haven't ruined anything so if I'm making my payments on time that means I'm gonna get all 35 percent out of this category Okay so payment history is 35 percent of your credit score however if you've had some late payments like I did in the past like 60 days late 90 days late 120 days late Those late payments actually hurt your credit score quite a bit it puts a huge dent in your credit score and the reason why it does is because it's a part of payment history and payment history is 35% of your credit score This is the most weighted part of our credit score so it's very important if you're starting off to be sure that you pay your payments on time If you've made some mistakes in the past all that means is that it's going to take a longer time, probably up to seven years before you're able to be in a position where you've paid on time consistently and all your late payments or your delinquent accounts have fallen off of your credit report

And so then in in a sense it's like you haven't had any late payments because all the late payments in the history of that has fallen off of your account so you'll be okay after seven years but seven years is a very long time and so all that means is that you won't be getting the max 35% that makes it this category right So payment history is 35% of our credit score The next category that is 30% of our credit score is credit utilization There's a lot of misconception about this part a lot of people think as well as long as you use about 30% of your credit limit you should be fine In all actuality you need to be between zero and ten percent and when you're the closer you are to zero the more you're going to get out of this category

So in other words if my credit utilization was zero, then theoretically I should be getting thirty percent out of this category and what this looks like is if I have one credit card let's just say one credit card to keep the examples simple Let's say I have one credit card and let's say my limit is $2,000 so if my limits $2,000 I need to be between 0 and 10 percent when my statement closes Okay so that would be between zero dollars and 200 dollars so in other words if my credit limit of $2,000 I can charge it up as much as I want but if I know that my statement bill comes and closes on the first of the month I want to make certain that by the first of the month I want my balance on my account to be between zero dollars and 200 dollars if I had a two thousand dollar credit limit okay That is credit utilization, it applies to your overall all of your accounts so if I had 10 accounts in each account had two thousand dollars the best thing to do is probably practice not having more than two hundred dollars on each of those accounts okay because you once again you want to be between zero and ten percent

Credit utilization is 30 percent of our credit score If you have a credit card currently or if you have some some money that you owe on a credit card and let's say you're closer to like 50 percent you know let's say I had $2,000 credit limit and I have $1,000 on that card If you go from 50 percent with your utilization all the way down to 10 percent let's say you go from $1,000 all the way down to $200 Your credit score is gonna jump a lot because once again credit utilization is 30 percent of our credit score okay So the next category in the credit score is credit history

Credit history refers to it refers to the length of time that you've had credit So like how long have you had credit established for example credit history would be like let's say I got a credit card when I was in college and that was a lot of years ago let's say it was 10 years ago but it's more than 10 years for me But let's say it's 10 years ago so that would be I would have an account and I would have had that account for 10 years and so credit history is talking about the length of time How long you've had credit established and it's to your benefit to have credit established for at least 8 years and above So when you do have credit for that long you're actually going to be getting closer to the 15% that makes it this category

Credit history is 15% of our credit score 15% once again it's not as big as payment history which is 35 it's not as big as credit utilization which is 30 but we're talking about the categories the different things that make up our credit score And understanding these categories will help you maximize how you go about trying to get a high credit score I know for me personally it certainly has helped me maximize my credit score because I'm trying to maximize every single category I want to get as close to as 100 percent I can to a hundred percent out of every category So that means out of the 35 percent I want to be at 35 percent if possible, out of the 30 percent on credit utilization I want to be at 30 percent okay

So once again credit history is just the length of time that you've had credit established for, so if I had a credit card like I said ten years ago from college and then I open a new credit card ten years later that's going to affect the overall age of my credit history or the length in which I've had credit established So you want to be careful about opening new accounts because this can affect your overall credit age And what will happen is if I keep opening a new account it's gonna lower my average age and that's gonna affect how much percent that I get out of the fifteen percent that makes up credit history or the length of time that you've had credit established for The next category is new credit and this is ten percent of our credit score New credit just simply refers to exactly that, new credit you're applying for something new like you're getting a loan for a car, you're getting a loan for a house, you're getting your credit pull to get cable okay

When you do that they actually pull your credit report and that actually kind of hurts your account it hurts your credit score for a little bit okay You want to be between zero and two accounts okay apps like Credit Karma and nerd wallet really show you exactly where you be in order to be in the excellent category Even though this is 10% of our credit score if I'm applying for five accounts it makes sense that I would apply for the five accounts like at one time as opposed to one new account every single year And the reason why that makes sense is because if you apply for five accounts in the same month for example that's going to be better because then that means that if five months go by then at least it was five months ago you apply for a card Which means when two years go by that those those five inquiries will actually be zero and so then you'll be in a position to get that 10% that makes up this portion of your credit score okay

So you want to be careful about not a prime for new credit and not just credit cards Any type of credit right like a car loan, getting loan for furniture You don't want to apply for these things like years and years and years and years over and over and over because what's gonna happen is it's gonna continue dinging your credit score until like I think it takes about two years to get off of your credit score for it to be for it to be zeroed out So you don't want to apply for new credit very often You want to make sure when you apply for something you you may want to apply for a couple of things like around the same time

Probably on the same day so that it hits your credit score all at once instead of like over time okay So that makes up like I said 10% your credit score The last thing that makes up our credit score is types of credit or the mix of credit So for example if I had a Best Buy card, if I had a Visa card, if I had a car loan, if I had a personal loan, if I had a home loan Those are different types of credit if I had a lease with an apartment complex

These are different types of credit and that makes up 10% of your credit score Once again the 10% isn't that it isn't that huge of a percent It's a low impact on your credit score but it does kind of matter that you have a credit mix Once again apps like Credit Karma and nerd wallet really show you exactly what I'm talking about You should download these apps or go to the website and create an account and just get familiarized with each portion or each category that makes up our credit score

The more you know, the more likely you will be to build your credit score And the purposes whole video is how to build your credit score So how you can build your credit score is by making yourself aware of how it's comprised, what makes up our credit score Understanding each category, there are five categories that make up our credit score and in doing so before you know it you're going to be very well informed and you're gonna be very much on your way to building your credit score Alright thank you so much for watching this video

If it was helpful please feel free to leave a comment below let me know, give me a thumbs up if you liked the video Please be sure to LIKE, comment, subscribe Share this video with somebody if you think that they may need it or it may be helpful to them Thank you for watching as always until next time take care and be blessed Peace!