U Deserve Some Credit
There's is get money and entertaining podcast. Yes but also guide to getting a financial shit together so I had to build credit from scratch after moving to the US sixty s but lots of my friends talk about spending that childhood hearing their parents freak out about the credit and so now they're freaked out by that credit to of course because like that works on this episode of get money would be mystifying credit and credit cards. I'm amber and I've got my friend. Call he he's worked at the big banks and is about to be a lawyer and wedge joined by. Aj and Shane certified financial planners and Co founders of financial planning firm Could Brooklyn FBI. Everybody Russa pouty. How's it going all right? Let's get money. So here's vocab. You should be familiar with a credit score is a statistical number that Evaluates Your Credit Worthiness Aka how much someone can trust you to pay back alone and is based on credit. History lenders use credit scores to evaluate the pro ability that you will repay your debt. A person's credit score ranges from three hundred to eight fifty and the high school the mall financially trustworthy. A person is considered to be. What is the good decent credit score? Like how what classifies as being pretty good classifies as being like really bad war classified as being like the fucking best thing. Aj knows it depends on which lender asking but if you want a ballpark Generally we say above like seven sixty seven sixty. Eight fifty is a great score. You're going to qualify for the lowest mortgage rates. You're going to get the access to the best credit cards with the lowest interest rates. The best perks you know between six fifty and seven six kind of like okay. You're doing pretty well. Keep going and then we start to see like below six fifty. That's when we get into the fair and poor situation where you're going to be. You're going to be charged a premium. So you'RE GONNA be charged higher interest rates for showing a poor credit history so can really impact like different aspects of Your Life. Maybe unexpecting okay. What's the first word that comes to your mind? When you hear credit card free flights I was GONNA say Paris as in free flight to Paris I would say nervous because I like all the benefits of the points but get very nervous about being able to the payments in time you know I think when I think of using credit cards. It's like what's the warning on a bottle of alcohol drink responsibly discredit responsibly. If you're in a position where you've got steady income and you're spending less than you make. Yeah absolutely use credit cards. Grab all those awesome points. Get those sign up bonuses. Get Free flights hotels. If you're not in a position to do that don't do it. The points are marketing campaign. So if they're going to get in the door without nice bonus but you don't have the income to support your spending you're gonNA lose the credit card game and you're going to end up on the other side of that where you're paying interest on money already. Spent a no a few friends. Who JUST USE CREDIT CARDS? When appoint stay literally stripes wiping and they pay it off maybe three or four days after Jesse get the points? How many credit cards should I have? How many should you have been well? You have opinions on this actually occurs to have. I have six cards and to business credit cards. I've sixteen credit cards. I kind of feel like a like a doctor that smokes right now with my me having sixteen credit cards. That's definitely not good planning advice for anyone listening to this. You don't need more than five credit cards. I think that's going to be a really bizarre situation where you need more than five. You know how often should you open? A NEW CREDIT CARD COUNT. I think when you're starting to build credit early on it makes sense to open a few cards because eventually when you are trying to buy a house or trying to move into an apartment and they need to check your credit you WANNA established that credit history so when you're starting out. Yeah you're ages zero talk on those cards but as you're starting to get into more maintenance mode and you have a car you like to stick with that car it also okay. I know calling someone on. The phone is scary. But if you're applying for a new credit card call him up on the phone. Don't just apply online. You can ask all the questions you have and they'll stay on the phone with you because they want you as a customer to anyone out there who's afraid of opening credit card or using that credit card in your wallet this one's view now one of the important things about your financial situation is improving your credit score but in order to improve that credit score. You've got to use credit cards. It's about debt management not debt accumulation. So that credit card is in the mail. Don't be afraid to open just set guidelines to how you going to use it and how you gonNA consistently pay it off because I damn well know that you will so what. I'm applying for a credit card. Who is it that is actually approving me foreign? Who's checking my credit score and who's making that decision. It's me now. Just getting is not me? It's me I'm the credit cards princess reviewing in credit card applications. You're it depends for the most part. It's yeah it's going to be some AI. Some algorithm putting a fact basically reviewing your credit report and credit scores. Saying yes or no then. It goes to a human team for review. If you are rejected you can appeal. Try to get a human try to get them to explain why you are because often. They won't tell you why you were. It feels Shitty to get rejected by credit card to get rejected for anything. Just checking your credit skull effect it. You checking it doesn't but a creditor checking it does so that that's a it's called. It's called a heard inquiry. Sit On that one So have you for a credit card? It's going to be hard angry to play for mortgage. It's going to be hard inquiry those Negatively affect your score but not in a dramatic way and those Disappear after about a year and a half so don't worry too much about those beget when you. If you apply for six credit cards you're going to have six heart increase. I was rejected twice for credit credit card and I literally was like this. Is the most insulting rejection of it comes in the mail run instantly one told me straight away and then I tried again and then it was like no you gotta declare. What have you got an invitation? A wedding in the mail that it said that you would specifically were not invited dirty. You can't come. Knowledge is power so let me explain an important concept real quick if you ever had a credit card or debit card you probably saw a little small logo on either mastercard discover or American Express and you thought to yourself who the hell are these companies and why the hell are they on every single car that we have well. These companies have networks filled with merchants and banks they essentially track all of your transactions processed them think of this as a road and visa discover. Mastercard and AMEX are essentially the toll booths on that road. Not only they collect a fee for every transaction but they also tell who was on the road at that time and who has told so. The credit card processor is essentially the middleman. How does like using a credit card police then affect my credit score road affects your credit score negatively usually paying late knock some points off but not paying the car back at all can a lot of points off and it's much easier to lose points than it is to gain them back. It's like kind of having a girlfriend. You know You know it takes a long time to earn her. Trust but you know once you get that one text from that girl. It's hard to get her trust back so and chatted thing that way classic the Credit Score. It's such a black box You know the different things that go into that number that three digit number at the at the bottom end of things the three fifty at the high end eight fifty. There's no reason anyone needs to have an eight fifty credit score. That's like shooting for the moon. I don't even have any fifty. I'm above eight hundred ninety eight fifty but so much. Sorry Humble Brag. There wasn't even humble. It's so much goes into the score that we spend all day talking about the mechanics but essentially the scores dynamic. When you make one move your score can go up or down. Relating to so many different things it could be the utilization rate which is how much credit that's available to you you're using It could be the age of your credit. So if you're a new bar let's say you just arrive in. The United States is trying to get a credit card. It's GonNa be hard for you to get a credit card because you've no history. No NO LENDER. No Credit Card Company is going to be excited about opening a new credit card for you because they don't know how you in the past so there's no easy answer for what actually goes into the score but paying your bills on time is one of the most impactful aspects of the score. So if you miss a credit CARBONARI MRS student loan payment that can have a really drastic impact on the score. You want to make sure that you're on top of payments. One of the first things we do with all of our clients is set up auto pay for all of their cards and a loans just because the minimum fee is just easy to forget. People get busy. You got ten different accounts. You missed one of them. Because you're busy and then you're certainly not one hundred percent and it has a dramatic impact on your credit score. So that's one thing. We advocate everyone on this. Listening to this podcast. Police set up minimum payments. On All your credit cards your student loans and anything else that you might owe people money for minimum. Payment is the smallest amount. You have to pay your credit card company. In a particular billing cycle. If a balance has accrued pay it the credit utilization ratio is the percentage of how much you charge your credit card versus the maximum that you can put on the cod for example if you have a ten thousand dollar credit line and you spend five thousand. Your ratio would be fifty percent lowering the ratio can help improve your credit score. The age of a credit card is how long credit card has been open for the longer cod has been open the better effect it has on your credit school. I WANNA NAR like high. School is such a thing as extra credit. Well sort of actually really heartache heartache. It's not necessarily extra credit like I said. There's no reason you need an eight fifty. That's silly Just having a great scorer is good enough but what you can do is if you have a family member or a close friend or significant other D Day. Can actually help your score out. If they have great credit it's called They can make you an authorized user on their card. Actually Shane an authorized user on one of my older credit cards. It up. You're a lot of Burrito week. As we discussed small you can meet someone authorized user and then you absorb their positive credit history. Observe THEIR CREDIT AGE. And give your score a nice little boost without you doing anything really. Obviously this has to be someone you really trust and you have to figure out. Make sure that you're close enough that the arrangement makes sense for both of you But that's a little trick for their home Columi- mountain mom I heard about your score was hooky. Asano yeah I mean there's six things that impact your credit and it helps three of them. The number of cards that adds a car the utilization rate will go down if there's no balance on it and then it adds age to your credit score so it's usually your friends oldest card with no balance. That isn't used. That often is what you want That wanted to be added an authorized user on. Are you listening? I'm GONNA need that. Let's hope so. So what other like? Really good quick ways to increase your credit score you want all of our tricks on how they pay. Hoti GONNA get paid. They give away all the money we got him. On a quick way to decrease your utilization rate therefore increasing your credit score is to just call up your bank and ask for more credit the less credit. You're using the better your score so if you have more available to you that's a win for your credit score and one other thing to watch out for is you might have a high credit score. Because you've got one card with a high limit that you never use. But that is a high score but it's also called thin file which is a secondary qualifier Someone will look like hey. The credit score is great but they only have one credit card so they don't have a good mix of credit. Scores are in a multitude of types of credit so You know they're not These creditors dumb. They're not just going to take a credit score and slap slop down a mortgage for three hundred thousand dollars for you. They think about the qualitative aspects on top of the quantitative stuff in student loans. Actually help your score a lot having student loans paying them back On time let's keep key point on time not missing payments that adds a lot of weight a lot of ballast your credit score so You know if you've if you borrowed a couple times a year for four years of Undergrad. You could have you know sixteen different loans making up part of your credit score. So that's GonNa make your score. Go Up Actually. Ballast terms. Here's one way not to get scammed mixture. You read what's called the Schumer box? That's the mandatory disclosure for interest rates and payment terms when you sign up for a new board. Now let's bring in our producer Ravana with a question that she's not too afraid to ask so. I have a question about credit. We we've been talking about credit and credit cards. How much of my available credit should I be? If you want a rule of thumb you should be using less than thirty percent the credit available to you That's just a a nice easy mark. We're going to have a green check. Mark in the utilization rate category when your credit score is calculated and the way we would calculate that is. Let's say you have a credit card with to keep things simple a thousand dollar limit. You charged three hundred dollars a month. You're good that's great but the mini get above three hundred. Then you're inching towards above thirty percent and that's bad cool. Maybe we should expand on that because shouldn't carry a balance. I'll tell you shake area balanced. You're just like a very small one assist show they use it well Credit card companies. Don't actually look at the like the balance on it doesn't get the credit score. So what would impact the credit score would be your utilization Ray and you want that to be as low as possible like south of thirty percent into your question. The answer is my class thanks This is how you get money so when it comes to credit and credit cards number one. Don't let the credit card companies win. If you're not going to be able to pay off your statement balance each month the fancy travel rewards just aren't worth it number two. There's no exact formula to how your credit score is calculated but we know it's impacted by six things the age of your credit your utilization rate payment history derogatory marks the number of accounts that you have and the number of heart increase on your score number three remember credit cards can be used to your advantage to help you build your Preta. Another type of credit can add a higher limit to utilization rate and can add to your credit score as well. Here are three tips to help you become a master of credit number one. Keep your credit score healthy. Don't close older credit cards? Having them open helps the age of your credit score number two. Don't Miss Minimum payments on your credit cards or loans? That's the biggest detriment to your scores number three. The Schumer box is the mandatory credit card. Disclosure brochure then. We'll tell you exactly what interest rate you're going to be paying on the balance. Always find the Schumer box on your credit card applications before signing the paperwork times the best remedy for fixing pass mistakes on your credit report new derogatory marks fade. Your Age will mature in. Those hard increase will drop. You don't need a perfect eight fifty credit score so don't get too obsessed with your credit score your score matters with big things like getting a mortgage you'll have access to the lowest interest rates with at least a great score. That's in quotes of around seven sixty. So hang in there. If you want something from getting money we WANNA know. We really excited. When you guys Texas hit off at nine one seven nine zero five six six three six and tell us how get money has changed your life for the better. I need money for overprice sneakers. So that's all for this episode of get money. Get MONEY ISN'T ORIGINAL PRODUCTION FROM GILDED AUDIO. 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