1 Hour Guide To A Better Credit Score

1. Intro: Building up your credit score simply comes down to understanding the credit equation and then figuring out how to optimize that equation to build up your score. Hi everyone. My name is Zach our Lee and I'm a full-time investor and stock trader. And over the last few years, I've built up my credit score so that I can buy and invest in real estate. Now, I want to share with you the lessons and strategies that I have learned so that you can understand your credit score and begin to use it to your advantage. I'm a graduate of Mount Royal University and I also run several businesses, including a YouTube channel with over 28 thousand subscribers. Now in this course, we're going to dive into three main topics. Number 1 is going to be understanding your credit score and credit report. Number two is going to be understanding the five factors that go into calculating your credit score. And number three is going to be the strategies that I use to improve my credit score on an automated basis. Now, by the end of this course, you should have a very good idea of how credit works, what is going to impact your score, and what you can do to improve it over time. Now my goal of this course is to give you everything you need to know about credit in as short a time period as possible. So it should only take you about an hour to complete this course. But I promise you, if you can just improve your score slightly, it'll be well worth your time and it will save you so much money. We're even going to calculate an example of how much money you could save you in one of the videos. So without any further ado, let's jump right in. 2. Course Project: All right everyone, so before we jump into Lesson 1, I just wanna do a brief explanation of the project for this course. Now, the project for this course is going to be a credit building checklist. And you can find it under the Project and Resources tab just below this video. The credit building checklist is going to be four pages long and it contains action items that you can go through after each video in this course, I've designed it to help you understand and build your credit score, is going to force you to check your credit score to set a goal for your score, to track your payments, enter rank your debts. So it is going to make you go through the process of organizing your credit and planning for the future. Now, there's also some extra resources in this project. Those include all of the links to the platforms and websites that I'm going to talk about in this course. So if you're ever curious, what was that webpage, how you get to that website? Everything is going to be in this document. It also includes a payment tracker for you to list all of your payments and track those payments over time. And it's going to give you a guide to calculate your credit utilization, which is going to be a topic for one of the videos in this course. Now, your job as you go through this project is to go through the action items. After each video that you watch, you're going to have to update it. You're gonna have to set goals and going to have to figure out what your personal credit utilization is based on your own situation. So there's gonna be some action items here and your job is to check off those action items and hold yourself accountable. I am not going to call you up after this course and nobody else is going to follow up with you. So it is your job to make sure that you get the work done and you hold yourself accountable. Now, skills, you're really likes it when we can submit our projects as well. However, I do not want you to tell me what your credit score is or submit any of your personal identifying information. So instead of submitting the project that you download here, what I want you to do is submit a photo of your city skyline, your favorite sports team, or your favorite food in the city where you live. So that once we have helped 2030, 40 people, we can look back at the collage and understand where people are from and how many people we have helped out. Now without any further ado, let's jump right into the course. 3. Finding your score: All right everyone, So now that we've gone through the project and you understand how this works, it's time to dive into Lesson 1. In this lesson, we're going to talk about what is a credit score and how to find your personal credit score. So first of all, a credit score represents your ability to pay back your debts and credits. Now, I'm going to use those terms throughout this course and they pretty much mean the exact same thing. Debt is what you are taking on as a person and credit is what somebody is extending you. And so throughout this course, there are pretty much interchangeable. Now your credit score comes on a range usually between three hundred and eight hundred and eighty. Obviously, the higher your score is, the better credit you have. Now your credit score is created and maintained by a company called a credit bureau in North America, the three main credit bureaus are Equifax, Experian, and TransUnion, and their job is to gather information about you in order to create a credit score that lenders can then use to measure your ability to pay back their debt or credit. Now, in North America, we use these three credit bureaus. But if you live outside of North America, You should be able to do a really easy Google search to see which credit bureaus apply to where you live. Now to figure out your credit score is very easy to do. All you have to do. And the credit bureaus website. So for me living in Canada and North America, I can go to Equifax, are Kong changing dossier or experienced.com, create an account, validate my identity and that will show me not only my credit score, but also my entire credit history. You can also sign up to have your entire credit report, as well as your current credit score mail to you completely for free once per year. Now, if you're interested in something a little bit more user-friendly and a little bit more convenient I use to services. The first one is called Credit Karma, and the second one is called Borel. Well, both of them have mobile applications that you can use to martyr your credit over time. They will alert you if anything suspicious pops up. And it's very easy to check your score and a very regular basis. So I personally recommend both of these services for checking and monitoring your score over time. But if you're new to this, I highly recommend you sign up and create an account and a credit bureaus that monitor your credit in the country where you live. Now, in the next lesson, what we're gonna do is we're gonna take a look at your score so we can understand how you are doing. And we're also going to dive into your credit report so you can understand how you've done in the past and how we can start to improve in the future. I'll see you there. 4. Reading your report: All right everyone, congratulations, you have made it through the first step of your credit building journey. Now is less than one and now it is time to dive into Lesson 2. In this lesson, we're going to start talking about how to understand your credit score and how to read your credit report. Now, your credit score is a number between 330 and usually 880 or 850. And it represents how well you've paid back and manage your debts and your credits. Now, here's a graphic that gives you a good idea of where the average Americans are at with regards to their credit scores. As you can see, it goes from about 300 up to 850. And it kind of gives you the proportionate amount of people in each of these brackets. Now, for me personally, what I recommend to people is to aim for a credit score between seven hundred and forty and seven hundred and sixty. The reason that I say that is because number one, it should be easily achievable if you go through the steps that you're about to learn in this course. But number two is that the benefits of having a higher score are almost absolutely 0 once you get above about 760. So that's right. If you have an 800 credit score, you're not gonna get any more benefits in somebody that has a 760. But yes, you will get massively more benefits if you have a 760 compared to somebody that has a. So what I recommend is to aim for a credit score between 740 and 760 because it's easily achievable and you're not going to benefit anything more by having an 800 or an 850 credit score that basically maximum benefits that you're going to get come out around that 760 marks are highly recommend that you use that as a target. And if you're not as 740 or you're not as 760, this should give you a rough idea of how much work you have to do and how much further you have to get before you kind of hit that top-level credit bracket where there aren't a whole lot more benefits because you're already doing so well. That's the goal for this course. That's where I want to get you to and I'm very excited to keep talking about it now, one thing that you do have to be aware of is that the different credit bureaus, even those third party platforms such as Burwell and Credit Karma, they're all going to have a completely different credit score for you. They're never going to match up. It's almost never going to happen. So you need to be well aware of that and you need to be okay with that. And you need to know this going into it because the reason that they are different companies and the reason they have different scores is because they calculate your scores differently. And they also gathered that information from different sources. And so it is logical and it's reasonable to expect that they will have different scores. Now what you want to look for is scores that are relatively close together. You want them to be within 10, 15, 20 points of each other. Because if one is off by about a 100 points, Let's say TransUnion was 740 and Equifax was, and 120. That would be a red flag immune. There's probably an issue there and one of them probably has an error. Now, later on in this course, we're gonna talk about how to rectify those errors. But what I want to talk about real quick is how these credit scores are determined. The credit score that is kept for you and is identified to you is determined based on your credit history and your credit report. Now, your credit report is a detailed breakdown of your debts and how well you have paid them back. Your credit report can be gathered from any of the credit bureaus directly. Or it can also be gathered from the third party companies like Credit Karma, and borrow. Well, you can see on the right-hand side here I've taken a screenshot of my boy Well platform. And right at the top, right in the middle here you can see this credit report button. And when you click on that, it will give you your entire credit report. Now, within every single credit report, there's going to be three different things that are contained on that report. Number one is you're identifying information. The second piece is going to be your credit history, and the third piece is going to be the inquires. Now, we're going to dive into each of these pieces real quick. Number one is that identifying information. This is going to contain things like your name, your birthday, your address, as well as your social insurance number or your tax identification number, depending on which country you live in, you need to do is make sure that everything on that section of the form is completely correct because if it's not correct, you need to make sure that you're looking at the right credit report, that it's actually your credit report. And if it is your credit report, you need to correct that information. So very, very important. Number 2 though, is the credit history and this is just a quick screenshot of what it looks like. And basically what's going to be contained here is all of your different credit lines. So if you have multiple credit cards, you're going to see this page, but for each different credit card, same thing with a mortgage or a line of credit, whatever it might be an each section is going to contain the lender or who's lending you that money, the balance outstanding, the limit that you can withdraw on that credit line count information as well as your payment history. And so here is a quick screenshot on the right-hand side here you can see that my lender is Capital One. The balance on it is $0, right now, the limit is $1000. The account information is right here and the payment history and you can see I've only had it for a few months and it is being paid back on time every single month. And so you're going to have a section like this for every single credit line, every credit card, every line of credit, everything that you have. Now, I know you're probably asking like Zack, what is actually going to report on my credit? Who was reporting back to these credit bureaus and where are they getting this information from? Well, here are the people that are going to be reporting your credit. So the first one and then one is going to be credit card companies. The second is going to be any lines of credit that you have. Next is going to be mortgages, then loans, cell phones, car payments, and sometimes your landlord or utility company will also report your credit. Basically anybody that you are giving your sin to your social identification number or your tax identification number 2, if you're giving that to accompany and you're making regular payments to them, they're probably going to be reporting your credit and it will show up on your credit report, and it will also be factored into your credit score. Now the last thing that you're going to see on your credit report is any inquiries. This is going to be requests to check your credit. This is going to be when a bank or a mortgage broker gets your information and they say, Okay, I need to check your credit to make sure that you can qualify for this loan. That is basically that they're going in there checking your credit report. They're measuring your credit score and they are going to analyze you to see if you are valid and equipped and basically good enough to receive their money. And so the inquiries, every time a company does that, it gets listed under your inquiries. Now there is a difference between a bank or a brokerage and mortgage broker going in and checking your credit as opposed to, for instance, for a well or a small little service provider just checking your credit or a landlord checking your credit to see what the score is and understand how good you are at paying back your credit. Those are two very different things and they are distinguished by something called a hard pull and a soft pull. A hard pull shows up on your credit report. Any hard poll shows up on your credit inquiries. And this is where you can see the banks and the lenders and the car loan people going in and actually running a heart check on your credit, this will have an effect on your credit. It's usually negative effect on your credit by a couple of points, but it is something that you just have to go through in order to get a credit card, get a loan or a mortgage. Now on the other side of it to soft pole will not affect your credit. It will not show up on your credit reports. Nobody else will be able to see it and it will have 0 impact on your overall credit score. So a soft pull is completely fine, but a hard pull will show up on your credit and other lenders and other people will be able to see that. Another reason that this is important is because if some news about to lend you money, but you're going out and you're trying to get more and more money every single month, that could be a red flag that they want to know about. And that's why it's reported on your credit report and that's why they are allowed to see it. So it is something to be cautious about. You do not want to have a ton of credit inquiries going into your credit report all of the time. So we're going to talk about that a little bit more later on. But in the next lesson, what we want to cover is why is credit important? Why are we going through all of this work and how can it actually impact your life? Because this one is probably going to surprise you. So I'll see you in the next lesson. 5. Why is Credit Important?: All right everyone, welcome back to another lesson. Now that you understand how to read and understand both your credit report and your credit score, is time to dive into lesson three. And in this lesson, we're going to talk about why this is important and what are the benefits of having a higher credit score? And really simply, there is one major benefit that kinda outweighs everything else. And that benefit is that it will allow you to borrow more money at a lower interest rate. Now what might you borrow money for? Well, there's a ton of different examples, but the number one thing that most people borrow money for in their life is a mortgage when they go out and buy a house, the other things that you might need to borrow money for where your credit score is going to be very important. A car lease, a business loan, car insurance, or a line of credit. Anytime that somebody is going to run your credit, they are going to be looking at your credit score. And the higher it is, the better the chances are that you're going to get approved for whatever you applying for. Now, let's just put this into an example really quickly here. So I've got two different scenarios. Both scenarios are trying to buy a $500 thousand house, but we have two different credit scores. In example one, we have a credit score of 750, trying to get a mortgage for 400 K, We're going to put a $100 thousand down and it's a 25-year term. In example one, we are getting an interest rate at 1 99 percent because we have a good credit score of 750. However, in example two, we only have a credit score of 650, so it's much, much lower. Everything else is the exact same except because we have a lower credit score, that means that we don't have as good of a history of paying back our debts. That means that to the bank or the lender, we are more high risk. And because we are more high risk, that means that they want a bigger reward. And the reward for the lender or the bank is going to be that interest rate. And so because we have a lower credit score, we're going to have to pay a higher interest rate. And that is going to cost us a lot of money. And so these are the two scenarios. One scenario with the 750 score, another scenario with a 650 credit score, the interest rates are 1.993%.5. The difference in the amount of interest that these two examples you're going to pay is probably going to surprise you. So just to give an example in your head right now of what you think this number is going to be. And now let's dive into it. So number one in our first example, over a 25 year time period on a $0.5 million house in the loan that we talked about, you're going to pay $107 thousand in interest. However, in example 2, in the exact same scenario with just a higher interest rate, you're going to end up paying $199 thousand in interest rate, which is absolutely crazy because that makes up a difference of over $91 thousand that you're going to have to pay over a course of 25 years just because you have a lower credit score. And so this is very, very important. The higher the credit score you have, the more you're gonna get approved for and the better interest rate you're going to get an over a 25 year time period on $400 thousand mortgage that makes up over $90 thousand. So this is very, very important. Now, in summary, having a good credit score will get you approved for more money at better rates, and it will save you on the interest payments. There's other benefits. You get flashy cards, you get cool things. Maybe you get some perch, whatever it may be. But this is the number one benefit of having a better credit score. You're going to get approved for whatever you apply for and you're going to get approved at a better interest rate so that you can save your money and you can spend it on yourself. That's the goal here and that's where we're trying to get to now, like I said, is that the benefits, I mentioned this before, but the benefits of having a high credit score pretty much go to 0 anytime you pass that 740 to 760 level. Like I said, if you get to 800, that's absolutely great. You can brag about it all of your friends, but you're gonna get the exact same rates as some via sevenths. 760 does. So keep that in mind, set a goal of 747 60. That's where you want to stay in between. And in the next lesson, we're gonna talk about how your score is calculated. There's a variety of different factors that go into calculating your score and they have different weights. So we're going to talk about which ones are the most important and how you can best strategize your payments to maximize the positive results of your credit score. I'll see you guys in that video and we'll talk to you soon. 6. Calculating Your Score: All right, everyone, welcome to Lesson 4. In this lesson, we're going to talk about how is your score calculated. So like I mentioned before, there are five different factors that go into calculating your credit score. And some of them are much more important than the other ones. The first one and the most important is your payment history. This is making your payments on time every single month. Then next one is the amount owed, the third is the length of credit history, the fourth is your new credit, and five is a type of credits. I've also put together a pie chart here on the right-hand side, so that you can see roughly what percentage of your credit score is based on which of these five factors. Now, I just gave you a quick summary here, but in the next five lessons, what we're gonna do is we're gonna do a deep dive into explaining each and every factor. And then I'm going to give you some strategies that you can use so that by the end of just the next five videos, you will have five brand new strategies for improving your credit. And it's also going to give you a much better understanding of how your credit score is calculated and how you can continue to build it up over time. I will see you guys in the next video. 7. Payment History: All right, everyone, now that you know the five different factors that go into determining your credit score, it's time to do a deep dive into that first factor, which is your payment history and the strategy that we're going to talk about today is automating your payments. So first of all, payment history refers to, Do you pay your bills on time every single month or at least make the minimum payments. So if you have a credit card that has an outstanding balance on it, when we're talking about payment history, the only thing we're concerned about is making that minimum payment every single month. Sometimes it's 10.20.100. It depends on your card, but what we're looking for and what is going to give you this green checkmark right here is just making the minimum payment. So if it's a line of credit or a credit card, it's going to have a minimum payment. If it's a phone bill, it might have a minimum payment or you might have to pay the entire balance every single month on time. If it is a mortgage, you have to pay the entire thing. If it's alone, you have to pay the entire thing every single month. And when you make those payments, as long as it meets the requirements, you're gonna get this green check mark here. And the more green check marks you have for the more years and the more months and the more consistent it is, the better your payment history is going to be. And as you can see here, the most important factor to your credit score is your payment history. So this is by far the absolute most important factor. If you're going to pull anything out of this course, it is to be paid your bills on time as often as you can. And if you can't pay everything or if you can't pay off your entire credit card bill, at least make the minimum payment. That's what I'm trying to tell you here because this is the little section here that shows your payment history. And anytime that you have an X where it shows missed or late payments, that is going to hurt your credit score and it's going to lower your ability to get better loans at a lower interest rate. And that's going to hurt you financially in the long run. Now, I just have to absolutely hammer this point. Home is minimum payments will give you that checkmark and it will make your payment history look good. So no matter what happens, do everything that you possibly can to just make that minimum payment. If it's a credit card, you can't pay off the entire balance, just meet the minimum. It will give you that checkmark that you need to show the banks that yes, you are meeting your requirements, you're paying the minimums and it will improve your hand in history because as soon as you miss a payment, that is what will hurt your credit score. Now, in the situation where you have multiple credit cards, what you need to do is make sure that you are still meeting the minimum payment. You have to pay. The minimum on all three cards are four cards, whatever you have there, make sure that you paid the minimum and then don't pay it off based on the balanced pay it off based on the interest rates. So what I mean by that is pay off the card that has the highest interest rate. First, if you have two cards and one of them has a balance of 10 thousand versus 5000, but the 5000 $1.1 has a higher interest rate. Pay that one off first because it is going to save you money in interest fees. I absolutely promise you it's going to be the best thing. No matter what, you still have to make the minimum payment on both cards to improve your payment history. Now, this strategy for handling this and the strategy to just never have to worry about this is to just automate your payments. So I live in Canada, you Scotia Bank for some of my personal financing. And what I can do a Scotia Bank is I can make a recurring payment. And basically what this will do is it will automate a transaction where it pulls from my checking account and it goes and pays off the credit cards. And what I do is I just automate that payment for $10. That's the minimum on all of my credit cards. And it goes there every single month. So as long as i just transact with the cards that will keep them alive and then this will automatically pay off that minimum every single month. So I never ever ever have to worry about my payments. I never have to worry about my payment history on any of my credit cards. And I tried to make automate all of my other payments as well. So a loan that I have, a business loan, a mortgage, whatever I get, I'm going to try and automate absolutely everything so that as long as there's money in my account, I will never miss a payment and my credit will never get hit. Now, one of the strategies that I use for this, because I'm starting to have a lot of different bills that AfterPay as I get older and as I add more things into my life is a bill payment tracker. And so this is basically a place where you can list out all of your bills on the left-hand side and then you can mark them off every single month to basically verify with yourself that that bill has been paid. Now I have linked a payment tracker to the resources for this course. It is down there and that's the one that I personally use. And I highly recommend that you do this because as you start to build a family and you have a housing of a mortgage, and you have utilities, and you have cell phones, and you have your own cards, credit cards, and you have your spouse's credit cards, and you have all of those different things. That could be 10 or 15 or 20 items on that line that are all going to be reporting your credit. And it's super important to make sure that you pay them off each and every month. So I highly recommend putting together a bill payment tracker and automating at least the minimum payments for every single credit card that you have, an every single basically dead and credit that you have. Now, like I said in the beginning of this video, this is the most important factor when it comes to your credit is your payment history. And so the most important thing that you can do to protect your credit and build it up over time is to just not miss the payments. Meeting the minimum will mark it as a good payment. But if you can pay off more or you can pay off the highest interest rate debt that you have first. That's always going to be a benefit to you. But more important than anything else, is just making the minimum payments on everything that you have. Now, in the next lesson, we're gonna talk about the second largest factor which is utilization. And the strategy we are going to use is the 30 percent rule. So stay tuned. 8. Utilization: All right, everybody, welcome back to Lesson 6. In this lesson, we're going to talk about your utilization rates or in other words, how much money do you? Oh, we're also going to cover a strategy called the 30 percent rule. But first, let's dive into utilization. This is the second largest factor when it comes to determining your credit score, and this refers to how much of your credit you are using. Now in this scenario and in this factor we're mostly referring to revolving credit. What I mean by revolving credit is any type of credit where they give you access to money and then you can use it and pay it back, use it and pay it back. That is considered revolving credit. And in this scenario, we're usually talking about credit cards and lines of credit. Now the main number that people use when looking at this factor of your credit is something called the utilization rate that refers to how much credit is available to you compared to how much credit have you used? Let's look at a couple of examples of this. In example one here, you can see that we have $1000 credit card and we have spent $500 worth of that credit card. In this example, we are using 50%, or in other words, our utilization rate on this credit card is 50 percent. Now one thing that you need to know is that your utilization rate is calculated both on individual cards as was your total debt. So if you have multiple credit cards, what we need to do is calculate the entire total. So in this scenario, we have the exact same $1 thousand credit card with $500 worth of money spent on it. We also have an $8 thousand credit card. And on that credit card we should add to $1000 worth of it. So our utilization rate on the first card is still 50 percent the same scenarios last time, but the utilization rate on the second card is 12.5%. As you can see, $100 divided by $8 thousand is 12.5%. Now, our total utilization rate, us as an entire person. As you can see here, all you have to do is add up those numbers. So we have $1500 in total credit outstanding. That's how much money we have spent in total. And with access to $9 thousand between our two credit cards. When you divide those numbers, you are left with 16.6%. And so we have two different credit cards, one with 50% utilization and one with 12.5% utilization. And then we have our overall credit utilization rate, and that rate is 16.6%. Now what you need to understand here is that the banks want to see a lower credit utilization rate. The reason that they want to see a lower credit utilization rate is because if you already have two credit cards that are completely maxed out and you're going to the bank looking for another credit card. Well, that's not a very good sign and it means that you probably didn't handle the utility that you had on those 2 first credit cards very well. And so that's a red flag. It's going to hurt your credit score and it's going to let the next lender know that hate you have some issues there. And so what you wanna do and what you want to know is that the banks and the lenders and the credit bureaus, they want you to have lots of credit available to you and they don't want you to rely on it. Or in other words, they want you to have a very low credit utilization rate. So what you can do is try and keep your credit utilization rate below 30 percent. That is the threshold where they will start to penalize you for using your credit card because it means that you are then relying on that credit. Yes. They've given you access to $10 thousand on your credit card, but I'm telling you right now, if you go out and you use $9 thousand of that credit, that means that you are relying on that credit card and that is a negative thing in the eyes of the credit bureau. And so to counteract that, what you want to try and do is keep your total credit utilization rate and your per card credit utilization rate below 30 percent. And again, the reason you want to do that is because credit bureaus and lenders want to know that you have access to credit, but you're not relying on it. And so by keeping your credit utilization rate below 30 percent, that is exactly what it shows them and they will never penalize you for using that credit. Now, another strategy that you can use to focus on this specific area of your credit is to try to increase your credit limits so that you do not need to use more than 30 percent of your available credit. So if you ever get automatically approved for a limit increase on your credit card or line of credit, you should definitely accept it because when you accept it and you keep your spending the same, that is going to decrease your credit utilization rate. The credit bureaus are going to see that and it is going to increase your score over time. The exact same thing applies to credit cards, as well as other types of revolving credit. The other thing you can do is call up your bank and say, Hey, can I qualify for an increase in the limit to my credit card? Because if you have enough history with that bank, they'll usually do a small increase for you, absolutely no problem. You also have the option of just applying for more credit, but they may need to run a credit check for you and that can negatively impact your score. So there are upsides and downsides to applying for more credit, but if you are ever automatically approved, you should definitely take it and keep your spending the exact same because that will decrease your credit utilization rate. Now, in summary, what you need to focus on here is keeping your credit utilization on a per card basis as well as a total basis under 30 percent. If you keep it under 30 percent, that banks will never penalize you. And if you keep it even lower, they will reward you. So if you can keep your credit utilization below 10 percent on a total card basis, you will see positive benefits from that on your credit score. So I want to give that out to you, but this does only apply to a revolving credit such as credit cards and lines of credit. This strategy and this information does not necessarily apply to loans or mortgages. So please keep that in mind. And in the next lesson, we're gonna talk about the third largest factory, which is the length of your credit history, and whether or not you should be keeping that old credit card that you started a few years ago. 9. Credit History: All right, everybody, welcome back to Lesson 7. In this video, we're gonna talk about the length of your credit history and whether or not you should be canceling old credit cards. So credit history refers to how long have you had the credit for. Banks and bureaus want to see a longer credit history because it gives them more information to analyze and see how well you've paid back those debts over time. And so to them, a longer credit history is more valuable and it will increase your credit score as long as you've been paying back your bills on time. Now, this is really important here because it makes up about 15 percent of your credit score. So obviously, payment history and amounts owed are the largest factors here. But the length of your credit history is really important because you have a lot of control over it. Now, let's just look at an example here. So let's say that you have a credit card with $5 thousand on it and you'd be paying it back consistently for three years. Well, that credit card is going to be a whole lot more valuable to the credit bureaus enter the banks compared to the exact same credit card with only six months worth of history on it. The credit card with three years worth of history on it is much more valuable to the credit bureau and to the lenders because it gives a much better representation of your ability to pay back their debts on time over a longer time period. And so the strategy for improving this area of your credit score is to keep your old credit cards you should never be and canceling your credit as long as it's in good standing and you can pay it off and you can manage it. It is going to be to your benefit to keep those old credit cards and to continue to maintain them and pay them off and use them regularly. Because that longer credit history is very valuable to the credit bureaus, to the banks and to the lenders because it's a great representation of your ability to pay back your debts and your credits. Now, to answer the question of should you cancel your old credit cards? The answer is no, you should not cancel those credit cards because those credit cards probably hold the most history about your ability to pay back your debts. And so those are very, very valuable to the banks and to the Bureau's now credit card companies, you have to be aware of this, that credit card companies, we'll cancel your credit cards if you do not use them, they have a limit as to how much credit they can give out in a year. And if they give you $5 thousand and you don't use any of that, it means they're not making money on it and so they're going to cancel your card if you do not use it. And so the strategy that I use to overcome this and keep the old cards active is to automate a $1 charge onto all of my cards every single month. And so I run a business where I sell access to my discord chat, which is where I post all of my investment analysis and my buys and sells and I charge $5 per month for that. But I've created a second tier on there for $1 where I have listed all of my own personal credit cards and that way they get charged $1 per month. They stay active and I automate a $1 payment per month from my bank to all of my credit cards. That way, every single month. All of my old credit cards and avocados, three of them, all of my old credit cards, we'll get a charge and a payment and they will consistently act to build up my credit score. And I highly suggest you do this if you have any old credit cards that you don't use anymore, you can go to this link right here. I've also linked in the resources tab of this course. And you can sign up here for a $1 per month charge. It is going to charge you $1 per month every single month. And then you need to go into your bank and automate a $1 payment per month. And what that is going to do, it is it is going to keep your credit card active and it's going to automate the charges and the payments so that you can consistently build your up your credit without ever having to worry about it. So I highly recommend you do this. And in summary here, you should be keeping your old credit cards. You should keep as much of your credit as he possibly can. Just make sure that you maintain it, that you use it. That is not charging you any ridiculous fees. And that way it is going to act to build up your credit, is going to work on your utilization rate as well, and it's going to be a benefit to you. So I highly recommend keeping your old credit cards, automating the charges in the payments because it will dramatically, dramatically increase your credit overtime. Now in the next lesson, we're going to look at the fourth largest factor, which is your new credit or credit applications, as well as the impact of credit checks on your score. 10. Credit Checks: All right, everybody, Welcome to lesson 8. In this video, we're going to explore the fourth factor when it comes to determining your credit score. And that factor is new credit, as well as the impact of credit checks on your credit score. We're going to cover all of that in this video. But what I want to cover first is new credit. So this makes up about 10 percent of your credit score. And what I'm referring to here is recent credit inquiries. So when you go out and you apply for a new credit card, that credit card company is going to check your credit. That is going to be what we call a heart check on your credit that is going to classify as a credit enquire. And it basically means that you're going out and you're trying to apply for new debt or new credit. Now, the reason that this is important is because, let's say on a credit card company and you come to me and you say, Hey, Zach, I'm looking for a $5 thousand credit card, but you have already applied for that same card at every other place in town and they've all turned you down. Well, that's a major red flag. And as a lender, I would want to know about that. And that is why the credit bureaus keep track of your credit inquires and who is checking your credit? Because if you have tons of credit checks in the last month, I probably don't want to be lending you money. And so if you have a ton of credit checks in a recent time period, that can lower your score. And so the solution to this is to try to limit the number of what we call hard pulls on your credit. Now we're going to talk about the difference between a hard pull in a softball in just one minute. But basically here is when you apply for debt or when you apply for a credit card or a line of credit or a mortgage, whatever it may be, they're going to check your credit that counts as a credit inquiry. And you want to try and limit those inquires as much as possible. Because if you have multiple inquiries in a short period of time, it raises a red flag and it can decrease your credit score. Now, one thing that you definitely need to keep in mind here is mortgages. If you are planning to apply for a mortgage, that is probably going to be the largest application that you ever go through with regards to debt financing and using your credit score. And so in that scenario, you want to be very, very careful to avoid almost all credit checks for about six months prior to applying for that mortgage. Because if I'm a mortgage broker and I am saying, Okay, I'm going to give this person $300 thousand to buy a house. I really don't want to know that they went out and got a $20 thousand credit card one month before that would be a red flag. That would be a bad thing to see as a mortgage broker. And you want to be very well aware of how other people are going to view your credit report when you go to them and you apply for a mortgage or a car loan or financing, whatever it may be. And so if you're looking for a mortgage, try to avoid any credit checks within six months of that application because it will give you the best chances of getting approved at a good rate. Now, just a minute ago I talked about a hard pull and a softball on your credit check and there's a big difference between the two. So let's talk about that real quick. A soft volt does not affect your credit score. This is done when you use a third party to check and monitor your score. So if you use Credit Karma or borrow, well, every time that they show you what your credit score is, they're doing a soft pull on your credit. It does not affect your credit in any way. It is completely fine. You could do a 100 of them for months. It does not matter at all. A soft bull would just give you some basic information about what is the credit score and how are things looking. It will give somebody a general idea of what your credit situation looks like. However, when you go to apply for a mortgage or you go to apply for a credit card or a line of credit, or even a cell phone, they will perform what is called a hard pull. This is when they go in and they pull your entire credit report, they go through, they can analyze all of the information in there. And the hard poles are what show up on your credit inquiries. This is what we're trying to limit. It is not you're never going to be able to get away from hard bulls. You're always going to have to go through the hard bulls to get a new credit card or get a mortgage or get whatever you may need. But you want to try to limit it because if you have too many of them over a 12 month time period, it can negatively affect your credit score. However, it is not a bad thing, it is a necessary thing, it is part of life. And so hard pulls or hard credit checks occur when applying for credit and it will be recorded on your credit report. It stays on your credit report for two years and it impacts your score for one year. However, inquiries can be grouped together. So for instance, if you have a pretty clean credit history, and then all of a sudden you're shopping around for different credit cards and they see three credit inquiry is always in two or three days of each other. They will group that together as one inquiry and it will not hit your credit report three separate times. And so the strategy for this area of your credit is if you know that at some point you want to have multiple credit cards, that you want to have a line of credit and you want to have a cell phone and all of these different things that are going to build up your credit score over time. The key to this and the strategy here is to apply for them early. Because by applying for them early, you can get the hit to your credit score out of the way. You can get that debt and get that financing. You can start to build up a history much, much sooner. And you can start to build up your credit overtime much, much faster once you have those credit cards and once you have that line of credit, however, you do need to go through the process of getting that credit, getting that line of credit, and getting that extra credit card. And that is going to take a little bit of time. It's also going to have a small negative impact on your credit score, but it will be worth it in the long run if you can make consistent and on-time payments. Now, for me personally, as of right now, I have four credit cards. I have one line of credit, one cell phone bill, a mortgage, and a car payment, and all of those are on automated payments so that I am paying them off on time every single month and building up my credit without ever having to worry about it. Now, as a summary to this video, you need to try to limit the number of hard pulls on your credit to a maximum of one every two to three months. You really want to try to limit that because it will have a small negative impact on your score. The other thing that you need to consider is that lenders do not want to see recent applications for credit on your credit report when you're applying for a mortgage. So if you're planning to buy a house, make sure nobody is running your credit in the six months leading up to that because that can be a major red flag. Now in the next lesson, we're going to talk about the last factor that goes into determining your credit score, and that is the types of credit that you have. And we're also going to talk about some strategies to diversify your credit. I will see you there. 11. Diversity: All right everyone, welcome to lesson 9. In this video, we're going to cover the last factor when it comes to determining your credit score. That factor comes down to the types of credit that you have. We're also going to talk about some strategies to diversify your credit. Now, when we talk about the types of credit that you have, what I'm referring to is what kind of debts do you have? Are they all credit cards or do you have a mix between a credit card or a mortgage and a line of credit. Because the reason this is important is because a credit bureau and a lender will value a more diverse mix because it shows that you are better at handling that debt, paying it back over time. And if you can properly managed three different types of debt are three different types of credit that will give you a higher score for that because it shows a diverse mix. Now, the different types of debt or credit that you can go out and get include credit cards, lines of credit, student loans, mortgages, a car loan, or financing, a phone bill. And if you rent from a very large company or a property management company, you can usually get them to report your rent payments to the credit bureaus as well. Now, the strategy for improving this area of your credit score is to diversify your debt. And so what I mean by that is if you're looking to go out and apply for new debt, if you already have two credit cards, it might be better for you to apply for a line of credit than to get a third credit card because that will give you a more diverse mix. And that will show the credit bureaus that you can handle different types of debt. They will value that more and it will increase your credit score over time. Now, just as a safety note, this video is not me telling you to diversify your debt by going out and taking out a car loan or a car lease, that is not the responsible thing to do. You need to make sure that you can responsibly handle and manage all of the debt or credit that you are applying for, whether it's a credit card, a line of credit, or a mortgage, you should never take on additional debt just to diversify. But as you take on more debt, it is something that you should keep in mind in the back of your head. Now, just as a summary, as you grow and as you get more money and as you build your net worth, diversifying your mix of credit can be beneficial to your credit score. However, do not go out and get 50 credit cards. Do not go out and get multiple lines of credit. Do not quote and max yourself out because that is going to hurt you. You're not going to be able to manage it. You are going to miss a payment and it is going to hurt your credit score in the long-term. So you need to make sure that you're being responsible with your debt. Now, in the next lesson, we're gonna talk about five other strategies that I use in order to build my personal credit up above 800. I will see you guys in those videos. 12. My Strategies: All right, congratulations everyone. You now understand the five different factors that go into creating your credit score. Now what I wanna do with you is just share a couple of strategies that I use to build up my credit score over time. The number one strategy that I like to use is from a company called co-host here in Canada, they have built something called a credit building program. And basically what they do is they extend to you a line of credit, but you do not get access to it. And then what they do is as long as you have at least $7 in your account each month, they withdraw that $7 and put it towards your line of credit and they report a positive credit payment to the credit bureau. So when you sign up for this program, you're getting a new credit as well as positive payments for the cost of $7 per month. This is an absolutely fantastic program for somebody with a low credit score or somebody that cannot qualify for certain credit cards or line of credit right now, this is going to be a fantastic way to kick-start your credit score because I've used it, I've tested it out. I put $50 into it and I didn't touch it for six months and had an amazing impact on my credit score, I highly recommend it. Now if you can't get this program because you live outside of where they service, try and do some research because there might be another company similar to this, offers a similar program if you can get access to something like this, I highly recommend it. Now, the second strategy that I use is I automate all of my credit cards. It doesn't matter if I use it all the time or not, just in case what I do is I put it onto my $1 per month subscription, charged that way every single month, that card is going to get used. And I also send a $1 payment from my bank to that card automatically every single month. That way, I know for sure that that card is going to get used and paid off and it's going to build up my credit overtime. Now if I use that credit pretty regularly, I will go in and I will pay off that credit card every single week. Now if you're interested in signing up for this $1 per month subscription, here is the website right here, and you can also find it in the resources tab to this course. Now, the third strategy that I highly recommend you use is to lock your credit reports with Equifax TransUnion. The reason for this is because if anybody tries to steal your identity and they go out and apply for loans and mortgages and credit cards, it will absolutely destroy your credit score. However, if you put a lock through Equifax TransUnion on your credit report. Whoever wants to run that credit report will have to call you and verify you on the phone and actually speak to you in person before they can get access to that credit report. So it is super important that you do this because it will protect you from any type of identity theft. I'm saying this because I learned this the hard way and my score took a very big hit after somebody stole my identity and went out and apply for three different credit cards, all of which ended up hitting my credit report and my credit score took a pretty big hit for it. So I highly recommend you go into Equifax and change union. Once you've set everything up, then go in and lock your credit report and make it so that if somebody wants to run your credit, they have to verify either in-person or on the phone that it is you and you give them approval to do so. Now, the fourth strategy that I highly recommend and that I personally do is I track my credit score and I check it at least once per month, usually about once per week on both boil well and Credit Karma, I check both of them because one pulse from TransUnion and one post from Equifax. So the scores are slightly different and the reporting is also slightly different, but this helps me notice any errors and I can file a dispute, which is what we're going to talk about in the next lesson. Now, the other thing that you can do with Burwell and Credit Karma is you can sign up for alerts. So anytime a new credit check is run, anytime your score changes, anytime something happens, you can have Burwell and Credit Karma alert you via email or SMS. And I highly recommend that because the sooner you can catch anything that is wrong, the sooner you'll be able to correct it, and the less impact it will have on your credit score. Now the last strategy, and I know I've said this several times, but this is the most important thing when it comes to building up your credit score is you need to pay every single bill on time. And if it is a credit card or a line of credit, you need to pay at least the minimum amount every single month on time, no matter what it is super, super important because this single factor has the largest impact on your credit score over time. Now in the next lesson, we're going to talk about what to do when you find an error on your credit report. I'm going to walk you through how to file a dispute and what you need to know. 13. Disputes: All right, everybody, Welcome to Lesson 11. In this video, we're going to walk through what to do when you see an air on your credit report, the process that you have to go through is called a dispute. So in this video, I'm gonna give you everything you need to know now, disputes happened when you see an error on your credit report, maybe you see a Visa or a credit card that you haven't applied for, Let's say somebody ran your credit without your approval, those would be errors that gives you the right to file a dispute. Now those errors can happen for a variety of reasons. Maybe somebody has stolen your identity and tried to apply for credit without you knowing. Another reason is that either the lender or the credit bureau has made a mistake. And the last reason is that maybe you have made a mistake or your internet cut out as you're making the payment, whatever reason it is, something is wrong. And there you have finally seen it and now you need to file a dispute to try and correct it and bring your score backup. So how to file a dispute? Well, it's fairly simple, but it must be done through the credit bureau. So this is when you're going to want to go directly to TransUnion, directly to Equifax. And you're gonna go to their website and click on the dispute button menu bar. Once you're there, you'll get to file a dispute either online or through the mail and that way the UAV to send them your information. That information includes your full name, social insurance number, date of birth, current address, the name of the disputed item. So what it is you're trying to dispute, as well as an explanation as to why you're disputing it and why you think it's wrong. Once you have all of that information, you will have to file a dispute either online or through the mail, and then it can take some time for them to resolve that dispute. I just recently filed one through the mail with TransUnion and they let me know that it will take up to 30 days to hear a response to this will not get resolved very fast. And that's why it's very important to actively monitor and check your credit score and your credit report. Now, if they do agree with you and they identify it as an error, they will remove that from your credit report and it will also update your credit score to where it should be, which is the end result that we're looking for when we file a dispute. Now, in the next lesson, we are going to talk about how to pay off your debt most efficiently so that you pay the least amount in interest expenses. 14. Paying Off Debt: All right, everyone, welcome to lesson 12. In this lesson, I want to talk about paying off debt. So if you have multiple credit cards or even if you run a business in the future or later on in your life, you take on multiple lines of credit or multiple lines of debt. It's really, really important to know how to pay off those debts in the most efficient way possible so that you pay as little fees as possible. And so that's what we're going to talk about in this video now, debt. So what I'm talking about here is that if you have any outstanding balances on your debts, what is going to be the best way to pay them off so that they get paid off most quickly and they you pay the least amount of fees. Well, there's two different rules that you basically need to follow. Number 1, make all of them minimum payments. It doesn't matter how many credit cards you have, what the interest rates are, doesn't matter what happens. You need to make sure that you make the minimum payments every single month so that that creditor or that lender is going to report good payments to the credit bureaus. That is the number one rule. No matter what it doesn't matter what the interest rates are, ye have to make all of your minimum payments so that they will positively reports payments to the credit bureaus and your payment history will improve with time. So that is the number one rule. And then the number 2 rule is to pay off the highest interest rate debt first. So if you have two credit cards and one of them has a 20 percent interest rate and one of them has a 10 percent interest rate. It doesn't matter what the balances are. Pay off the 20 percent interest rate card first 100% in full, pay that one off first, and then pay off the next credit card. And I'm going to walk you through an example of why that makes sense and why that's the best thing to do. Okay, So here's the first example that I've put together here and the blue sections here are two different credit cards. So this one here on the left side is a 20 percent interest rate credit card and the one on the right side, a 5% interest rate credit card. And then on the far left you have the months here and then the principal amount. Both of these cards have a $5 thousand balance. And then here's the monthly interest amount that we are going to be charged. We're gonna make a $1000 payment every single month and we're gonna see how long it takes us to pay off both of the credit cards. And then right here under this remainder section here, you can see what the remaining balances at the end of each month. And so in this example, as you can see, we start with $5 thousand on our 20% interest rate credit card, and we're making our payments to the higher interest rate credit card first. So in this scenario we're going to pay off our high interest rate credit card first. This is what I recommend you do and we're going to walk through exactly why right now. So here you can see in month one, we start with $5 thousand, we prove $83 in interest. We pay down $1000 and we finished the month with $4,083. We start the next month at 4,083. We approve $68 in interest, we pay down 1000 and we finished a month with 3,151. And as you can see, it takes us six months to pay off this credit card. And in the last month we make a payment of $266 to bring the balance down to $0. Then we move over to our other card and we've used the rest of that $1000 payment to pay off our 5% interest rate credit card, and that's $733 goes in and months six and my month 11, we have paid off the final remaining amount of both of our credit cards. Now, the interesting thing here, and I want you to really focus on is this interest charge column right here. So I've summed up at the bottom. And on our first credit card we paid $266 worth of interest. And on our second card, we paid $177 worth of interest for a total of $442 worth of interests. So in this scenario, we have two credit cards with 5000 dollars on them each. We paid $1000 per month towards our credit cards, but we pay it off the high interest rate credit card first. That's what I'm recommending to you. And in this scenario, we paid $442 with an interest in total. Now, in the next scenario, what we're gonna do is we're actually going to reverse it and we're going to pay off the 5% credit card first. And then we're going to use the money to pay off our 20 percent credit card second. And so this is really important because the only thing that I'm changing in this example is which card we are paying down first. And so in this example, again, it takes us about six months to pay off this credit card and we only have to pay $63 in the final month, and we can use the remaining $937 to pay off our 20 percent credit card in 16. And then again, it takes us 11 months to pay off both credit card. So in reality, it took this same amount of time to pay off those credit cards. However, let's take a quick look at how much interest we paid on these credit cards in this scenario. And so on the 20 percent credit card in this scenario, we were paying interest for the first five months where we weren't making payments to this card. And so unfortunately, we paid a total of $747 worth of interest on the 20 percent card and on the 5% card we only paid $63 worth of interests. So we paid it lower interest on the 5% card, but we paid dramatically more interest on the 20 percent card. And when you add up these two numbers, it comes to $810 worth of interest that we paid in this scenario. And so when you do the comparison, we paid $442 in the first example by paying off the high interest rate card first. And in this second example, we paid off the low interest rate card first and it cost us $810, which is a difference of $368. And what's cool about this is that just by making the right decision of where to put your money, you can save yourself hundreds of dollars. And on top of that, these principles and these rules apply to all forms of debt no matter what it is, try and pay off the highest interest rate debt first because that is going to save you the most money. Now, in summary, always make the minimum payment no matter what it is. If it's $10.20 dollars, fifty dollars, you have to make the minimum payment on to every single card. After that with the money that you have to pay back your debts, make sure that you are paying off the highest interest rate debt. First, pay it off completely, and then move on to the next highest interest rate debt card because it will save you money on interest fees. Now in the next video, I'm gonna give you a quick summary of everything in this course as well as a couple of extra resources. So make sure you stick around and I'll see you there. 15. Conclusion: All right everyone, congratulations. We're now at the end of the course. And the only thing that I wanna do in this video, I'll give you a quick summary of some of the main points for you to take away, as well as give you a couple more resources that you can use on your credit building journey. So let's jump in. Okay, So as a quick sorry to this course, I've put together some of the biggest bullet points from throughout the course. And the number one thing is to pay all your bills on time every single month and try to automate as many of those bills as you possibly can. And number two is to stay under 30 percent utilization rate, both on a per card basis as well as a total debt basis. You need to make sure that you're staying under 30 percent and the lower that you can stay while still using all of those debts every single month is going to be the best-case scenario for you. Thirdly, is do not cancel old cards, put them onto my $1 per month subscription basis, and then automate a $1 payment towards those cards. It'll keep them active and it will continue to build your credit overtime without you having to do absolutely anything. The next factor is to limit your hard poles. Do not let anybody and everybody run your credit and only let them run your credit when he know that you're willing to accept the application that you have applied for. Lastly, you need to monitor your credit sign up for Borough well, sign-up for Credit Karma, turn on credit alerts and walk your credit report at Equifax and TransUnion that is going to alert you when anything changes and it is going to prevent somebody from stealing your identity and trying to apply for credit on your behalf. Now, if you've got any value out of this course, the only thing that I asked from you is to please consider leaving a review for this course. It sincerely helps me out and it helps other people out when they go through these courses and they try to find out which ones are good, which ones are bad, and where they should spend their time. So my only ask of you is please leave an honest review. Tell me how I did. Tell me where I can improve and if you've got any value out of this, I would love to hear from you. Now, if you're interested in seeing more courses that I've put together, I actually have four other courses here on the Skillshare platform. My first and best course was actually the stock market fundamentals course. It walks people through from start to finish, everything they need to know to get started investing into stocks and into the market. I promise you it is like the best stock market course you will find anywhere online once you've taken that course, I also have a course on options which is kind of like one level up, a little bit more complicated as I've also done a course on personal finance. So how to manage your personal finances and pay back some of those debts is what we really focus on in that course. And then just recently, I put together a couple of our course on how to trade and invest in cryptocurrency and Bitcoins. So lots of different resources here on the Skillshare platform, I have lots of different courses that I'm gonna be coming out with over the next little while. So please consider following me and if you're interested in any of those topics, please check out my profile here on Skillshare. Now, if you're interested in any other resources, I've linked them in the description to this course as well as the project for this course. And if you're going through the project right now, please consider making that submission. I would love to see a logo from your favorite sports team, a photo of your Skylar and your favorite food, whatever it is. But go through that project, use that credit building plan, and then leave us a submission for your project. I would sincerely appreciate it. And if you're interested in staying up to date with me and learning what I'm doing on mostly a daily basis. You can definitely follow me on YouTube. I'm posting videos. They're almost every single day about what I'm investing in, what I'm doing, and how I'm building my own personal credit. So if you'd like to stay up to date with me, please consider subscribing to me on YouTube. And lastly, I just want to say thank you, thank you for watching this course here on Skillshare. Thank you for following along and thank you for paying attention. I sincerely, sincerely appreciate it. And if you have any questions or you want to reach out to me, you can contact me at zed Hartley at Hotmail dot ca or you can visit my website, Zach Hartley.com.