What’s more important:
Your debt or your credit score?
It seems obvious at first, but people who have lots of debt often ask me:
“But Caleb, wHaT CaN i Do AbOuT mY cReDiT sCoRe?”
And I always give the same response:
F*CK your credit score!
😛
If you have lots of debt, your #1 priority is paying that off.
And when you do, guess what happens…
Your credit score improves!
WHAT A SHOCKER.
That’s because…
Credit scores predict how well you are at handling debt (DEATTHHH).
More specifically, if you can pay loans back on time.
Companies use your credit score to decide whether they should lend you money for things like:
🏠 A home mortgage
💳 A credit card
🚗 A car loan
Have a dead-in-the-water, dogs**t credit score?
One of 3 things happen:
- No money for you 🙁
- Get money at a super high interest rate
- Get a very small amount of money
Have a fan-f**king-tastic score?
Borrow as much money as you need at a low interest rate 🙂
(Don’t know your credit score? Check to see if your credit card company allows you to check it with their app, or sign up with a company like Experian or Credit Karma.)
The main point here is risk.
If a business is going to lend you money, they want to know you’ll pay them back.
So, if you want to:
📈Improve your credit score
📉Pay less interest
🇺🇸Have more freedom in borrowing money when you need it
Then just do what a responsible spender would do.
And since I’m feeling nice today, I’ll give you a good breakdown of how it all works.
Here are 7 ways to impact your credit score:
- How much credit you’re using – High Impact
Credit bureaus track the total amount of available credit you have.
This is also known as credit utilization.
And here’s a secret not many people know:
Banks don’t want you to use all of the credit they let you borrow.
Lower credit score: Max out your credit cards. They see that as irresponsible borrowing.
Higher credit score: Use only 10-20% of your available credit. They see you have some self-control with your monies.
- Bill Payment History – High Impact
This one is simple:
NEVER MISS A PAYMENT.
All it takes is one late payment to hurt your score pretty badly.
Miss two or more within a year and you’re in deep doo-doo.
Lower credit score: Miss a payment every once in a while.
Higher credit score: Make the minimum monthly payment. EVERY TIME.
- Derogatory Marks – High Impact
These are absolute DEATH.
Derogatory marks happen when you have a debt sent to collections, a foreclosure, or a bankruptcy.
It’s the closest thing to being put on a credit blacklist for 7-10 years.
PLEASE AVOID.
Pro Tip! If you have a derogatory mark and it’s an error, you can file a dispute with the credit bureaus.
If it’s not an error, then you can write a goodwill letter to the creditor or debt collector. Long shot but worth it.
Lower credit score: I’m telling you. Don’t let it happen.
Higher credit score: Don’t be a dumb**s.
- Credit Age – Medium Impact
This one’s a little weird.
It’s based on how long you’ve had access to credit divided by the number of different credit streams.
For example, let’s say you got a credit card at 18 years old.
You held it for 2 years. That means your credit age is 2 years.
But, you decided to get another credit card at age 20.
Now, your credit age is split in half to 1 year because you have 2 different credit streams.
2 years / 2 credit cards = 1 year (credit age)
Lower credit score: Lower credit age.
Higher credit score: Higher credit age.
- Current Unpaid Debt – Low Impact
Got massive debt from student loans or a mortgage?
Your credit score might be taking a hit.
Credit bureaus see that as risky and will want to prevent you from taking on more debt.
Lower credit score: Take on massive debts like mortgages and car loans.
Higher credit score: Have zero DEATTHH or pay everything in cash.
- Total Loan Accounts – Low Impact
The more different loan accounts you have, the better your score:
- Credit cards
- Student loans
- Auto loans
- Home loans
Now obviously, don’t go out taking loans just for your credit score. That’s not a smart move.
But if you open credit cards and don’t use them, it still counts.
Lower credit score: Having only one credit card.
Higher credit score: Using multiple lines of credit responsibly.
- Hard inquiries – Low Impact
Hard inquiries include new credit applications that were denied.
They normally stay on your report for up to 2 years, but your score normally bounces back within 3 months so don’t stress about this!
Lower credit score: Apply for a bunch of loans and get denied.
Higher credit score: Be smart and selective with which loans you apply for.
“Wow Caleb, this is so informative. You’re so smart. Marry me. Pls bby. Tell me, how can I improve my credit if I don’t even have a credit card?”
Aww, you didn’t have to say all that 😊
If you don’t have a credit card, fear not fellow citizen.
Some companies can help you build your credit just by using a debit card like Fizz.
Here’s how it works:
- Their debit card connects to your bank account
- They give you a credit limit based on how much money is present in your account
- When you use the card for your purchases, it builds a balance that automatically pays itself back with the money from your account
It’s that simple. Not to mention:
There are zero fees or interest AND you can earn rewards when you use the card.
And if you sign up using my affiliate link here (which supports our growing team), you can get a $10 sign-up bonus – limited to the first 10,000 people.
Hope that answers your question.
There’s a lot more about credit and borrowing money that we’ll cover, but I think this is good for now.
See you later slick.
Taquitos,
Caleb Hammer
