How to start building credit? How to increase your credit score?
If you want to know, please stay tuned
Hello everyone, welcome back to my channel
Today, I'm going to show you how to start building and increasing your credit score
as everyone knows already
To have good credit, you just need to use your credit card and pay the bills on time every month
This is absolutely correct, but the problem here is how to get the first credit card
There are two ways to get your first credit card
Method 1: if you have relatives that have good credit
you can ask them if they want to add you as an authorized user under their credit account
If they agree, the bank will issue you a credit card in your name
BUT this credit card will be solely responsible for the responsibility of your loved one
If you can't afford to pay that debt
your relatives will have to pay these debts
If you have young children, you can also add the as an authorized user under your credit account.
Once they turn 18, their credit score will be quite good
Method 2: you can go to the bank, any bank, and ask for a secured credit card
This means that you will have to give them a secured deposit (for example, $500)
then they will issue you a credit card with a credit limit of $500
And you just use it and pay the debt on time
about 6 months or 1 year after they start to trust you, they will give you back your $500 deposit
After you have successfully obtained your first credit card
Then the next thing you do is use this for daily expenses
IMPORTANT: use the card for necessary expenses ONLY like groceries, buying gas
and making a monthly payment ON TIME. This is very important!
After making payments on time for about 6 months or 1 year, your credit score will be better
After 1 year from the date you got that first credit card
Now, you can apply to apply for another credit card
At this point, your credit score is quite good, so getting a credit card at other banks is not too difficult.
Please remember 1 thing,
do NOT apply for multiple credit cards at the same time. You should only apply for one credit card per year
Because every time you apply for a credit card they will check your credit
And every time they check credit, your credit score will drop a few points
Here are a few small things to keep in mind when using a credit card
First, do not use a credit card If you do not have enough money to pay
and do not use your credit card without innocence, and only spend necessary expenses
Second, you should pay bills on time and pay off the card at the end of the month
because you will have to pay interest for the amount of money that are not paid off
and interest will be calculated on a daily basis
Third, you should not close old credit accounts
If they do not charge an annual fee, you should not close the accounts.
Use the cards once in awhile so they don't close your accounts.
Because when you close old accounts it also affects your credit score
Since many of you ask how I check my credit score
I am going to share with you what I am using to check my credit score
I am using Credit Karma
First, I will go to Credit Karma's website
If this is your first time using Credit Karma, you must sign up
On the right hand side, there is a "sign up" button, please click on it
Next they will ask for an email and ask you to create a password
Enter your email and create a password for your account
They will then ask you for your information
Name, age, social security
and then after that they will ask you to answer some questions
to confirm it is yourself and not someone else
After you create the account, then you log in
Right on the first page, they tell me their credit scores from 2 credit bureaus
There are total of 3 different credit bureaus rated your credit score
And in Credit Karma they will show us our credit scores from 2 credit bureaus only
If you want to know in detail the factors that affect your credit scores
then you click here
As you scroll down, you will see that there are 6 factors that affect your credit score
The top 3 factors have high impact to your credit score.
The bottom 3 have medium and low impact to your credit score.
This is the payment history.
It's very important that you pay your bills on time every month
This is the ratio between the amount that you owe and your credit limit.
For example, click here
My total credit limit is $163,000
Currently, I only owe $1000
So the rate is only 1%. We always want to keep this ratio as low as possible
They have stated here
less than 29% is good
from 30% to 50% is the average, and over 50% is the warning
so the ratio numbers between the amounts owed and your credit limit should always be as low as possible
These are your records.
Collection means when owe money to credit cards companies
they will sell it to collection
Or if you file bankruptcy
these records are greatly affect your credit score
Credit age means the number of years since your credit was established
Why is my credit age only 5 years?
I closed all of my old accounts that I opened when I was young, and that brought my average credit age down. :(
So please, if your old credit cards have no annual fee, do NOT close them.
This is the total number of accounts that I have
Now I have 31 accounts
And these hard inquiries mean
every time I check credit to open credit cards, or borrow money, or rent an apartment
Then it is called hard inquiries
This number, 2 or less is good, 3, 4 is average, and 5 or more is not good
That's why I advise you not to open many credit cards at the same time
because every time you open a credit card, they will check your credit
and you will get 1 hard inquiry each time your credit gets checked
Those are the factors that make up your credit score
when you check your own credit, it won't affect your credit score
so you can check it yourself, don't worry
I did a video explaining in detail how credit score is calculated
I will be on this side, please check them out.
If you find this video useful, don't forget to like and subscribe. Thank you for watching
bye.