Now, on my channel, I always teach you
how to make more money and how to create wealth,
and one of the things that most people don't think about,
or they overlook, it's their credit score,
and today, I have Matthew with me from VIPFinancialEd,
right, his channel, we're doing some collaboration.
I thought, you know, Matt,
why don't I just kinda pick your brain
and share with my audience a little bit about how to build
that perfect credit score, and also, why is it important?
So I think most of us begin to realize the significance
of credit and credit scoring early into college
and after college because most of us go onto campuses
and we're inundated with these offers,
and we have no idea how our credit works
and our social security number, it follows us around.
And my personal story was the same.
I got a Discover card.
To me, it felt like free money.
(Dan laughing) I maxed it out
in the first 30 days. Yes.
$1,000, I'm thinking, okay, maybe if I move enough,
they'll never find me.
They just kept following me around magically.
Shortly thereafter, I had the opportunity to hire a mentor.
I got involved in the real estate business,
started a wholesale residential mortgage company,
and began to see the tie-ins between credit
and how the rest of your life is gonna go.
If you are not concentrating on what they consider
to be your life's financial report card, then guess what?
You are gonna pay the consequences,
and you will pay dearly in actual dollars and cents, folks.
So if you care about money,
you should care about your credit.
And what we talk about on our channel, Dan,
is the concept of other people's money.
We like to think of ourselves as the perfect blend
between the Robert Kiyosaki ideas
of leveraging money to create wealth,
while also treating debt as if
it is a cancerous danger, it is.
It's the blend between Dave Ramsey--
It's a two-edged sword, I always talk about.
It is, exactly.
So we look at it as a tool
that when used well and correctly,
it's gonna work really, really well for you,
and when it's used incorrectly,
it will be a tremendous danger.
Credit is something that, since that time,
I cared a lot about, and I was presented
with the opportunity to hire a mentor,
one of the original pioneers of the credit industry,
the original FICO credit score.
FICO is the Fair Isaac Corporation.
Fair Isaac Company has created this algorithm
that takes all the data from your payment histories,
and it processes it into this magical score.
The highest score you can get is an 850, and so--
That's the perfect score.
That's the perfect credit score, right.
And it's said that about a million people,
according to Fair Isaac, have an 850 credit score.
Mine, right now, is 820, 830.
The way that you develop really, really excellent credit
quickly is by understanding the different elements
that go into the credit scores.
I've been considered one of the foremost leading experts
on the subject of credit,
and we have managed to dovetail that
into a tremendous amount of assets,
and credit has since become a very small spoke
in a much bigger wheel.
When we first started, we were out teaching on credit.
That was really our main--
But the credit, it's a mean to an end.
That's exactly right. It's a tool.
We started realizing that,
once I hit 25 years old, I started seeing
how credit influenced all these other things,
and those other things were much more valuable,
I just needed the tool to get to those other things.
So that's what we focus on our channel about.
So I wanna leave you guys with a couple
of really cool techniques
that you'll never hear about in school,
your parents aren't gonna know about this,
your friends aren't gonna know about this,
so make sure you share this video with everybody you know.
The first technique that is extremely popular
on my channel is talking about a strategy
that was expected to go away a long time ago,
known as piggybacking, or the authorized user technique.
It's one of the fastest ways to skyrocket your score.
I've seen more people get 100-point credit scoring increases
from this one technique, or even more than that,
within 30 to 60 days.
Wow.
So the very first thing you wanna do is find out
whether or not you have a friend or a family member
that is willing to look into this tactic with you
and understands that they don't have any risk, okay?
So the primary account holder,
being your friend or relative that owns an account,
has to be willing to add me
on their account as an authorized user.
Now, if I'm added as an authorized user,
within that next reporting cycle,
which usually happens 45 days or less,
I will immediately adopt the entire history
of that one credit card account.
So if your friend or relative has, say,
10 years of history of on-time payments on this account,
I will suddenly receive on my credit report
10 years worth of on-time history on that account.
Now, there are some very key pieces
of cautionary information you're gonna have to consider
before you do this.
Number one, the primary account holder
has to be paying that account on time.
Don't sign up as an authorized user on an account
that has any past-due payments, any delinquencies,
or if they're in default, you're gonna adopt the negative--
That's not good. Just as easily
as you would adopt the positive.
That also means that you wanna make sure
that the utilization ratio is very low.
I like to look for accounts that have
at least a $5,000 credit limit.
Okay, so $5,000 available,
and any time they are spending above zero,
and the closer it gets to $5,000,
the more that will negatively impact you.
That is worth 30% of your overall credit score.
So how much you're borrowing
compared to what's available to you
is worth 30% of your score.
What's surprising to most people, Dan,
is that paying your bills on time is only valued at 35%.
Wow. Okay.
So it's worth almost as much to your credit score
to keep your balances compared to your limits
as low as possible.
So make sure that if you're being added
as an authorized user that the primary account holder
keeps a low balance, preferably they're paying it off
in full every single month.
Finally, you wanna make sure
that this person is understanding
that they can remove you at any time.
So this is not a permanent cosigner, co-borrower situation.
So unlike actually going on the account
where you can never be removed
until the account is paid for and closed--
There's no risk for them.
No risk at all.
Within a five-minute conversation, you can be added,
and within a five-minute conversation, you can be removed.
Here's the downside.
Not every creditor is gonna allow this to happen.
So not every credit card provider actually will recognize
authorized users and report to the credit bureaus.
So just because you're added as an authorized user,
you have to ensure that they're actually gonna hold you
liable for that balance if there is one,
and the liability, while it sounds like a risk,
isn't if you're dealing with a primary account holder
who manages their money really, really well.
So if they're managing their money well
and they report to the credit bureaus,
then it's a win-win, and you can adopt the history.
If they don't get your social security number,
it's a sign that you're not liable.
So that's a good indicator, you can also just flat-out ask.
So, again, this is usually based
on a quick five-minute conference call,
primary account holder and you are on the phone,
call the creditor and ask to be added,
will I be liable for this account,
do you need my social security number,
et cetera, et cetera, okay?
So very good technique,
you'll see your scores skyrocket within 100,
within 30 days, and it could be as much as 100 points.
Now, I don't recommend this as a permanent strategy.
This is a stepping stone to get into your own credit.
So if you're just trying to build your credit up,
this is a great way to get to a better score
so you can apply for your own credit card accounts
and then get removed from that person's credit account.
I love it.
Second technique.
Second technique is pay
before the statement closing deadline, folks.
I talked about the utilization ratio,
also known as debt-to-available ratio,
not to be confused with debt-to-income ratio,
which we hear about all the time,
it's used in underwriting to determine
if you're a good borrower.
Debt-to-available is determined
by the credit-scoring algorithm
as how much you're borrowing
compared to what's available to you.
If we know that that's worth 30% of your score,
then we wanna manipulate the system as much as possible.
What most people don't know is that credit card companies
or other creditors will generally report once per month,
but they report on or around the statement closing deadline.
The statement closing deadline
is not the same thing as your due date.
Okay.
The statement closing deadline is the last day
that transactions are added to your monthly invoice
before they cut the invoice,
and it's the last day that transactions are added,
and they send you the bill,
and the bill is due a couple weeks later.
So you're spending, spending, spending, spending, spending,
you have the highest balance here, it cuts off,
and then, they report to the bureaus.
So it's showing that, even if you have a $5,000 limit
and you're spending $3,000--
Right, all the way up. All the way up,
$3,000, and then you pay it to zero every month,
what's reporting?
$3,000, not zero.
$3,000's reporting,$3,000's a 60% utilization.
60% utilization is considered very harmful
to your credit report.
Now, a lot of people have heard the milestones,
keep it below 30%, keep it below 50%,
and yes, those are great benchmarks to focus on,
but every dollar increase to how much you're borrowing
compared to what's available is considered harmful.
Every dollar decrease of what
you're borrowing is considered helpful.
So try and have it as low as possible.
I teach, and my preference is, to pay every single day,
I pay my balances in full,
and the reason I do that is because I'm able to go in
and look at the transaction history
and see and manage what I'm doing.
It takes five minutes.
I know where I've spent the money.
I have one business account, one personal account.
We keep this separate, so it's very easy for bookkeeping.
I go into the business, pay it to zero.
Personal, pay it to zero.
So if you're just wanting to pay once per month,
that's okay, but try and pay several days before
the statement closing deadline, so that when they report,
you have a much lower balance that's reporting,
which will have a tremendous impact
on your personal credit scores.
So guys, that's it. I love it.
So one is a fast strategy, 30, 60 days, authorized user,
but one is a more long-term habit
that you should have. Every month, every month,
habit, yep. I love it.
That's how you build a perfect credit score.
Matt, I appreciate it.
Make sure, check out Matt's channel.
I'm gonna put a link right here,
which you have a lot of videos
that goes more in depth on the various techniques.
All about creating wealth,
all about creating cash flow, folks.