Looking to rebuild credit? Duane here with How To Build Credit TV and in this
video I'm going to talk about one of the main things that you should know in
regards to rebuilding your credit. But before we get started I have a quick
message
Once again my name is Duane with how to build credit TV. This channel offers
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Alright in my other video I talked about three tips the actual three tips that I
used to rebuild my credit score. The first thing was number one get a copy of
your credit report. Number two know your credit score in other words find out
your credit score and number three get a secured credit card. In this video I'm
gonna talk more specifically about our credit score and how it is comprised.
There are actually five categories that make up our credit score the first one
which is worth 35% of our credit score is payment history.
Payment history just simply refers to paying your bill on time not having late
payments. This is very important this is actually very easy to accomplish if
you're starting from scratch and regarding in regards to building credit.
If you are brand new and you just have one credit card and you always pay a
bill on time for like let's say a year. You're gonna have 100% of that category
which is 35% of your score comes from payment history. So it'll be
easy if you're starting off brand new but if you've had a couple of mishaps
just like myself in the past. This category is hard to maximize because you
won't be able to get 100% and one or just 100% just simply
refers to the fact that you've paid all your bills on time right. So when you
miss a payment or you miss several payments it's gonna lower the overall
percentage or grade in that category. So for me for example mine was at 89%
for the longest time because I had a couple of things on my credit
report I still do that I'm waiting to fall off of my credit report because
they normally fall off after seven years. So just recently mine went up to 91%
And I'm gonna actually get in my phone and show you guys exactly how, how
the credit score is rated and that's the good news about when you use apps like
the creditwise app with Capital One or Credit Karma or nerd wallet. So I'll show
you guys that in just a second but the first category like I said is payment
history and that makes a 35% of our credit score. The second category that
makes up 30% of our credit score is credit utilization. There is a lot of
wrong information out there about this category. A lot of people seem to think
that as long as you're around 30% that that's good in actuality that is not and
I'll log into the app and show you guys that as well. You need to be between 0
and 10% So if I have a credit line of $10,000 10 percent
of that would be one $1,000 I do not need to be any higher than one
thousand dollars. If I have above one thousand dollars then I'm gonna be
moving out of the excellent category for that particular for that particular part
of my credit score. So you want to be between zero and ten percent and I'll login
to the app and show you guys exactly what I'm talking about.
The third category that makes if our credit score is credit history or
another in other words time that we've had credit. Okay so like if this refers
to how long we've had credit or have had credit established. For example the longer
you've had credit let's say I'll open a credit card back when I was in college.
And I've kept that card open for the last 20 years
then my credit history will be very good it'll actually be in the excellent
category versus if I open a credit card and I've only had it for three years and
I've only had credit established for three years. So this category credit
history is talking about that and that makes up 15% of our credit score. The
fourth category is new credit and new credit kind of refers to when you apply
for a car or a loan or a house loan. They pull your credit report okay so it
really kind of has to do with getting credit inquires. So that's what new
credit has to do with and so the more you pull your credit report the more you
kind of ding your credit score overall. You should not have more than two pulls
on your credit report for a yea.r And I'll show you once again I log into the
app and show you exactly what I'm talking about. New credit makes up 10% of
our credit score. The fifth and last category that makes up our credit score
is types of credit that is 10% as well. Types of credit refers to what kind of
credit you have. Like a car loan would be one type of credit a credit card with
people one type of credit a store credit card would be another type of credit
house loan would be another type of credit. So this refers to the mix of
credit that you have. And this is only 10% of your score but this is a part
that makes up the entire credit score. S,o there are five categories the first one
being payment history number 2 credit utilization, number 3 credit history or
credit history referring to the length of how long you've had credit. number 4
is new credit like new accounts and number 5 is types of credit which is the
mix of accounts. Alright so for this part of the video I'm gonna go ahead and
log into my credit computer and show you guys or specifically how these
categories are made up so I have my phone here. I'm gonna go ahead and touch
the Credit Karma app and I will put my fingerprint there to log me in okay and
you guys will see this on the screen. So once this pulls up alright so I have two
different credit scores you have transgene and you have Equifax I'm gonna
go and click on the Equifax just to use this one as an example
Alright so the first thing which is 35% of our credit score is payment history
so as you can see I'm at 89% the reason why I'm at 89% is because I've had some
past bills that I wasn't able to pay. And so what happened was it clearly affected
me so those things actually will fall off of your credit report after seven
years. SO what will happen is I think I'm I think the last ones supposed to fall
off this October so automatically I should be at least 95 to 100% in that
category which will bump my credit score because right now I'm at 89% and 89% is
actually not good let me see 89% is probably
below average to be honest with you okay so when I get that off my credit score
will go up. because I'll be let's say I'm getting 25 percent out of the 35 percent
in that category and let's say I get to 100% as far as my payment history is
concerned then I will get the full 35 percent out of that portion of my credit
score okay the next category is credit utilization
which is 30 percent and as you can see it's on the screen here so I'm having 1%
currently this app is really good because it shows you your total limit.
You see mine there is 18,000 and then it shows you how much I actually have on
all my cards and so currently at the moment when this report came out I had
147 dollars which is clearly less than one percent. So that's really good. As you
can see on the phone screen here it shows. You a lot of people think around
30 percent is good for credit utilization and as you can see that's
absolutely kind of wrong or not really wrong but you're just not getting the
max amount. You see 30 percent on the screen here and 30 percent is kind of in
the caution right it's not in the green it's kind of in the caution category. So
my advice is to be between zero and ten percent to max out and to actually get
30 percent of this particular category which is credit utilization alright so
let me go ahead and go back. Alright the next one here is length of credit
okay or like credit history like how long have I had credit like what's the
average age of my credit. And as you can see here it's three years and nine
months that's not very good. I'll tap on that so you guys can see. If you have
credit established for nine plus years then you would be in you'd be getting
100% of this category right. This category is 15% of our credit score so
as you can see my credit my ah I'm between two and four years which is like
a little above average I guess but that's not really good. In order for me
to maximize this category I need to have had credit for a long time like if I had
a car from college and I still had it open now I would totally be maxing out
and getting the max 50% out of this category. Alright let's go on back.
Alright the next one is going to be total accounts and total accounts is kind of
it has to do with like mix of credit. That's ten percent of your score. So this
total accounts it's showing how much accounts I have and this parts interest
and of course I'm gonna have some of this blocked out there's no personal
information here. But this part is interesting because let's say I had a
student loan which I did and I do I that student loan it works to my benefit in
that like it's considered to be established credit which is kind of
weird or let's say I bought a car ten years ago even though that account is
closed it's still it still serves under here as an account that I've had and it
serves towards total accounts. So as you can see on the screen here it says 21
plus accounts would be the very top end of this right so that you would be
maxing out the percentage that you could get towards your credit score. Alot of
people believe that you know you need two or three cards the more credit card
you have the better you're looking right at the screen here and it's showing you
between 0 & 5 is the lower end. Okay and between 11 to 20 would be closer to
where you would need to be. So you don't necessarily need that many credit cards
you just need credit types are you know types of account like a loan
car loan those are different things that goes towards this category. Aright let
me go on back and show you guys. Okay so we have derogatory marks of
course that affects your credit score this is a very high impact on your
credit score. So make sure if you have derogatory marks here that you know
after a while if you can pay for it pay for it but if you can't you know after 7
to 10 years it'll be gone. So the reason another reason behind my scores higher
with Equifax is the one derogatory mark that I thought I still have and I
do TransUnion shows it it's still on my
credit report so that's why the TransUnion score is lower and I think it
falls off in October okay so that's pretty straight for the last one here is
hard inquires this one is very important. Okay so every time you apply
for a loan a credit card, maybe cell phone, maybe electricity
you're pulling your credit and so in this category what you want to do is you
don't want to have any inquires within the past two years. So as you can see
zero we'd be considered to be excellent. one to two is okay three to four is
caution or average so the closer you are to the green the closer you are to
maximize every single percent that you can out of that specific category. Now I
know that was a lot of information but if you're very diligent about rebuilding
your credit and you actually want to do it you definitely got to get in there
find out this information come back and watch more videos for me because like I
said this is something that I've experienced myself and I just kind of
learned it along the way alright. Thank you guys so much for watching the video
please be sure to LIKE, comment, and subscribe
I can't spoke right. Anyway thank you guys for watching this video until next
time take care and be blessed.
peace!