Credit is kind of like trust.
It takes a long time to build, but you can destroy it in an instant.
Hey guys, Sebastian from ask Sabby today, we are going to look at how to rapidly increase
your credit score in 2021 as always chapters tool down below.
Big favor from you guys is to give this a thumbs up because there probably will be some
anti credit people who watch this video.
And if you are someone new here, want to get that extra cash back and maybe some subsidized
trips then consider some.
We're pretty much all about how to maximize her credits, who leverage it for other things.
One question, I get a lot for videos like this is why even bother.
Just get a job.
Don't be poor.
You don't have to worry about putting credit.
The average credit score right now in America in 2021 is seven 11.
If you're below this, then it's obviously fine, but you might be handicapping yourself
for a lot of things.
If for someone just coming out of school or you're pretty early in your career, then you
might need to bring it up.
If you are in a super competitive place for rentals, then it might make it impossible
to find something that is actually good, even worse.
I've actually seen some pretty shady behavior by landlords where they try to make you pay
even more money up front because you don't have a good score.
I feel like finding a place is stressful enough that you don't really want to add to that.
If you have the luxury of living at home, then that's great.
But for a lot of people, you might need to move to a different city because that's where
the opportunity.
If you have bad credit, then that can actually affect your it to work in some industries.
So for something like finance or accounting, they want to make sure that you're not at
risk for either selling that information or using it in an inappropriate way.
Imagine you were auditing Tesla.
So you see all this financial information.
Do you try to trade on that, which is insider trading for some branches of the military,
they do it as part of the enlistment process.
And then for some other ones, if you are trying to go for that promotion, get that security
clearance, then they also do a.
Mortgages are pretty obvious.
And unless you're super rich, you probably do need to finance it.
You could do something called manual underwriting, but I feel like you don't want to make that
process more difficult if you don't need to, especially for something as big as a mortgage,
those little interest rates can make a huge difference.
So you just want to position yourself the best you can.
Okay, cool.
So with all of that said, what is your credit score?
It's a way to measure how reliable you are in terms of paying off your debt.
There's a ton of misconceptions, but the basic idea is that they want to see that if they
give you all this credit, can you be responsible?
35% of your credit score is going to be your payment history.
So do you pay off what you owe?
30% is going to be the amount owed.
This is a utilization.
There are a ton of tricks here, and we'll cover those towards the second half of the
video.
15% of your score is going to be your credit history.
So how long have you had these cards?
10% is going to be new credit, which represents inquiries.
So are you actively looking for.
For example, someone applying for one a month would be less risky than someone applying
for 10 a day.
Why are you applying for so many?
Is there something going on?
Why am I wearing this hat?
The last 10% is going to be your credit mix.
And this is also one of the traps that I think people get caught in.
This is basically the type of debt products that you actively use.
Before we dive into all the tricks.
I ended up doing a poll on the community tab.
And if you are part of the 50% of people who want to fix your score, but you're maybe putting
it off, you're saving it down your plan to do one on the weekend.
And then that weekend turn to the next year because new year's resolution time might as
well fix my score then versus now, if you are someone who stuck, I ended up making a
community on viably as a disclaimer.
There's no secret sauce.
And there are silver bullets.
A lot of people have been able to get pretty good scores just by watching these.
The main point of it though, is accountability.
And number two, to help you build out a spreadsheet to manage everything and to improve your score
in a very short amount of time, it's really easy to talk about all the principles, but
making them bite-size pieces and actionable ones should help.
A lot of people.
Ironically, this spreadsheet is also high managed 30 plus cards.
So if there is a secret sauce, then it's a secret sauce.
It is $8 a month, but it's intended to be a one month bootcamp.
$8 also keeps the bots out of the system who are offering free crypto.
There's also some psychology around.
If you pay for something you're more incentivized to actually go through it compared to free
information.
Some people are probably going to be surprised that I'm charging only $8 and not 80 or 800.
And I probably could get away with 800, but that's not really.
End of the day.
I want something that the average person can afford and is about the price of two coffees
are one in San Francisco where I live again, viably linked down below.
If you want to check it out, if you already have great credit and you have a system for
everything, then you're good to go.
Don't worry about that.
If you do want to learn about cards though, then consider using the ones on our site,
ask sebi.com and also the one-stop.
In the description box, probably the easiest way to support the channel.
So thank you guys in advance, diving back into it.
Why do I think credit mixes a trap or trap number one, it forces you to get debt products
that you might not actively need.
So for example, I live somewhere where I don't need to have a car.
I can pretty much walk everywhere or take public transit, but for a lot of other people,
they have cars for me.
It doesn't really make sense to get an auto.
Just to increase my score because that's pretty stupid.
A lot of other instruments like student loans, mortgages, and auto loans have an expiration
date.
Once we finished paying it off, then it's effectively closed and it does keep aging
for a little bit, but it eventually falls off.
So you're saying if I pay off my student loans, then it hurts my credit, but if I keep it
and I keep paying interest, then that helps.
This is ironically why credit cards are so powerful and why we focus on them so much.
They're one of the few products where you can get away not paying any interest and it
still helps her credit score longterm.
The cool thing is that you don't need to spend a ton on them.
Let's do a deep dive on the other factors other than credit Mets.
So I actually made a chart for this two or three years ago, and I noticed that some blogs
and also some other YouTubers have decided to copy it and just replace my logo with something
else.
Ironic because I had the keynote file for it.
I ended up doing something a little bit different.
Okay.
Let's start off inquiries.
And this is the thing that most people get.
Inquiries do not matter as much as you think they do in the early game.
Maybe it does hit you for 10 20, 30 points because they're still new to everything.
But once you have that base up, it's only going to hurt maybe one to five points.
So it's a lot better later on, but that sounds super confusing.
The easiest parallel is.
So when you're working out, technically you're destroying your fibers and then your body
is coming back and repairing them or replacing them in order to build additional muscle.
So working out is taking two steps back and then five steps forward because they're damaging
it in the short term, but longterm it's making it better.
Inquiries are part of the game ends.
Michael Scott has a pretty good quote on this.
You miss a hundred percent of the shots that you don't.
The cool thing too, is that after one year the inquiry stops affecting your score.
And after two years it actually drops off completely.
There was probably a period where I had 20 or 25 inquiries, some crazy amount, and they're
gone.
They don't really show up anymore.
So inquiry's low impact.
And another low impact.
One is going to be total accounts.
The idea being that the more that you can manage the better it is.
So for example, imagine a manager who can manage a team of 20 people, and then you compare
it to one.
Only manage a team of four people, obviously a lot more goes into it, especially for someone
like Michael Scott, but for a lot of people, you would say that the person who can manage
20 on average is probably a little bit better.
I would recommend thinking strategically about this and adding the right cards rather than
just racing to the end and trying to add as many as possible.
If you are someone who wants to maximize your subsidized trips are the cashback.
Then I'd recommend watching our 5 24 video just to make sure that you're not getting
locked out of any system.
Basically each non chase card you add can easily cost you something like $500 in subsidized
travel, moving into the medium impact zone.
We have average age of accounts online.
You'll probably see this as a oh a in case that looks weird to you.
Age of account is how long you've had that card or that product.
And the average age is the average among the current.
There are some systems that focus on only your oldest cards.
So that's something to be aware of.
You generally want to keep your oldest card for that reason.
This is why I recommend downgrading instead of canceling some of those cards that you
have that option for.
So for something like the chase Sapphire preferred, maybe you're getting that bonus and then cashing
it out year two.
It doesn't make sense.
Just downgraded into a no annual.
Freedom flax that keeps the accounts age.
It doesn't cancel it.
It doesn't do anything.
And then it just keeps aging.
It doesn't hurt you.
Long-term because there's no annual fee kind of related.
But if you have a closed account, it actually does stay on your credit report for up to
10 years, if it's good history and up to seven years of its bad history, it does keep aging
with you.
But at the tender point, it does drop off.
So you would want to have some other cards with you rather than nothing at the.
Moving into the high impact zone.
We have derogatory marks.
These are negative items on your credit report.
Also known as badly as, but in the bad way.
So thank miss payments.
Collections, foreclosures them, collecting your car back.
Completely forgot the word for that.
But it's repossessions.
These are generally items.
I can take her score in the longterm, so you'd want to watch out for them and try to avoid
them.
If possible payment history is another high impact zone and this is effective.
Total number of on-time payments divided by number of total payments who should have made.
So for example, if I have a card for 12 months and I made 11 of those payments on time out
of the 12 payments, then I'm at 11 divided by 12.
Looking at the chart, you can tell that a hundred percent is the best and it does get
progressively worse, pretty quick.
Early on.
This is one of the easiest things to mess up because you don't have enough on-time payments
that one miss payment does dramatically pull that down for someone currently at a hundred
percent, then auto pays her friends.
If, for someone currently in a bad spot, because life does happen, then I'd recommend paying
at least a minimum amount.
That way there's an on-time payment.
If you do have to keep that balance for, let's say another month, you end up paying interest
on that.
So not ideal, but at least we don't have any negatives on your credit.
There are some tricks involved where you can kind of artificially increase your total payments.
So for example, let's say you have four cards, but you only actively use one of them.
For the other three cards.
You can put very small transactions on them.
Let's say one, $2.
That way there is a payment that's due at that statement date, and you're paying it
off.
If you only have one on-time payment every month, then it's going to take a lot longer
than having a bunch of them.
I have two suggestions for this are going to be Amazon reloads because you can do them
for 50 cents and then also self checkout.
But only if there's no one else behind you, this also ties into a utilization trick that
we'll cover in this.
Utilization is a pretty high impact factor.
And it's how much of the credit that has been extended to you that you actively use for
a lot of other things like student loans, that doesn't really matter that much.
Most of this is going to be impacted by credit cards.
The rationale is a mortgages doing loans, auto loans.
They know that that's a long-term thing that you're going to pay off over time, rather
than something that's supposed to be paid off.
Well, you need to carry a balance and then pay interest in order for your credit to increase.
The credit industry wants you to have higher balances because that benefits them.
I run up Lee, not really the case.
It actually benefits you to have a lower utilization.
There's two types of utilizations.
One is across your whole portfolio of cards.
The other one is going to be on a per cart basis.
The first one is generally a red flag for bust out.
So if you are someone who is likely to max out your cards, run away to something else
and just not pay them back.
This is often when issuers will either set your cards down, ask you for tax returns to
make sure that you're good for it.
Get some income verifications are sometimes just cut your card off for now.
Maybe not even let you charge it until you pay that balance down.
It can also happen on a per cart basis or on a per issuer basis, because they might
have too much exposure to you.
But a lot of people who are trying to increase their score the per card basis is what kind
of screws them over.
The tough thing is that you might have a card that has a lower limit and you want to use
it because maybe it earns more points.
There is a trickier though.
When you think of utilization on a per cart basis, it's basically a snapshot on a specific
date.
When that statement closes.
Let's actually do a real life example because I think that makes it a lot simpler for people.
I have a card that is from August 17th until September 16th.
So we know that on September 16th at midnight Eastern time, they're going to be taking that
picture.
You do want to do payments before that because for a lot of them there isn't like a 4:00
PM cutoff and it does differ by cardiac.
It was a $5,000 credit limit, but I ended up using $4,682 for some reimbursable work,
spent doing the math that's 93%.
And if we look at the chart, that's terrible.
If this ends up posting to the credit report, when they take that picture, it's going to
take my score.
Even though I have $200,000 in credit limits across other cards.
And if you look at this number, it only represents about 2%.
It still looks bad on a per card basis.
So knowing when picture day is I ended up cleaning myself up.
So I ended up paying $4,680 right beforehand.
This means that my utilization is two 50 divided by $5,000 effectively, 1%, even though it's
more like 0.05.
So by doing this prepayment, treating it as a pay as you go card, you can protect your
credit history during busy times where you might have more expenses such as the holidays
or back to.
As long as I pay off the $2 and 50 cents before October 10th, I don't pay any interest.
And I also have another on-time payment for my credit history.
One obvious question is why not just pay off the whole balance in full before picture day,
rather than leaving a small amount.
If you have a lot of cards, if you have a pretty long history than I would argue that
it doesn't matter too much, but I did this mostly for this.
ABCD 2, 1 9, 9 from phyco form has a pretty good chart here.
And if you look at it, you can see that there's a dip at 0%.
And then there's a peak towards 1, 2, 3, and 4%.
Basically 0% is fine, but 1% will technically be better.
And it doesn't really even need to be that much money.
It could be $2.
If you are someone paying off all the cards before picture day, then make sure that you
have at least one card that has a payment that's due and it can be a tiny.
The reason for this is because you want at least one on-time payment every month, I've
seen some people's credit score dropped because of this because they had no activity evolve.
This sounds very confusing.
Then I'd recommend checking out that viably course, just because I think it is a lot easier
to learn over a period of time, kind of like studying versus trying to cram everything
in bright before the exam, whether you want to have two or three cards are 40 cards.
I think having that foundation is pretty.
But the OGs who've been watching this as a refresher video.
If you are someone that wants to learn about other cards, whether cashback travel, anything
else, and you want to support the channel links down below, and also on our website,
ask savvy.com.
Make sure that the offers competitive, but otherwise huge way to support.
My question for you guys is what's your credit score and what's holding it back.
Let me know.
And everyone else know in the comments down below, if you'd like to give it a thumbs up.
And if you know anyone else who would benefit from this, because it is pretty helpful, I
think then feel free to share this with them because we'll probably help them out.
Otherwise, I hope you guys liked it.
So he hasn't.