The Ultimate Guide to Building Good Credit

Summary

This video provides an ultimate guide to building good credit. It covers essential steps, including getting your finances in order, laying the foundation by joining a credit union, and starting with responsible credit card usage. The guide emphasizes the importance of maintaining low credit card balances, avoiding closing accounts prematurely, and managing credit responsibly. It also advises on how to manage hard inquiries and how to build a strong financial profile over time. The goal is to help viewers understand and implement proven strategies for improving their credit score and long-term financial health.

Takeaways

• 😀 Start by checking your credit score through credit monitoring apps to get an accurate reading.
• 😀 Building good credit is crucial for financial success and allows access to better financial products.
• 😀 Secured credit cards are a good option for those new to credit or trying to rebuild their credit.
• 😀 To build credit effectively, make timely payments, avoid high balances, and use credit wisely.
• 😀 Utilize the 30% credit utilization rule—keep your usage below 30% of your credit limit.
• 😀 Having a mix of different types of credit accounts can benefit your score, like credit cards and loans.
• 😀 Regularly review your credit reports for inaccuracies and dispute errors to improve your score.
• 😀 Hard inquiries from credit applications can negatively impact your credit score, so limit the number of applications.
• 😀 Don't close old accounts, as the length of credit history affects your credit score positively.
• 😀 You can increase your credit limit on existing cards to improve your credit utilization ratio.
• 😀 Avoid late payments and keep an eye on your payment due dates to avoid penalties and damage to your score.

Q & A

What is the first step in building good credit according to the script?

The first step is to get your finances in order, which involves paying off existing debts and setting up a checking and savings account with a Credit Union (CU).

Why is it important to choose a Credit Union (CU) over a large bank?

Credit Unions offer better opportunities for higher-limit credit cards and provide relationship banking, which can benefit you more in the long run.

How can a secured loan help in building good credit?

A secured loan helps to establish a positive credit history. It’s recommended to pay off 80% of the loan and leave the remaining balance on auto-payment.

What is the recommended approach to credit cards when building good credit?

It’s crucial to open a credit card with your CU after 6-8 months of building your credit. You should never carry a balance on the card, paying it off in full each month to maintain low credit utilization.

How many credit cards should you ideally have when building your credit profile?

Ideally, you should have 3-5 credit cards, including a CU card, a Visa/MasterCard, a medical credit card, a store card, and a branded store card with a Visa/MasterCard logo.

Why is it important to keep credit utilization low?

Keeping credit utilization below 9% is important because it shows responsible credit management and can positively impact your credit score.

What should you avoid when managing your credit profile?

Avoid excessive hard inquiries, as they can negatively affect your credit score. Additionally, ensure you don’t carry a balance on your credit cards and consistently make timely payments.

How can adding a car loan or mortgage improve your credit profile?

Adding a car loan or mortgage can diversify your credit mix, which is beneficial for improving your credit score in the long run.

What are the top factors that influence your credit score?

The top factors influencing your credit score are payment history (35%) and credit utilization (30%), followed by credit age (15%), credit mix (10%), and hard inquiries (10%).

What is the ultimate goal in building good credit?

The ultimate goal is to maintain a good credit score (750+) by having high credit limits, low utilization, and a healthy credit mix, which makes it easier to qualify for loans and other financial products.