馃攳
Credit Scores Fully Explained (Plus ONE Common Misconception) - YouTube
Channel: One Mile at a Time
[0]
hi I'm Ben from one mile at a time and
[2]
today we're gonna be talking about one
[3]
of the most common misconceptions about
[5]
credit scores which is that applying for
[7]
credit cards ruins your credit first of
[15]
all if you're new to one mile at a time
[17]
we're all about luxury travel it for
[18]
less so please subscribe and what is it
[22]
please subscribe and if you find this
[25]
video helpful please give it a thumbs up
[27]
and subscribe so personally I have over
[29]
20 credit cards and that's actually
[31]
among the fewest cards I've had in a
[32]
long time I used to have over 30 credit
[35]
cards now when I talk to people about
[37]
this and I'm an introvert so I don't
[39]
talk to that many people but in those
[40]
few cases where I do the first question
[42]
I always get is like doesn't that ruin
[44]
your credit your credit score must be
[45]
horrible and the reality is exactly the
[48]
opposite my credit score is nearly
[49]
perfect it's in the top percentile and
[52]
obviously that throws off a lot of
[53]
people for good reason because we're
[55]
taught I think from a young age that
[56]
applying for credit cards is bad for you
[58]
so in this video let's look more closely
[60]
at what goes into your credit score and
[62]
why applying for cards is good for you
[65]
before I get into deep into this I'd
[67]
like to say that if you don't think you
[69]
can use credit responsibly in other
[70]
words if you don't think that you can
[72]
pay off your balance in full each month
[73]
then this really isn't for you while
[75]
travel rewards are great they will not
[77]
be worth it if you're paying huge
[79]
interest charges so if you want tips for
[81]
repairing your credit or being
[83]
responsible there can click a link here
[85]
also full disclosure through one mile at
[88]
a time we do receive commissions from
[90]
some banks if you're approved for a
[92]
credit card we always try to give honest
[94]
advice here and of course you don't have
[96]
to use our links but if you do we do
[97]
appreciate the support so there are five
[100]
main factors that go in to your credit
[102]
score 35% of your credit score is your
[105]
payment history 30% of your credit score
[108]
is your credit utilization 15% of your
[111]
credit score is your credit age 10
[115]
percent of your credit score is the
[116]
types of credit you use and 10% of your
[118]
credit score is your requests for new
[120]
credit now let's talk about how having
[123]
different cards impacts that and also
[125]
about how applying for cards
[127]
so let's start with the bad news which
[129]
is that roughly 10% of your credit score
[131]
is made up of your credit increase which
[134]
is your request for new credit this
[136]
means that when you apply for a credit
[137]
card you can expect that your score may
[139]
go down temporarily by about 2 points or
[142]
so of course the exact details will vary
[144]
depending on the rest of your credit
[146]
history so that part of your credit
[148]
score is adversely impacted by applying
[151]
for cards the good news is that
[153]
virtually the rest of your credit score
[155]
will go up the more cards you have as
[157]
counterintuitive as that may sound so
[160]
the single biggest thing that goes into
[162]
your credit score is your payment
[164]
history that is 35% of your score what
[167]
this means is that if you make your
[168]
payments on time that's over a third of
[170]
your credit right there that's perfect
[172]
if anything actually having more cards
[173]
helps you because you can demonstrate
[175]
more often that you can use credit
[176]
responsibly when you're making your
[178]
payments on time so by having more cards
[180]
you're showing a better payment history
[182]
the second biggest factor in to your
[183]
credit score is your credit utilization
[185]
and that makes up about 30% of your
[187]
credit now this is the area that is most
[190]
positively impact by having a lot of
[192]
credit cards so the concept of credit
[194]
utilization is that card issuers want
[197]
that you don't utilize too much of your
[199]
credit typically I recommend don't use
[201]
more than 30 to 40% of your credit so
[203]
what that means is let's say you have a
[205]
credit card and it has a $10,000 credit
[207]
line if you spend $9,000 on that card
[210]
every month you're using 90% of your
[212]
credit to banks this seems really
[215]
high-risk because they're worried okay
[216]
is this person using almost all of their
[218]
credit if we extend them more credit
[219]
will they be able to pay it back that
[222]
shows us high risk and that's typically
[223]
why you want to use no more than 30 to
[225]
40% of your credit so this is where the
[227]
real positive impact is if you have a
[229]
lot of cards like I said I have about 20
[231]
credit cards actually more than 20
[233]
credit cards and I have over $500,000 in
[236]
available credit across all of those
[238]
cards of course I don't spend nearly
[240]
that much every month so I'm utilizing a
[243]
tiny percentage of my available credit
[245]
so I use about let's say 1% of my credit
[247]
if I'm spending $5,000 and I have
[249]
500,000 and available credit to credit
[252]
card companies this looks great because
[253]
they say look he has so much credit and
[255]
he's not choosing to use all of it he's
[256]
being responsible and believe it or not
[258]
this makes them more
[260]
to extend you more credit in the future
[262]
so your score can potentially skyrocket
[265]
if you go from just having one card to
[267]
having four cards and you're spending
[268]
exactly the same amount because your
[270]
utilization goes down by that much so
[272]
that is the single biggest tip to having
[275]
a great credit scores to not use too
[277]
much of your credit and again this all
[279]
goes out the window if you're not making
[281]
your payments on time and if you can't
[282]
use your credit responsibly because then
[284]
you want up in more trouble if you have
[285]
more cards and you can't pay them on
[287]
time so the next biggest factor in your
[289]
credit score is the average age of
[291]
accounts what credit card issuers want
[294]
to see is that you're using cards long
[295]
term and so this is where it makes sense
[298]
to have a balanced strategy I have a lot
[299]
of credit cards some of them are new and
[301]
some of them are old so what I do is I
[303]
get some no annual fee cards that I hold
[305]
on to long term that I've had for over a
[308]
decade and the reason I have them for
[309]
that long is because it makes my average
[311]
age of accounts older the longer you
[314]
show your responsibly using your credit
[316]
the better in a position you're in the
[318]
higher your score will be and the last
[319]
10% of your credit score is the types of
[321]
credit you're using so the question is
[323]
do you have loans either with the car or
[325]
home do you have credit cards you're
[327]
using responsibly so just using it
[329]
responsibly will show well they actually
[332]
want you to have loans because it shows
[334]
that you can use them and you can use
[335]
them responsibly so to sum it up what it
[338]
comes down to is that 90 percent of your
[340]
credit score is potentially improved by
[343]
having more credit cards and using them
[345]
responsibly with these tips
[347]
and the other 10% of your score which is
[349]
if obviously a small fraction goes down
[352]
a little bit now when those two points
[354]
are taken off typically for a credit
[356]
increase that's very minor and that
[358]
falls off your score after a while so
[360]
this is why so many of us who have
[361]
dozens of cards actually have excellent
[363]
credit scores because if we're using it
[365]
responsibly it shouldn't matter what
[367]
else we're doing so just you guys know
[368]
I'm not making this up you can see here
[370]
is my credit score which is actually
[373]
down a little bit compared to where it
[374]
used to be because I've recently applied
[375]
for cards but it will go right back up
[377]
again and as you can see just having a
[379]
lot of cards and using them responsibly
[381]
can be great for your credit score and
[383]
I've had a countless number of messages
[386]
from readers who started off with credit
[388]
scores in the low seven hundreds which
[389]
is still decent but not amazing and
[391]
after applying for a few
[393]
using them responsibly and within a year
[395]
or so their credit scores shot up over
[397]
800 so this is something that works over
[400]
and over and it's proven to work and
[401]
really it's the best way Elsa Turin
[403]
miles because you can get a lot of cards
[405]
that are new lots of points and you can
[407]
improve your credit score thank you so
[409]
much for watching if you enjoyed this
[410]
video and found it helpful
[412]
I'm so bad at script thank you so much
[415]
for watching hope you found this video
[416]
helpful if you did please subscribe and
[418]
also let me know what questions you have
[420]
in the comments below for more tips
[422]
check out one mile at a time calm
Most Recent Videos:
You can go back to the homepage right here: Homepage