Rebuild Credit | Understand FICO Score


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 100% free information about how to build credit, how to get cash back actual cash money from using credit cards, as well as
credit card reviews. So if this sounds like something in which you’re interested be
sure to subscribe and click the notification bell so you don’t miss a
thing. 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!

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