Credit Cards 101: How to build your credit score ASAP and leverage your money

what's up you guys it's Graham here so

this is probably one of the most

important videos I've made so far and

it's how to get a good credit score now

I have a bit of a confession to make I'm

a bit of a nerd when it comes to credit

cards so I'm going to be sharing with

you why this is so important why you

need a credit card right now and how

this can make you money so I used to

believe the credit was stupid I thought

that you should only buy something if

you could actually afford it and I

thought that people who needed credit

cards to buy something were totally

irresponsible I mean that's just how I

was raised so when I came time that I

wanted to buy real estate even though I

had a six-figure income

six figures saved up cash in the bank

and I've never needed a loan before in

my life because I'd pay for everything

in cash that said banks would love me

for that base disagreed and no one

wanted to give me a loan because I had

zero credit history and I've never had a

credit card or any sort of loan of my

name before ever

that is a mistake by the way that

probably cost me over five hundred

thousand dollars in lost real estate

because they couldn't leverage my money

when I was buying properties in 2011 and

2012 so that's what I decided to make a

change get a credit card at 21 years old

and then spend the next five years

building my credit score up to its 780 I

now have over a hundred thousand dollars

in available credit I got the lowest

rate possible on the loan I got last

year on a home I purchased and I will

continue to get the best rates possible

on every single loan I get because I

have a good credit score so to start

your credit score shows Bank how

responsible you are paying back money

that you owe your credit score ranges

from about 300 to 850 with the best

rates being given to credit scores above

740 it's kind of like getting a grade in

school except your credit score shows

banks how likely you are to default on

the loan that they give you so the lower

the score the more likely you are to

default on a loan that they give you

which means that they have to charge you

a higher interest rate to make up for

that or worse case they just say nah and

they want nothing to do with you because

if you're like me you didn't have any

credit score to begin with likewise if

you have a high credit score you're less

likely to default on the loan and you're

a safer bet for the bank and they will

charge you less interest because of that

saving you money so if you want to

invest in real estate get business loans

your money grow your wealth you're going

to need a good credit score it's not so

much about getting in debt by the way

it's just showing banks that you're

responsible with the debt that you're

given and can pay it off on time

every single month as a Greek so they

calculate your credit score based off

several factors now the first factor is

how long you've had credit for it the

longer you've had your credit the more

history you have and the higher the

score you'll get that's why it's so

important if you don't have a credit

card right now get a credit card because

you're able to start the history earlier

than if you had waited another year or

so the next is how much credit you

actually use compared to how much credit

you have available to you this is called

the utilization rate and generally

speaking they like to see a low

utilization rate which means you only

use a small percentage of the total

amount of credit that you have available

to you the next one is obvious its

on-time payments you want to make sure

that you pay off your credit card on

time every single month and that will

help you score the next one is a

diversity and mix of credit cards and

loans that you have they generally like

to see different types of credit cards

and different types of loans which show

to the bank that you're responsible not

only paying off a credit card but also

an auto loan a lease or a mortgage so by

showing this generally you'll get a

higher score so the last one is total

credit inquiries which means that every

time you go and apply for new credit

card or loan it's marked on your credit

report as an inquiry banks don't like to

see a lot of inquiries in a short amount

of time because get some nervous that

you're out there seeking as much money

and credit as possible and you're seeing

is a bit of a risk but I wouldn't worry

about this too much because credit

inquiries only lower your score

temporarily for about six months so I

wouldn't be too concerned about this and

for everyone starting out it doesn't

really matter anyway because you really

don't have any credit to work off anyway

so if you're just starting out right now

and you have the zero credit the first

thing that you need to do is go to a

local bank and get what's called a

secured credit card this means that you

put down a few hundred dollars and in

return they give you a credit card with

your deposit that you given them as

collateral against the credit card which

means if you don't pay off your credit

card they hold the deposit from you that

they can pay off the credit card with

generally I recommend a 300 to $500

limit which means that you put down 300

to $500 in in return they give you a

three to five hundred dollar credit card

this is the best and easiest way for any

bank to accept you as a first credit

card now one thing I want to make very

clear is do not spend money you would

ordinarily spend just because you have a

credit card treat the credit card

exactly as you would cash by putting

normal expenses on as little meals guest

whatever it is keep minimal expenses of

the credit card and make sure you paid

off in full every single month there's a

myth out there that says you should pay

interest and carry a bit of a balance to

increase your credit score which is

totally false you don't need to pay any

interest or any money to try to increase

your credit score that's false just pay

it off and pull every single month and

use it responsibly I'd recommend doing

this for about four to six months and

that should give you enough time to

build up some credit history

so after this you'll have established a

bit of printed history and you can go

and apply for an unsecured credit card

I recommend the capital one card or a

bank of American cash rewards card I

have both of these and in fact the

Capital One was the first real unsecured

card I got I think I've got a $500 limit

at the time but it really doesn't matter

what limit you get just get something

and then again do the same thing but

minimal expenses on it and paid off in

full every single month it's very

important not to get carried away by

having a limit and spending more money

than you would otherwise that defeats

the purpose of having credit you don't

really need to do that just keep it

minimal and make sure you've paid off in

full every single month just remember

all of this is just showing the banks

that you're able to pay off your debt on

time a degree so after about a year of

building your credit and hang it off on

time in full every single month it's

time that you can apply for a charge

card and this is a card where you don't

carry a balance at all but you paid off

in full every single month this is great

because charge cards don't show a limit

on your credit report which means that

if you spend $5,000 on it it doesn't

impact your utilization rate because it

doesn't show a top end limit now my

favorite of the charge cards is American

Express I personally have the gold card

which offers amazing rewards and points

I'll go into more detail in a future

video but essentially I've been able to

travel to and from Canada to visit

family we're totally free just paying

with points which is pretty cool so now

from here you can just continue to add

to your mix of credit cards pay it off

on time and continue to get some credit

history behind you eventually you can

start getting more advanced and start

signing up for credit card reward

bonuses which essentially you sign up

for a credit card to get a whole bunch

of points for signing up for it and you

can use that for free airfare trips

hotels rental cards even though

these are more advanced techniques you

can totally do this and take advantage

of them when you have a good credit

score if you're interested in learning

more about this I recommend googling

credit card churning and reading more

about it because it's pretty cool and I

definitely take advantage of as many

credit card offers as I can you can now

also begin applying different types of

debt to your mix such as getting a

mortgage getting a car loan a car lease

all of these things help diversify your

credit report and help improve your

score so now these are a few credit card

myths that I want to debunk you don't

need to pay interest to increase your

credit score you also don't need to

carry a balance to each month to help

improve your credit score just pay off

in full every single month and that will

be sufficient the next is that it does

not hurt to check your own credit score

I personally checked my score every

single month and I use Credit Karma

I like to check in just make sure

everything is there and everything is as

it should be the next one is that it's

also false that having too many credit

cards will decrease your score in fact

the opposite is true the more credit

card you have the more credit you have

available to you which lowers your

utilization rate so as an example let's

say that you spent three thousand

dollars and you have ten thousand

dollars of available credit to you your

utilization rate is 30%

now instead let's imagine you have a

hundred thousand dollars but you still

spend three thousand dollars now your

utilization rate is three percent that

is a huge difference between three

percent and 30 percent so I recommend

having as much credit available to you

as possible because that lowers your

utilization rate and that helps increase

your score of course I just have to

disclose spend responsibly don't use a

hundred thousand dollars because you

have it available still keep your

spending to a minimum but having it

available will help your score now this

one I want to make very clear to you do

not close a credit card especially if

it's an old account now when you close a

credit card it also closes off all that

credit history and credit history is a

huge component of what makes up a high

credit score the more history you have

the higher the credit score so you

always want to keep your credit cards

open even if you don't use them because

that keeps your credit history intact if

you have to pay an annual fee for the

credit card still keep it open but see

if they can downgrade you to a free

credit card instead the last piece that

I want to talk about is the mindset that

debt is bad because this is false so

there could be good debt like a mortgage

a car loan

or business loan where your money makes

you more money being invested than

you're paying off and alone or there

could be bad debt like the five thousand

dollar Hawaiian vacation that you

couldn't really afford but since you put

it on a credit card you can pay it off

in low monthly payments over the next

ten years

that's bad debt is a very very very

clear distinction between having good

debt and having bad debt debt is a great

way to leverage your money and have it

work for you earning more money than

you're paying in interest so for

instance on a rental property if you're

paying 4% interest but the property is

making you 10% essentially you can

leverage your money and property

difference between four and ten and you

prop it six percent now keep in mind

that a credit card is something to use

responsibly now that doesn't mean you

should go and buy that really expensive

Hawaiian vacation or that really cool

flat-screen TV just because you have the

credit available to pay for it use a

credit card the exact same way as you

would if you had cash or a debit card

and treated responsibly put your normal

expenses on a credit card instead of

paying with cash or a debit card and

paid off in full every single month now

if you forget to make a payments on time

and you get a late payment keep in mind

this stays in your credit report for

seven years so you really want to treat

this responsibly and make sure you pay

it off and fold every single month I

recommend you set it up just to be paid

off automatically every single month you

don't even have to think about it but

just make sure it gets done and that's

it I mean it's really that simple put a

small amount on your credit card every

single month paid off the time and get

more credit cards and do the same thing

they often time in full that's it it's

really simple do this for a few years

adding different credit cards to the mix

adding different loans of the mix and

you're going to have an amazing credit

score to get pretty much whatever loan

you want lenders will love you people

will be throwing money at you to borrow

and you'll be able to take full

advantage of all the great credit card

reward travel perks that you can imagine

look up credit card churning because

that's what I do and it's so much fun to

get into it as always you guys thank you

so much for watching this this has been

a really fun video for me to make

because I'm so passionate about credit

cards I was in a terrible position when

I was younger that it didn't have a

credit card and I [ __ ] up massively so

if someone else is in a similar position

and doesn't have a credit card yet I

really hope that this would have an

impact and you get a credit card

now and you just paid off you'd be

responsible with it 20 years from now

you're going to be in a great position

with a whole bunch of credit history

behind you and you will definitely be

thankful that you did that so as always

thank you again for watching if you

haven't already click Subscribe you know

what to do just click that little button

subscribe I'll wait I'll wait for you to

do that do it alright I'm going to trust

you I'm going to trust you that you did

it feel free to also add me on Instagram

and on snapchat I post there pretty much

daily if you want to be a part of it

feel free to add me there and thank you

again for watching and until next time