What is best way to build credit
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
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