YouTube transcript (T5UHXCrW0gI) — Transcript

Full transcript

1. 0:00this is just about everything you need
2. 0:02to know
3. 0:03about credit scores
4. 0:05[Music]
5. 0:10hello and welcome to practical personal
6. 0:12finance where you get the information
7. 0:14you need
8. 0:15to understand and succeed with money if
9. 0:18you're new to credit scores or just want
10. 0:19to enhance your knowledge
11. 0:20then you're in the right place this
12. 0:22video is going to be broken up into
13. 0:24three parts in part one i'm going to
14. 0:27teach you about what credit scores are
15. 0:30and what life was like before they
16. 0:32existed then in part two
17. 0:34i'll tell you about the different types
18. 0:36of credit scores and what constitutes a
19. 0:38good score finally in part three we'll
20. 0:41finish up with the five factors that
21. 0:43influence
22. 0:44your credit score and for those of you
23. 0:46who stick around until the very end
24. 0:48i'll let you in on a little secret that
25. 0:50will help you achieve a high credit
26. 0:51score
27. 0:52with very little effort in a short
28. 0:54amount of time
29. 0:55let's get started
30. 0:59think of a close friend of yours someone
31. 1:01you've known for a long time
32. 1:0310 years or more now let's say that
33. 1:06person called you up and said
34. 1:07hey i need some cash to get some repairs
35. 1:10done on my car
36. 1:11could you spot me 500 i'll pay you back
37. 1:14next month
38. 1:15when i get paid with some interest if
39. 1:18you knew this person well enough
40. 1:20you probably have a sense of whether
41. 1:22you'll get your money back next month
42. 1:23or if lending the money is a bad idea
43. 1:26but imagine if the person
44. 1:28asking you to borrow money and promising
45. 1:30to pay it back with interest
46. 1:32wasn't someone you knew personally but a
47. 1:34stranger in front of you in line at the
48. 1:35grocery store
49. 1:37this is the position banks are in when
50. 1:39we ask them to borrow money
51. 1:41and yet a lot of times they let us
52. 1:43borrow the money anyway
53. 1:44without even really getting to know us
54. 1:46what makes them do that you ask
55. 1:48your credit score your credit score is a
56. 1:51way for a bank
57. 1:52or other lender to quickly ascertain how
58. 1:55likely you are to pay them back on time
59. 1:58and in full before credit scores existed
60. 2:02lending and borrowing money was much
61. 2:04more difficult
62. 2:05and it was largely based on personal
63. 2:07relationships between
64. 2:08bankers and their clients banks needed
65. 2:11assurance that you weren't going to take
66. 2:13their money and skip
67. 2:14town never to be seen again and your
68. 2:17reputation provided a big
69. 2:19portion of that assurance but now your
70. 2:22credit score precedes your reputation
71. 2:24and your personal relationships and is
72. 2:26the primary factor used to determine
73. 2:29whether or not
74. 2:30you get a loan and on what terms
75. 2:33your credit score is a number assigned
76. 2:35to you
77. 2:36based on your credit history i.e your
78. 2:39record with other loans over the past
79. 2:41five to seven years this record is
80. 2:44maintained by
81. 2:45three independent credit bureaus equifax
82. 2:49transunion and experian if you have a
83. 2:52perfect record
84. 2:53you'll end up with a high credit score
85. 2:56and you'll find it very
86. 2:57easy to borrow money with favorable
87. 2:59terms but if your record is flawed
88. 3:01you'll end up with a low credit score
89. 3:04and you'll probably find it difficult to
90. 3:05borrow money at all
91. 3:08[Music]
92. 3:09two of the most popular and well-known
93. 3:11types of credit scores
94. 3:13are the fico score and the vantage score
95. 3:16these scores are all based on the same
96. 3:18information that's included in your
97. 3:20credit report
98. 3:21with those three credit bureaus but the
99. 3:23scores may be slightly different based
100. 3:25on how they analyze that information
101. 3:28and how much weight they assign certain
102. 3:30factors
103. 3:31it's kind of like if you gave two chefs
104. 3:33the same ingredients
105. 3:34and told them both to make you some
106. 3:36chicken parm
107. 3:37the resulting dishes are both going to
108. 3:39be chicken parm
109. 3:40but they'll be slightly different in
110. 3:43addition to that
111. 3:44the fico score and vantage score have
112. 3:46both been refined
113. 3:48and improved over time and you might run
114. 3:51into
115. 3:51older versions still being used this is
116. 3:54especially true when you're applying for
117. 3:56a mortgage
118. 3:57but again it's just like if you gave a
119. 3:59chef a set of ingredients on two
120. 4:01separate occasions
121. 4:03five years apart and asked for chicken
122. 4:05parm
123. 4:06both times over time the chef's cooking
124. 4:09technique
125. 4:09changed and improved you're going to get
126. 4:12chicken parm on both
127. 4:13occasions but chances are it'll be a
128. 4:15little different and better
129. 4:17the second time the highest credit score
130. 4:20you can get is
131. 4:21850. the lowest credit score you can get
132. 4:24is 300. if you have no active accounts
133. 4:28on your credit report
134. 4:29your score will be zero having a credit
135. 4:31score of zero
136. 4:32isn't necessarily bad it just means
137. 4:35you're not currently participating by
138. 4:37incurring
139. 4:37debt some people believe that's a good
140. 4:40thing i personally believe
141. 4:41it's not a bad idea to maintain your
142. 4:43score by keeping at least
143. 4:44one account open as long as it's not
144. 4:47costing you anything to do so
145. 4:49this will make your life a heck of a lot
146. 4:51easier when you want to take out a loan
147. 4:53for that reason among others i have a
148. 4:55couple of credit card accounts open that
149. 4:57i pay in full
150. 4:58every week or two and i think you should
151. 4:59do the same
152. 5:01everyone and their mother seems to have
153. 5:03a different definition for what is
154. 5:04considered a good credit score
155. 5:06i like to keep things simple so if you
156. 5:09ask me anything higher than
157. 5:10650 means you're doing a good job
158. 5:13anything higher than 750
159. 5:15means you're doing a great job and
160. 5:17anything under 650
161. 5:19means you can use some improvement if
162. 5:21you would like to check what your credit
163. 5:23score is for free
164. 5:24i made a video on how to do it and i'll
165. 5:26leave a link down below
166. 5:28if your credit score could use a little
167. 5:29pick me up stick around until the end of
168. 5:31this video
169. 5:32and i'll let you in on a little secret
170. 5:33that's sure to help
171. 5:38last but not least let's talk about the
172. 5:40five factors that
173. 5:41influence your credit score they are
174. 5:43your payment history
175. 5:45amounts owed length of history
176. 5:48credit mix and new credit let's break
177. 5:51these out
178. 5:52one by one so you can begin to
179. 5:53understand what each of these factors
180. 5:55are
181. 5:56and how much influence they have on your
182. 5:58credit score
183. 5:59factor number one is your payment
184. 6:01history this one is the single
185. 6:03most important factor and it's
186. 6:06responsible for about a third of your
187. 6:08credit score
188. 6:09in short your payment history is all
189. 6:11about whether or not you pay your bills
190. 6:13on time
191. 6:14this includes things like student loans
192. 6:17mortgage payments
193. 6:19car payments and credit card payments
194. 6:22the main thing lenders want to know is
195. 6:24that you're going to pay them back
196. 6:26if you pay your bills on time every
197. 6:28month your payment history will be
198. 6:30flawless
199. 6:31if you're late even once your credit
200. 6:33score is going to take a big hit
201. 6:36more than once you're in the toilet late
202. 6:38payments will stick around on your
203. 6:40credit report and
204. 6:41ding your credit score for up to seven
205. 6:43years
206. 6:45factor number two is your amounts owed
207. 6:47this is a close second for the most
208. 6:49important factor
209. 6:50and again it's responsible for about a
210. 6:52third of your credit score
211. 6:54with amounts owed we're primarily
212. 6:56looking at the percentage paid on your
213. 6:58long-term loans
214. 6:59and the percentage of your credit card
215. 7:01limit that you're using on a monthly
216. 7:02basis
217. 7:03for long-term debt like student loans or
218. 7:06car loans
219. 7:07a higher percentage of the total loan
220. 7:09paid indicates that you're a reliable
221. 7:11borrower
222. 7:12for example if you have a student loan
223. 7:14you've been working on for six years and
224. 7:16it's eighty percent paid off
225. 7:18that's good but if you just financed a
226. 7:21brand new bmw five series with
227. 7:23zero dollars down and haven't made a
228. 7:25single payment yet
229. 7:26that's bad both for your credit score
230. 7:29and your net worth
231. 7:30please don't go out and finance a 5
232. 7:32series with credit cards
233. 7:34you want to use only a small percentage
234. 7:37of your monthly limit
235. 7:38the smaller the better so for example
236. 7:40let's say you had a discover
237. 7:42card with a one thousand dollar limit if
238. 7:44the balance on your statement is one
239. 7:46hundred dollars
240. 7:47you're in good shape but if the balance
241. 7:49on your statement is eight hundred and
242. 7:51fifty dollars
243. 7:52your credit score is going to take a hit
244. 7:54factor number three is the length of
245. 7:56your credit history
246. 7:58this one is responsible for about 1 6 of
247. 8:00your credit score
248. 8:02plain and simple the length of your
249. 8:04credit history is all about the amount
250. 8:05of time you've had your different
251. 8:07accounts
252. 8:08active if you took out a student loan 12
253. 8:10years ago
254. 8:11that account is 12 years old even if you
255. 8:14didn't make a payment on it while you
256. 8:15were still in school
257. 8:17if you got a new credit card six years
258. 8:19ago and you've kept it active
259. 8:21that account is six years old your
260. 8:23credit score looks at the average age of
261. 8:25all your active accounts
262. 8:27once a student loan or other installment
263. 8:29loan is paid in full
264. 8:31it no longer counts toward the length of
265. 8:33your credit history
266. 8:34if it was an old account that you paid
267. 8:36off it will actually hurt your credit
268. 8:38score
269. 8:39it's almost like the system was designed
270. 8:41to keep you in debt for as long as
271. 8:43possible
272. 8:44go figure factor number four is your
273. 8:46credit
274. 8:47mix this one is responsible for about
275. 8:50one-tenth of your credit score
276. 8:52lenders like it when they can see you've
277. 8:54got a variety of different active
278. 8:55accounts
279. 8:56so it's good mainly for your credit
280. 8:58score when you have at least a couple of
281. 9:00long-term loans like a mortgage and some
282. 9:03student loan debt
283. 9:04and a couple of credit cards it shows
284. 9:06you're responsible and can manage
285. 9:08different types of debt simultaneously
286. 9:11factor number five is
287. 9:12new credit this last one is also
288. 9:14responsible for about one
289. 9:16tenth of your credit score when you
290. 9:18apply for a new credit card or a new
291. 9:20loan
292. 9:21that lender pulls a copy of your credit
293. 9:23report
294. 9:24this is called an inquiry inquiries are
295. 9:27bad
296. 9:27for your credit score an inquiry every
297. 9:30year or two
298. 9:30is alright and won't have too much of an
299. 9:32impact but any more than that
300. 9:34and banks start to worry that you're
301. 9:36opening too many accounts
302. 9:37too quickly in general an inquiry will
303. 9:40disappear from your credit report after
304. 9:42two years
305. 9:44hey you made it to the end of this video
306. 9:46congrats here's a little secret to help
307. 9:48you bump up your credit score
308. 9:50ask one of your close friends or family
309. 9:52members to add you
310. 9:54as an authorized user on one of their
311. 9:56credit card accounts
312. 9:57you don't want a separate credit card or
313. 9:59anything you just want your name
314. 10:01listed on the account becoming an
315. 10:04authorized user
316. 10:05can be a triple play for your credit
317. 10:07score if you choose which account to be
318. 10:09added to wisely
319. 10:10it can increase your credit mix and your
320. 10:13length of credit history
321. 10:15and it can reduce your credit card
322. 10:17utilization percentage
323. 10:19that's a win-win win got any questions
324. 10:22about credit scores
325. 10:24anything i missed let me know in the
326. 10:25comments if you want to know more about
327. 10:28what it takes to achieve a credit score
328. 10:29of
329. 10:30800 or higher click right here
330. 10:33and if you're not already a ppf
331. 10:35subscriber then what are you waiting for
332. 10:37click right here to join the fun as
333. 10:39always
334. 10:40thanks for watching i'm andrew scheer
335. 10:42and i'll see you
336. 10:44next time