800+ Credit Score
Over the past few years we have heard by far some of the worst advice possible when it comes to having a good credit score and this advice comes from none other than people with the absolute worst credit and money situations walking God's good earth. Some of the ones that take the cake are:
All are dumb as shit. Now having good credit is important when it comes to getting a car loan, applying for a mortgage or securing a loan for a business. However for most of us, we are not doing any of those things on the regular and even with superior credit the interest rate that a credit card is going to charge you will be obscene regardless of your credit score. So is your credit score important? Of course, however it's not the end of the world if your not seeing in the 800 plus club, we still pay for shit just like you.
For myself I have had a credit cards for since my first mickey mouse Visa card at 16 fast forward to today with a black card, half a dozen AMX’s, a Discover card (that's my favorite), and a bunch of others. All in all my available credit is north of half a million however my overall credit card debt is a whopping zero and it's not that my credit cards sit collecting dust. I use them all day long, I just pay them off before any interest is added.
As of writing this lesson I am mere 6% away from a perfect credit score. If your score is higher than mine, stop reading now, if it's lower, why not we continue?
Now if you are currently carrying credit card debt, how often do you pay your bill?
The answer is more than likely going to be once a month, and the reason for that is because drum roll, your credit card requires you to make a payment of X amount once a month. They give you that so you can let your balance sit and collect interest. Every notice why V, MA and AMX are usually banging on all time highs? They’re legal loan sharks charging you 19-29% a year on the money they lend you and that interest compounds daily.
A few tips to get your credit card debt under control is to first rank the debt from the highest interest rate to the lowest. Let's test your skills below.
Which card would you want to pay off first if you were carrying a balance? The green or blue?
One card is charging you 21% while the other card is charging you 17%, the obvious answer would be to pay off the 21% card first. I know that seems obvious however you would not believe how many people get that one wrong.
Now the reason why I don't get charged interest is that I pay in full before my statement is due. Most cards give you a 30 day window, for example if your statement is due on Jan 1st and you pay your balance in full prior to Jan 1st you will not incur any interest, any balance after that day will start to incur interest. What this does is essentially give you up to 30 days of free credit, however if you let this snowball out of control it can be very costly for you and this what the credit card companies bank on. As most people are financially stupid.
When I was running my Amazon business out of college I lived on credit cards paying for my inventory which was great as I was spending tens of thousands of dollars a day, however when money would get tied up, those interest payments would add up quickly.
The one habit I got into was making credit card payments weekly of a fixed amount regardless of my spending, I started at $100 a week, $200 a week, $300 a week, $1,000 a week, etc. As time went on $100 payments felt like nothing, so I moved up to $200 and so on and so forth. By doing this I am always chipping away at the balance. We often forget how much we spent over a months time and than look at the statement and wonder what the fuck happened. Those weekly payments will keep you in check and that total under control.
Credit cards are really simple if you get the basics down and get your spending under control, you should not have a dozen cards all carrying balances, even though I had quite a number of cards, I use 2, my discover for personal stuff and my AMX business card for business expenses that's linked to my Quickbooks account so my accountant can work his voodoo magic even though I still manage to owe Uncle Sam a small fortune each quarter. The other cards chill on the bench and from time to time I will increase the credit limits when needed.
Do not carry a balance because you think it will improve your credit, pay that thing down every month, don't make an excuse to give your money to a credit card company because of an imaginary number. Avoid spending more than 50% of the total limit of your cards, if the limit is $1,000 try to avoid spending more than $500, you see above that my credit utilization is 6%, meaning that I am only using around 6% of my overall credit while a higher risk person would be using 60 to 100% of their credit. Keep your credit cards simple, find a card that gives cash back as cards that give points tend to be far less worthless than actual cash back. If you credit situation is really out of whack let me know and we will dig a bit deeper. If you would like me to refer you to my favorite credit card that has given me thousands of dollars in cash back over the year, no annual fee and a low APR, let me know your email and I will send you the link.
Do you have balls?
What are 3 ways that you can improve your credit?