Build Credit – So you wanna know how to build credit
Your Credit Minute Show Notes:
- 00:01 YouTubers, what’s goin’ on?
- 00:03 So you wanna know how to build credit. I get it. You’re new. You’re brand new to credit.
- 00:08 Or you’ve taken a credit hit over the years, and you’re just making your financial comeback. You haven’t used credit in a while.
- 00:15 Or you’re just new to the country and you wanna know, “How do I re-establish credit?”
- 00:18 Well let’s show you. I’m gonna jump on the whiteboard real quick, guys. Let’s jump on the white board real quick, and let’s do this together, okay? And let’s show you how to build up some credit.
- 00:29 Okay, remember the rule of three, guys. Most banks and lenders, well, what do they wanna see? They wanna see that you have at least three active trade lines on your credit report. So what’s Nick’s rule of three? Um, or what’s Nick’s strategy, in terms of an actual, and if you’ve ever done a consultation with us, is three active trade lines. That’s mandatory, that’s how many we wanna have on the credit report.
- 00:48 So the first thing you wanna do is make a note. Grab a notebook, grab a piece of paper.
- 00:53 By the way, a credit action plan should only encompass one piece of paper. It does not require a notebook. Don’t waste your money on notebooks. Grab a sheet of paper, okay?
- 01:01 Um, so we want the rule of three, okay? We want a good mix of “Revolving,” “Installment,” okay, and then eventually “Real Estate Credit.”
- 01:12 Why? ‘Cause 15 percent of the credit score is types of credit, having a healthy mix of different types of credit, okay? Um, but in this case, to build credit, obviously, we’re not gonna get real estate credit, okay? My suggest is one credit card, two credit cards, okay, and one secured loan, okay? Let’s talk about this.
- 01:43 Now, the question you’re gonna ask is, “Nick, how do I get a credit card when I don’t have credit?” Okay, it’s pretty simple actually. Something called a secured credit card, okay?
- 01:52 You can go to a website called bankrate.com, I don’t know if you guys can read this. Bankrate.com
- 02:02 So bankrate.com is gonna give you a list, there’s actually a drop-down in the credit card selection section where you can search credit cards, where you can search starter credit cards and secured credit cards.
- 02:13 The concept of a secured credit card is fairly simple, okay? You’re going to take $500, okay, and you are going to put that $500 or give that $500 to the credit card company, okay? They’re gonna hold that $ 500 as collateral, okay? It’s collateral. This is not a prepaid credit card. This is collateral. They’re just holding it, okay?
- 02:38 And what they will then do, in turn, is issue you a credit card with a $500 credit limit, sometimes a little lower as well. Sometimes a little higher.
- 02:47 Why do they do this?
- 02:48 Well, they have no risk. You have no credit, so you’re considered a higher risk for them, especially when you’re re-establishing credit, okay? But when you’re putting up that collateral, there’s no risk. If you don’t pay on that credit card and you go into default, guess what? They’re gonna take your money.
- 03:02 Now, the good thing is, a lot of these secured credit cards, after you’ve established credit, they’ll offer you unsecured credit cards, and you can actually get your security depots released. Some of them will do it, um, right up front, they’ll actually tell you, in six months of on-time payments, they will release, uh, that security, okay?
- 03:20 So we wanna get two of these secured credit cards, okay? And then we want to get a secured loan.
- 03:27 So, remember, we want a good, healthy mix of active accounts. We have revolving accounts, which are credit cards. We have installment accounts, which are personal loans, student loans, or car loans. But again, the dilemma is, we don’t have credit, how are we gonna get these things?
03:41 Well, this same concept here, with the secured credit card, where you put $500 into a, um … or you give it to the bank as collateral and they give you a credit line for $500, you can actually do that with an installment loan. Usually they’re a little pricier, okay? Most banks will do it for about a thousand dollars in the form of a CD. So they’re gonna take that thousand dollars, and they’re gonna put it into a certificate of deposit, okay? Don’t get caught up in the fancy talk, it’s a savings account, okay? But the savings account is locked, typically for a 6, 12, 24, 36 month period, okay?
- 04:20 They will then, in turn, give you … we’ll go over here, we need a little space … a loan for a thousand dollars. They will give you … remember what we talked about? Having a mix of different types of trade lines? They will give you an installment loan for a thousand bucks, okay?
- 04:37 So there we go, guys. We got a credit card, our two secured credit cards, then we have a secured loan, okay? We have that healthy mix of three active trade lines. We’ve done it without a credit score, okay? Most of your local banks, lenders, um, credit unions will offer you these two products. Secured credit card, secured installment loan.
04:58 If you need any help, or you need some direction on where to access the-these types of products, um, we have full access to all this stuff in our client portal if you sign up with us. Um, aside from that, you can access through our blog. We have a million and one resources. You can actually reach out to one of our consultants, um, call in for a free consultation. We’ll actually direct you on where to go to get these products.
- 05:18 Guys, this is Nick Chucales. This is Rebuilding Your Credit 101, and if you have any questions, give us a call. Bye.