Financial Freedom Junkie

FREE Credit Score Hacks Everyone Needs to Know!

• Adam Fernandez • Episode 3

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#3 This is your comprehensive overview of credit scores and credit reporting. Learn free and fast ways to instantly boost even bad credit and get closer to a perfect score, including actionable strategies you’ve never heard of. You’ll gain an understanding of how credit reports are put together and how to use FICO score calculations to your advantage. I also highlight the importance of monitoring your credit to catch and correct errors, and I suggest tools to do just that. You’ll walk away with the ability to create an action plan to level up your credit game so that you don’t have to worry when a lender goes to pull your credit for a loan.

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Disclaimer: This content is for general informational, educational, and entertainment purposes only, and it is not financial, tax, investment, or legal advice.

Have you ever thought about your credit score as being a part of your brand? Or at least your financial brand? Well, it is. It's used in your brand valuation. Basically, what an outsider considers you to be worth. Whether you don't care too much about it, or it's just been dragging you down, you know that you'll borrow money in your life, and it's important to give yourself the best chance to get the best financing terms if and when you need it. I'll walk you through some credit score hacks that you need to know. Welcome to the Financial Freedom Junkie Podcast, where we help everyday people master their money and fulfill their financial purpose. You should never lose sleep over money, but together we can change that. I'm Adam Fernandez. Join me and let's get addicted to the pursuit of financial freedom together. It's time to become a financial freedom junkie. So I want to split this up into three parts. I'm going to go over a quick history and overview of credit scoring and credit reporting. Then I'll go into the main tips and tricks to boost your credit score. And then we'll go into monitoring. You're not going to want to miss that because there's some pretty crazy statistics out there that it's important for you to know and for you to stay on top of. All right, so starting off, you should know that we have three major credit reporting bureaus: Experian, Equifax, and TransUnion. Now, you may hear credit reporting agencies, credit reporting companies, credit bureaus, they're all referring to the same thing. Now these credit bureaus, they gather data based on your spending and borrowing habits. The data they gather is based on publicly available data such as, say, local records, county records. Things of that sort, property records, as well as spending and borrowing data from institutions that you apply for loans, retail stores in which you apply for a credit card, things of that nature. Now what they do is they gather that data and then they sell it to potential lenders when you go and you apply for a type of loan. Say a car loan, a credit card, a mortgage, potentially even your rent. And many employers even run background checks when you're applying for a job. Now all the data that's compiled goes into what's called a credit report. And you're going to have one for Experian, for Equifax, for TransUnion. So you do have different credit reports. And each of those credit reports is what's going to be used in determining a credit score. Now each of your credit reports may look a little bit different because say when you go apply for a loan, a lender is going to, they'll say, they're going to run your credit, right? And when they run your credit, they are choosing a specific source to pull your credit information from. But by and large, I would say don't worry so much about which credit bureau should I be looking into the most, which credit report should I care about the most. What's most relevant to know is holistically, this is how the process works. And your credit score, will range from poor to excellent. So what is your credit score? Where will you find your credit score? There are actually numerous different credit scores, so you may hear the generic term credit score, and usually people are referring to a FICO score, but there's also a Vantage score. Now for all major models, your score may be as low as 300 or it can get as high as 850, but even amongst these different models, the actual score between say poor and fair and good and very good. They range depending on which scoring system you're talking about. But nonetheless, I would say if you're not sure what to focus on, if you really feel like I really, I just want to focus on one score, I need to look at one. I would say focus on the FICO score because the FICO score is used by lenders about 90 percent of the time. Um, so that's why credit score and FICO score typically used interchangeably. So in terms of the FICO score, the way that your score is calculated is based on five main, let's call them attributes. 35 percent is based on payment history, 30 percent on amounts owed, 15 percent based on the length of your credit, 10 percent based on your credit mix, and 10 percent based on new credit. So in a nutshell, your payment history is have you paid on time? Have you paid late? That sort of thing. Amount owed has to do with how much you've borrowed. So say you get a new credit card and the credit card issuer says that you can borrow up to $5,000 on the card. So the amount of charges that you rack up on that card as a percentage of the amount owed is pretty relevant. Now, the length of your credit history is just that, how long have you had credit. Someone that's never borrowed any money before has never had a credit card, they probably have no credit history, but someone that has had credit cards for years, or maybe they have student loans, that sort of thing. The longer that you've had some sort of credit, the more time that has passed since you have applied for credit or borrowed money. That goes into the length of your credit history. Now, your credit mix has to do with the different types of credit that are on your credit report. So, like I said, maybe you have a student loan, maybe you have credit cards, maybe you have a mortgage. These are all different types of loans, and all these different types of loans go into your credit mix. And the last one, new credit, Well, new credit is just that. How much new credit has been issued to you, whether it's taking out a new credit card or have you taken out a new loan in the past year or two years. That's all your new credit. Now onto the tips and tricks. First and foremost, please pay your bills on time. I feel like this goes without saying, but I think it's important. And I'm not just talking about credit cards, I'm talking about all types of bills, such as medical bills. What's pretty crazy is your credit score can drop almost a hundred points if you're 30 days late. just once and well over 100 points if you're more than 90 days late. So please, please pay your bills on time because if you're late, it can really destroy your credit and it takes a long time to make up for that drop in your score. I feel like I could have a whole discussion about why you should pay your bills on time, so let me know if you're interested in that. I'm happy to hear it. Now on that same note, if you're missing payments or maybe you're just not paying your bills in time, please feel free to reach out to me. You can reach out to me via email, social media platforms. As always, I'll leave my contact info in the description below. Now there are some pretty cool services like Experian Boost, and they can link bill payments for your phone, internet, utilities, possibly even rent to your credit report. And that's pretty huge because there are a lot, there are a lot of people out there that maybe have never gotten a credit card before, have never applied for a car loan, haven't applied for a mortgage. So this kind of thing, something simple as linking your phone bill, payments on utility services, being able to have responsible spending habits reflected on your credit report, especially for people that don't have much of a history, that's pretty amazing. Now for credit cards specifically. Where you can really level things up is by paying before your balance is due. I know that sounds strange. How am I supposed to pay my credit card balance before my balance is due? That, I couldn't possibly know. Well, I promise it's actually not as complicated as you may think. I actually have friends that do this. They pay their credit card weekly. Now, even I haven't gone to that kind of extent, but I could see a really great method being maybe try to link paying your credit cards. To your payroll schedules. Maybe you get paid bi-weekly. So, bi-weekly, make a payment for whatever your current balance is at the time. And I'm not talking about your statement balance, I'm talking about your current balance. Any amounts that are owed on your credit card at that point in time. And the reason that's so impactful is, one of the best things you can do is keep your credit utilization under 30%. So, the way that the credit utilization works is that whenever your statement ends, whenever your billing cycle completes, whatever amount is shown as your statement balance at the end of that billing cycle or statement cycle, that amount gets reported to the credit bureaus that we talked about earlier. And, ideally, you want that amount to be under 30%. for any cards that you have. And let's just run a quick example using some round numbers. Okay, let's say, let's say you have a credit card with available credit of $10,000. When your statement comes to a close, you want the balance that's going to be reported to be less than 30 percent of your available credit. So again, in this example of having $10,000 of available credit, you would want your statement balance that's reported to be less than $3,000. And again, maybe you're spending more than $3,000 on that card throughout the month. But again, if you use the tactic earlier of paying more frequently, let's say you pay bi weekly instead of monthly, the amount that's shown in your statement balance is much more likely to be a lower amount rather than had you paid your card monthly. And this one hack is what I found to be the most impactful in Pretty much skyrocketing my credit score. I'm not even joking. Keep your credit utilization under 30%. All right. Now you're saying, well, I just like, how am I supposed to do that? I'd have to be paying my credit card off every few days to be able to do that. Well, one thing you can do to help with this credit utilization. Is to request higher credit limits. A lot of credit card issuers have even facilitated this to the point that you can request higher credit limits from within the mobile app. But if nothing else, it really doesn't hurt to look at the number on the back of your card and give them a call. So if you can do it on the mobile app, amazing. If you don't know how to do that or you just really need to call, I know it can be a pain, but it can make a huge impact and really help you out. Now, if you're backed up on payments and you're actually accruing interest on money that you owe from previous statements, I would encourage you to try to negotiate lowering your interest rate or possibly even look into limited time offers. Now, it probably helps if you have a good payment history, but if you don't, if you're carrying a balance on a card, unfortunately you are accruing interest. The amount that you owe in that card is going to increase and increase and increase due to that, due to that accrual of interest. So what you can do is look into a balance transfer to another credit card with 0% intro APR. That's, that 0 percent is effectively the interest rate that you will pay on this new card to transfer your balance from old card to new card. And that 0 percent will be for a specific period of time dictated in the terms and conditions for that specific offer. Personally, I really love the Capital One Quicksilver Rewards Card. You can get that 0% intro APR for 15 months. That will buy you some time to pay off that balance in full. Don't just keep on carrying the balance. That's I feel like that goes without saying, but I'll say it. And on top of that, you'll get unlimited 1. 5 percent cash back on all purchases that you make. They'll throw in a one-time $200 cash bonus. And there's no annual fee, so that's pretty amazing. If you are interested in seeing if you apply for a Capital One credit card, I will leave a link in the description below. This is an affiliate link, so I may earn a fee for you signing up at no cost to you, but you can, you can check to see if you're pre approved with no impact to your credit. This is what's called a soft credit check. They don't actually pull your credit initially. So, if you're interested in looking into a Capital One credit card, I would really appreciate it if you use this link, because it really supports a show. Terms and conditions apply so make sure to view the important rates and disclosures. Now onto credit monitoring. I know, I know. It sounds really exciting. I know, obviously I'm kidding, but it's just as important as the tips and tricks to get your credit score to the highest level possible and maintain that. So here's a surprising statistic from the federal trade commission, the FTC. They found that one in five or about 20 percent of people had an error on at least one of their three credit reports. Just think about that for a second. You, four of your friends, most likely one of you five, have an error on one of your credit reports. Also noteworthy, 5 percent had an error that could have them end up paying more for things like car loans and insurance. So it's important to scrutinize your credit report. Again, like I said, this is not sexy. This is not exciting, but you really should be looking at your credit report. You actually have that option. And you can look at all of your credit reports every year. And actually, not so long ago, they changed it so that you can access your credit reports every week for free. Now, I'm not suggesting you look your credit reports every week. I know that the credit score is the exciting or maybe anxiety filled part, but again, all the important details that gets you to your credit score are in the credit report. The credit report shows your loans, addresses that you've lived in, things of that nature. So you can go to AnnualCreditReport.com. Now, if you find creditors you don't recognize, the first thing you should do is contact the creditor, see what's going on, see if there's an issue. If it really is an error, the next thing you want to be doing is reaching out to the credit bureaus to report that issue and probably freeze the account. That's your credit report. Now, most major credit card companies will provide free access to your credit score. And again, the score you see will probably differ depending on your credit card issuer. Now, earlier I mentioned a Capital One credit card. A really neat perk is CreditWise from Capital One, which is built into the Capital One app. With CreditWise, you have access to a free score, what they call a CreditWise score, and that's currently calculated based on the TransUnion Vantage Score 3.0 model. There you can access your credit score whenever, all the time if you'd like, without negatively impacting your credit. If you don't use credit cards, you may wanna sign up for a free credit monitoring service like Experian or Credit Karma. Those are two good options. Now one thing to note on this monitoring end, I think we can all agree that scams suck, right? Well, please be careful not to select services with hidden fees. There's really no reason for you to be paying for credit monitoring service unless you feel like you need to pay for those services for some enhanced features, and that may be legitimate, but just something to note. Now, if you remember nothing else, just try to keep these things in mind. The quickest way to boost your credit score is by lowering your credit utilization rate. Again, under 30%. And by the way, that's not just 30 percent for a particular card. It's 30 percent for say each credit card that you have, but also 30 percent in the aggregate, 30 percent for all your debt, 30 percent for all your available credit combined. Okay. And consider getting a new credit card if that will help, because getting a new card will get you more available credit, more available credit will add to your total available credit. So that will help with your credit utilization and check on any and all cards that you already have to see if you qualify for credit line increases. That said, thanks so much for being here. If you learn something useful, please rate and review the show. Let us know what you plan to use right now. And don't forget to subscribe to the show for similar future content. If you haven't already. Oh, and listen, while you're working to build your credit score, make sure you're crushing your student loans. Check out some simple strategies that you may not have known existed in this next episode. Oh, and one more thing, quick disclaimer. This content is for general informational, educational, and entertainment purposes only, and it is not financial, tax, investment, or legal advice. See full disclaimer at financialfreedomjunkie.com/disclaimer.

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