How to Build Your Credit From Scratch | 7 Methods |

Okay, this may shock you. I think your credit score is important. I think you should have a credit score and you need to build a good credit score. That's right. Not all credit is bad. A FICO score is good if you build it responsibly. I'm going to give you seven ways to build a good credit score. That's going to help you build wealth. Now, this may also surprise you. Agree and disagree with Dave Ramsey. That's right. He's the guru that's helped thousands, if not millions of people get out of debt. Heck, he's helped me in my life and our family. I think his teachings are great, but I think he sometimes goes too far. Not all debt is bad. I think there is good debt as well. It's okay to use debt if it's used carefully and wisely. Now, is there bad debt? Yeah, you bet. Credit card debt, Maybe even an auto loan or student debt. We got to get out of that debt. Use a debt snowball. I'm all in. But we need to build our credit score. And when you're young, a credit score is extremely valuable. Okay, one more point here. Before we move on, I want to use an analogy. Let's consider credit as if it was a gun. Now, is a loaded gun in the wrong hands a very dangerous item? Absolutely. But is every gun bad? What happens if I have learned how to use it wisely, safely and carefully, and handle it properly? A gun can be a very powerful and safe tool. Well, credit's the same way in the wrong hands. It's terrible. And there's a lot of people that should cut up their cards and never use credit again. I totally agree. And there's a. This is this message that Dave Ramsey gives. It's incredible and it's life changing. But does that make all credit bad? No. We're going to need credit to rent an apartment, maybe buy our first home, to get an SBA loan to start a business, to buy a rental property. I want you to use large down payments and get credit wisely. But you're going to need a credit score to do that. So we've got to use a FICO score wisely to build wealth. Okay. Now, the first three are pretty tricky and very intertwined. So I'm going to list them out together and then we're going to break it down. Number one is pull your credit reports. That's@annualcreditreport.com. it's free. You should go there to just pull your credit reports and see what's out there. Number Two is hire a monitoring service. And number three is coaching and education on your credit score, credit reports and building credit. Now remember, number one, annualcreditreport.com it's free. You want to pull it. You can do it once a year and it's not going to give you your credit score, but it's going to give you one activity may exist on your credit and it's going to be hard to read, but you want to pull it and use it as a resource as you move through these other steps. Now number two was get a monitoring service. Lots to talk about here. When you get that first monitoring service, you're going to get your credit score. Let's start there. A credit score can be a moving target and you need to realize that and not get frustrated by it. This is where I've learned from my hero in credit reporting, Eric counts. He's@creditnerds.com and I quote him in some of my best selling books. What he's taught me is an important point that a credit score doesn't get you credit, but a bad credit score can keep you away from any credit at all. So that's why the credit score matters, because it's not getting you credit, it's just getting you to the point where you can apply for credit. Another way of looking at it is an analogy that Eric taught me and that is think if you wrote an essay and you took your essay to three different professors, they're going to grade it three different ways, right? You're going to get three different scores or grades. Well, that's how your credit score works. In fact, there's 56 different ways your credit score can be analyzed. So you don't want to get frustrated. You got to remember that the credit score is going to be a moving target and you're going to want to build your credit report with good habits and responsibility. And that's what's going to create this, this credit picture for different lenders to look at. And that's okay. So remember, you're going to pull those credit reports, you're going to get a monitoring service. Now it's off to that coaching and learning. Now coaching is an important part of these steps because you need the help of professionals that look at credit reports every day. They know how to read these 56 different scores and they can help build your score based on what you need. Now sometimes these coaches are paid for separately than the monitoring service. Sometimes they're included. They kind of come together. Now I like watchmyscore.com because you get free coaching with it through this credit nerds and Eric counts and his team. But again, you find a place that works best for you. But you need that coaching and training places that are going to teach you what type of cards to get and not to get and what type of loans are good ideas and bad ideas. So that's why I like the coaching and the training a part of these seven steps. Now we get on to these other four steps of how to build your credit and more specifically, build a good credit report. Remember, your score is going to change, but you want a quality credit report. Now, I'm going to get to the why at the very end of this in a moment, but let's hit these four. Number four, secured credit card. You're going to hear a lot about this out on the web. And basically it's where you put maybe $500 with a bank, and then they give you a credit card with a $500 limit. You can't touch the $500 and the bank feels good about that. And so they give you this credit card with a $500 limit. Now that's good. It's going to report to your credit reports and your credit score will be affected. But it also put you in a weird world in a bad way. You're now in this $500 credit limit world. Maybe you want a $20,000 credit limit someday. Is this going to help you get there? Because when someone looks at you, they're going to see you as kind of a $500 borrower, not a bigger borrower. So it can have some detrimental effects. So in summary, you want to talk to your coach and go, should I get a secured credit card or not? And you're going to talk about your goals with credit, and the coach is going to help you decide on which secured credit card, if at all, is good for you. Number five, secured loan. Very similar to a credit card, but it's going to help you build credit without putting you in that $500 world of a credit card. You're going to basically put money in a CD, a certificate of deposit with a bank. Think of $500 or a thousand, and then you're going to borrow against it and make loan payments. Now, that's going to affect your credit score in a good way, and it's going to report to your credit report, but it's not going to put you in this $500 secured credit card world. So it's another way of looking at it and going about building credit. And it could Be a good choice for you. Talk to your coach. Number six, become an authorized user on someone else's credit. And this is the fastest way to build a good credit score and get some good reporting on your credit reports. But what I'm not talking about is having someone co sign on your application for credit. That's very different because you still might have these credit card limit issues. What you're doing is getting a credit card on someone else's credit that's had it for a long time has a high limit and it's almost like they're coaching you and teaching you responsible credit usage by getting on their credit. That's becoming an authorized user and a great way to build credit. Now number seven, show responsible use of that credit. And this really starts to build upon the why, which is the summary of this little video. Show responsible use. Now what this means is credit cards. That's right. I'm doing what Dave Ramsey told you not to do. Get credit cards. Now are you going to go out and max these out? No. Are you going to go out and use them for dumb purchases? Absolutely not. The credit card is a necessary evil to build credit. We're not going to use the credit cards and we're not going to max them out. We're just going to have those two or three credit cards to maybe build some points, which is in a whole other strategy for those that are really, really responsible with credit. Topic for another video of mine. But we're going to be using those credit cards once in a while. Common industry use says about every three months you the credit card for a small purchase and pay it off immediately. I don't want you paying a lot of interest. Pay that thing off right away. See again, Dave Ramsey. We don't want to pay a lot of interest. We don't want to use credit cards ever. But we've got to have a credit score. We've got to have a credit history and a good credit report. So number seven is using the cards responsibly because that's what you're telling lenders. I've got credit, I've got credit cards, but I don't use them. I keep them in a drawer and I just use them once in a while. What have you done? You've shown lenders that you're responsible. What's your credit score going to do? Climb up. That's the point. Now the why now why does all this matter? It matters because I see things. I'm a CPA attorney like I said earlier, and our firm helps Clients around the country. And we do consultations every, every day. And I myself doing three a day, I'm going to meet with a thousand clients during the year. Do you think I see patterns? You think I see patterns of success? And when clients ask me, mark, what are successful people doing? Well, successful people are using credit wisely and carefully to build wealth and passive cash flow. Now when I use the word wealth, I get it. A Dave Ramsey definition of wealth would be completely out of debt. Even with your home paid off, you got your retirement plan, you're putting some money in and it's going into Wall street and you're getting a decent rate of return. You have Social Security and maybe retirement at work. Cool. That is a great definition of wealth. But are you going to get the style or the quality of life that you want? Is it going to be enough income for what your dreams might be? And is that a moderate style of living versus something you dreamed of to do more with charity and philanthropy, more money? I don't know because I have other clients that define wealth as being out of credit card debt and having passive income and contributing to their retirement accounts. But they might have a little mortgage on their home with a very low interest rate. They might have debt on rental property or align with credit inside their business as they're growing their business. So that's what I see. I'm not a credit expert, but I am a small business expert to some degree as I help consult clients on these tax and legal and business matters. So in summary, if you're trying to build wealth, credit your credit score. And credit should be an important part of your equation. And I need to say thanks again to Eric Counts and the guys over at Credit Nerds. They do a great job and I even call them right before the show is like, I'm going to talk about credit because I have so many clients using it, you know, wisely and badly. What should I remember and what are the facts? And so he was so helpful in this. So folks, I hope this has been helpful. And as many of you are young and building that credit for the first time, be careful, be cautious, keep working and don't give up. Thanks so much for watching that video and I want to be your source for tax and legal strategies. It's hard enough to live the American dream without being out on the web, on Google, trying to find answers to clients complex questions and just click in a mouse hoping you got it right. My team and I want to be a huge resource to you. The law firm, accounting firm, my education resources on my site. Please continue to follow these strategies. I know they'll save you thousands. Now click here if you want to be a part of my newsletter. It's awesome. Weekly updates and deadlines and strategies and tips. Also, subscribe to my YouTube channel. You'll love it. And make sure to click the bell icon so you get a little ping whenever there's a new video. 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