1. Building Your Credit Foundation

Hello, welcome everyone to Week 6. Building Starter Credit. And in this first module, I’m going to break down building your credit foundation. So here is what we’re going to cover in this particular module. So the first thing I’m going to get into is the review of the 700 Credit Score Academy process. Then I’m going to get into maximizing the 412.5. You’ll understand exactly what I mean when I get to that particular part of this module, then I’m going to explain the importance of primary tradelines and what exactly they are. I’m going to break down why you should never close credit cards. I’m going to explain how to, how to calculate your credit age, then the road to an 800 FICO score. So all of these things are going to be foundational pieces for you as you build this process. So most people you already get and understand when it comes to this process, it’s easy.

The first five weeks was all about cleaning your glass. So at this point, we have already done all the heavy lifting when it comes to cleaning the glass. If you’re watching this in week six, and you have not completed the first five weeks of this program and done the things that I highly recommend, that you stop watching this video and you stop even attempting to prevent, do this week and you go back and you complete the first five weeks, but the first five weeks is all about cleaning your glass. You understand everything there is to know about getting the negatives removed, suppression, auditing your credit report. You have a system in place to ensure that you get those things knocked out, moving forward for your re-challenges. You understand how to do horizontal scaling TOS system. Again, we’ve cleaned the glass and we’re going to continue to clean the glass for as many rounds as it takes. Now, week 6, 7, and 8, is all about helping you put ice in the glass and more so, making sure that you are putting your credit file in the best place position to be approved for accounts at the end of this process.

Now this is many people go wrong because they spent all this time on trying to clean up their credit report, and then they don’t spend any time on the rebuilding process, which is why I’ve broken it down this way for you. So now we’re going to spend time. We’re going to transition now, and we’re going to start putting ice in the glass and putting a proper foundation in place. All right, now, once we have done this, cause this is where we are for the next few weeks. Then we’re going to pour clean water in a glass. And then at that point, I’m going to break down some strategic things that you can do to add water, add credit history, while at the same time position, showing you how to position your file for those big ticket purchases. So again, the first five weeks of this program are foundational and you get it.

You understand why we don’t dispute and why we challenge. You understand how to clean the glass. You understand personal identifiers, hard inquiries and all that good stuff, and you have that blueprint already in place. You have your credit success meeting scheduled. So the rest of this week is all going to be about implementation and ensuring that I have the right mix of accounts to ensure that my file is positioned the best for the rest of building, I will call your credit house. Okay. So let’s go ahead and hop right in and talk about maximizing the 412.5. So what does this mean? Well, what I’m saying here is maximizing 412.5 points available to you. So the very first one that we’ve already given, we’ve already gotten into in great detail is 35%, which is the 192.5 points. That’s addressing the past. Now up to this point, everything that I have broken down and done with you and shown you how to do is all, has been about getting it cleaned.

It’s been all about making sure that it’s not negatively reporting, you have all those derogatories gone, removed, or you’re on the journey of getting those things addressed to where they’re no longer reporting negatively on your credit file. However, however, although we have now put ourselves in position to ensure that stuff cleaned up, that’s a big part of it, but the other part that’s just as important now that that hasn’t been addressed or you’re addressing this is making sure that we maximize all the points available to us for all, for all of our current accounts. So what does this mean? This means that I have current accounts right now, and I need to make sure that I don’t miss any other payments on those accounts. I’ll get into this and show you exactly how to make sure you don’t, but layman’s terms, this means I need to pay my bills on time.

So you understand you get that paying your bills on time, obviously isn’t going to fix or improve the 35%. However, once you have addressed the negative items on the 35%, paying your bills on time is going to be what you do to maximize all of these points available to you. And that’s why this is so pivotal. That’s why this is so important for you to get. And now you have worked so hard to get that past cleaned up, but we’re not going to miss any more payments because one late payment can literally drop your score 70 points, 50 points, and some scenarios, I’ve seen a drop over 80 points and that’s so, so I mean, that’s like literally dropping one or two credit grades down and we don’t want that to happen. So I commend you, and I’m excited that we have really addressed the past. However, we want to make sure that all the current accounts that we have are going to get all the points available to you in this category.

Then we now have the 30%, which equals 165 points, and this has a lot to do with our utilization. So in this week we’re going to get into the nitty-gritty of making sure that we have utilization and, or maximizing our utilization, because what we want to do in this particular scenario, in this particular category is we want to get all points available to us in this category as well. So the simple way we do this, and I’m going to break this down in the 14 K blueprint guaranteed revolving lines of credit is we want to decrease outstanding balances and maximize all available credit that’s reporting on our credit file. Because again, we want all of these points to be reporting on our credit file when we go to apply for credit. Then the last thing, which is one that many people don’t even get into, or even talk about, or even break down or even understand is the credit mix. The 55 points, right?

And that’s making sure that we have the holy grail credit mix or the proper mix of accounts between revolving and installment primary and all this other stuff. And we’re going to get into that as well and have a module dedicated to that specifically in this week. However, this is 412.5 points that is now under your control. And you now will understand how to deploy and maximize in your favor. And this, these three are the foundational pillars to a 700 credit score. So when you do it in this order and you follow this process and you address it in this order, and you have all of these proper things on your credit file, you can see that even if I start out at the 300 credit score, because that’s the lowest score that I can have is a 300. And I simply just do all of these three correctly, 412 plus 300 means I will at least have a 712 credit score.

So that’s why these three pillars are so important. Now the other ones I’m going to get into and break down, but this, these three, these three are the foundational pillars of that 700 credit score. And it’s not, again, yes. I’m excited that we have addressed the past. Yes, I’m excited that we have gotten those challenges out. Yes, I’m excited that we’re going to continue to challenge. However, we need to make sure we’re doing these three as well, and we’re going to get into it in this particular week. Now, let’s get into more. I really want to get into this cause I’ve already kind of did, but I want to really, really break down this maximizing 112. So we already understand that we need to make sure we’re ensuring the past is addressed. We’ve already done that. You have your credit success meeting scheduled on your calendar.

You have your re-challenges knocked out at this point. Your round one is done. And if you follow, and you watched the re-challenge process, your round two should also be out as well. If your round two, and your round one is not complete in the mail and or scheduled to go in the mail, then I want you to make sure that that’s done on your part, because we want to get that. We want to get that stuff out. We want to get that momentum going. Now. Like I was saying, we executed this in the first five weeks. The other thing I was just getting into in the last slide is we want to pay all bills on time moving forward. And here’s a little hack. What I want you to do is audit your credit report or audit for all credit reporting bills.

Let me say it this way. So you already know that you have bills and I’m going to get into this in week seven, when we talk about creating a cashflow program, excuse me, need some water. However, I want you to now as an action step, I want you to look at every bill that you have, and we’re going to audit that bill more specifically for credit cards, home, auto, personal loans, student loans, and in some scenarios utility. So any bill that you have that has to, or that does report to the credit bureaus, we need to ensure that we set up automatic payments. Because again, it’s one thing to make sure that we’ve addressed the past. We’ve already completed this. It’s another thing to say, hey, look, I want to pay my bills on time. Okay, I get that. Now what I’m going to do, and what you’re going to do is ensure that this, this is like, you don’t even mess this up.

So we need to audit for these things. We need to audit for these accounts. And then we want to call our creditors and call each creditor, call each bill and put this on automatic payments. They’re going to have automatic payments because you do not want this to drop down. Again, one missed payment, I want to reiterate. One missed payment can literally drop your score 50, 60, 70 points. So it’s not worth it. We’ve already worked so hard to get our glass cleaned and get this addressed. And we’re going to continue to work so hard, but we want to eliminate failure as an option. That’s one of the things that I’ve been communicating, you guys have heard me say this probably a couple of times in our course, in our training, eliminate failure is an option. This is how we eliminate failure as an option to ensure that we get all points available to us in this particular category.

Now, primary tradelines, you know, what are they and why are they important? And how am I going to ensure that these are going to be used efficiently and effectively for me? Well, primary tradeline is any type of credit account opened in your name in which a creditor and or business has extended credit to you as a borrower. So I want to go ahead and explain this before I explain the other two bullet points or get into the other two bullet points and really dispel a myth. So in week nine, I’m going to break down authorize user tradelines and how you can use those as a way to add additional history to your credit file. You can rent those. However, there’s a myth out there saying, hey, look, I can buy a primary tradeline, but there’s no need for you to buy a primary tradeline.

You can just establish primary trade lines with new creditors, which I’m going to show you how to do in this week for free and or for whatever their application fee is when you get started with them. So there’s no need to try to go out and add primary tradelines outside of the ones that we recommend. Now, the other thing is, this means when you have a primary tradeline, this means you’re solely responsible for this accounts reporting status and all the transactions. So basically it’s almost like opening up an account. So to give you an example, primary tradelines are the foundation of your credit report content. So you want to have primary tradelines on your report. So examples just to be clear, are credit cards, auto, home, student loans, personal loans, revolving lines of credit, basically any type of account that’s established.

Generally speaking that reports on a monthly basis to the credit bureaus is considered a primary tradeline. And we want to have a specific type and mix of primary tradelines. However, you need to understand that I need to have primary tradelines and i.e credit accounts reporting on my credit file so that this is going to help me with my particular score. And again, we already get the addressing the past, but these are going to be the foundation again of our report content. So why you should never close credit cards. So this is a common question that I get about credit cards and, you know, Kenney, should I close the credit card? I’m not really using it or what should I do about it, or how do I maximize this? So let’s get into it. Now, there’s three reasons why you don’t want to close credit cards.

The first reason why is when you do that, you’re going to decrease the amount of available credit that you have. For instance, let’s just say I have $10,000 in available credit and I closed a credit card that has the availability of $2000, but I closed it. My available credit automatically decreases by 20% from $8,000 available credit to, from $10,000, excuse me, in available credit to $8,000. So I’m automatically going to decrease the amount available credit and really the game of credit is making sure we maximize are available credit. We want to make sure maximize that because the more we can look and show our responsible use and deployment of available credit, the more of it will get, and the more, I would say, I’m going to say safe, but the better we look as a credit risk. Case in point, let’s just say that we both get our,.

we both have our driver’s license. Let’s just say I’m 19 years old and I have had my driver’s license for a year, and your friend is 40 years old, and he’s had his driver’s license for 22 years and you’ve got a brand new car. Who would you, who would you trust more with the car? The 19 year old has been driving for for a year or the 40-year old has been driving 22 years? So having that available credit shows, and I’m going to get into this in the next slide shows that I could be trusted and I can have responsibility with that. And the other thing is, is when I decrease my available credit, it means that I’m going to, if I do have reporting balances on my credit report, I’m going to increase, this amount is going to increase assuming I have reporting balances.

So for instance, let’s just go back to that same scenario I’m using, I have 10,000 available credit. I have a $2000 on other card, I’ll allow it to close, but I have a balance on all of my cards reporting at $3000. Well, what does this mean? This means when that $2,000 card is closed, that account is closed. I’ve decreased my available limit by 20%. So now I was at roughly in this scenario, 30% utilization, but when I take away 20%, I literally increase my utilization, which means I directly impact the amount of utilization being reported on my credit file. Assuming I don’t pay that balance down and I take away my points. So instead of looking like I’m using $3000 of $10,000, I’m looking like I’m using $3000 of $8,000, which is close to 50% utilization, which is going to decrease my score. The other thing, and I was kind of getting at this is age of credit.

So when you close a credit card, that amount is only going to be capped at the age of the account when it is closed, which means, let’s just say, I have the same credit card that I’m using as an example. And it’s been open for two years. I mean, let’s just say it’s been, yeah, it’s open for two years and it’s a $2,000 balance. If I don’t close that account and I just keep it open, that’s just going to be another tradeline that’s aging on my credit file. Because again, it goes back to that scenario that I was giving with the drivers, both drivers have a driver’s license. We have a 19-year old driver with a driver’s license and we have the 40-year old driver with the driver’s license. To the credit bureaus, if the 40-year old has a driver’s license and they’ve had that driver’s license for 20 years and they can show that they’ve had that specific account for 22 years versus the 19-year old only has one year of driving experience,

and you’ve got a brand new car. Who would you trust with the car? You would trust the 40 year old because the 40 year old can show the track record. Right? I hope this was making sense. It does make sense. Right? So that’s the scenario there like our age of credit. So if we closed that account at two years, we’re only going to cap out at that age being at two years on our credit file, as opposed to, if we just keep it open, we’re literally just keeping that account open just so we can age the tradeline, right? We can age it, right? Same scenario here, let’s just say we have two scenarios, we have, we have a bit of a different scenario. Let’s just say we have a 30-year old and a 40-year old. Let’s just say the 30-year old started when they were 18 years old, they opened up a credit card, a primary tradeline.

They followed all these principles and now they never closed any of their credit cards. And they’ve had that account on their report at 30 years old for 12 years, then let’s take the 40 year old. And let’s just say the 40 year old didn’t know anything about credit. And they started at 36, they had to rebuild their credit. They’re starting at 36 and at 36, they opened up an account and they don’t close it. But from 36 to 40, they’ve only had the account four years. To the credit bureaus, who are they going to trust more? They’re going to trust the 30-year old because the 30-year old has 12 years of history showing on their credit file. Although they’re younger, as opposed to the 40-year old has four years of history because they can show that they’ve only had that account age on their account, on their report for four years.

So this is why we don’t close credit cards. We don’t close these primary tradelines. We just want to keep them open for as long as possible because we’re playing the age game, right? That age game is by far one of the single biggest factors of how you can really maximize your credit score for the long-term right? So this is why you shouldn’t close a credit card. Now, this leads me right into how we calculate your credit age. So how do we do this? I really started breaking it down in that last slide, but let’s go ahead and break it down specifically. So step one is you want to find out how old your account and or your tradeline is. So if you’re using SmartCredit or Identity IQ, when you pull up under the account section is going to have a date opened.

I want you to go to that particular date and you’ll be able to see when that account was established. It might say September 2019, or May 2002, that is going to be how you find out the year your account was established. And then obviously you just do simple math, and then it’ll tell you how old it is. So if it was opened up in May 2002, and we’re now in 2020, it’s safe to assume that, that tradeline line is 18 years old. Okay. Then once you find out how old your account is, let me make this clear, we’re not just finding out how old one account is. We’re going to look at all of the accounts that we have. So if we have 10 accounts on our credit file, we want to find the age for all 10 accounts using what I just said.

So we’re going to go to the account one, look at when we opened it up, account two, account three, account four, so on and so forth till we have all the ages of all our credit reports. So in step two, what we do is we add up all the years from all the accounts. So for example, once we’ve added all those years, we are then going to divide the total number of years by the total number of accounts. So step one, we need to find out how old the tradeline is for every account. Step two, we need to add up all the years from all the accounts. Step three, we want to divide the total number of years by the total number of accounts. So here’s the example. I said for example earlier, but this is, I’m just gonna go ahead and break it down in this scenario here.

So let’s just say you have a total of 12 accounts, right? You have six accounts and six of them are five years old. So you have three of them that are four years old. You have two accounts and they’re two years old and you have one account that is 10 years old. Well, that means that’s 30+12+4+10. That means total years of all of these accounts is 56 years. Now, what we want to do is we want to the divide, 56 years by the 12 accounts that we have on our credit report, and then that number that we come up with is 4.66 average credit age. So that’s why, I mean that’s how you calculate your credit age. So I’m going to get into this on the road to 800. However, this is why I am saying, and this is why I was saying in a previous slide,

why you never ever ever want to close an open tradeline, especially a credit card. You just want that to have with age on your credit file. Think of it like why, the older it gets, the better it gets, because again, credit is short for credibility. The more credibility we can have the better. So this scenario was an average age of 4.66 credit age, which isn’t bad. But again, going back to that same scenario, I was breaking down. If I am the 30 years and I’ve been doing credit since I was 18, and those of you who have kids watching this particular training, make sure you get your kids as soon as they turn 18 on opening up tradelines on their credit report. So that way they can keep the lines. But again, let’s just use the same scenario.

Let’s just say that I’m the 18-year old, opened up all 12 of these accounts when I’m 18. And I then have all 12 account reporting on my credit file for 12 years. Well, 12 times 12 was 144 years. 12 divided by 12 is, 12 x12 is 144. I believe that’s it. 12 divided by 144 is 12 years. So that means that my average credit age is going to be 12 years, which is huge to the credit bureau. So this, I wish my parents have told me this when I was 18. Right. I didn’t know. Nobody told me they didn’t know nobody got it. So now you understand that this 800 credit score is really a time game. It’s really a time game, but this is how you calculate your average credit score. So how do we maximize our age?

Well, the first thing at this point, I have beat this down. Don’t close any revolving tradelines in good standing. Just don’t do it. Again, you want to keep that thing open for as long as possible. If you were considering closing a tradeline, don’t close it. The second thing is you want to pay off all credit cards, but keep them active with a small bill. For example, things like Netflix, iTunes, Hulu. What you want to do with these particular accounts is just, let’s just say you have a random credit card, you don’t even use. You just want to put an auto bill on there. If you can like this and then just pay it off every single month. So just Netflix is only 10 bucks. Just have it on there and then have an auto-draft to come out of your checking account for 10 bucks.

You won’t miss it. You just want to keep that deal going. Now, the other thing you want to do is, closed and opened accounts that you need to understand here, closed and opened accounts are calculate it the same. So I’m not saying that a close account isn’t impacting your score because it is because you could have closed an account prior to you watching this particular training and say, man, I closed that account. So here’s the good news, the good news is, even though you closed that account, which at this point, you know never to close an account, but at this point, what you need to understand is closed accounts will report on your credit file for 10 years, but open the accounts we’re report as long as they’re active. So if I have, we’re going back to that scenario of the 18-year old, and let’s just say, I started credit when I was 18 and now I am 36 years old.

Case in point, really good friend of mine. She is, she has, her credit is better than mine. She has like an 840 credit score, and wouldn’t you know, her first credit card, she opened up when she was 19 years old, it’s a Sears card. Not even Sears, a Sam’s club card, and she’s 36 years old. So she’s got 18 years of credit history. She doesn’t even close it beause she just has it open because she understands the fact that, you know, she started young. So, and she’s never going to close that account because again, that’s 18 years of credibility. So that’s the thing, never closed that account because once it’s closed, it’s going to report, it’s going to still be calculated in your algorithm, but after that 10-year mark, it’s gone, right? And here’s another hack I recently find out about, which is really good,

don’t pay off loans early. So a lot of people say, Oh man, I’m going to pay off my installment loan quickly. I want to go ahead and get this thing paid off. No, no, no, no, no, no, no, no, no. Don’t do that. Because again, this is a waiting game. This is an age game. So instead of paying off, number one, don’t pay off your loans early, pay them off in the timeframe that you have agreed to. But also number two, instead of just paying them off early at the end of the term, leave a dollar balance on that particular loan, just so you can keep the account open and then it will continue to report. So again, that’s another small hack that I wish I would have knew about before, because I would just have a couple of auto loans and loans on my credit file, just with the dollar balance, but they’re still going to be reporting, right.

And they won’t be reporting like a negative balance because it’s just a dollar, right? So it’s just like one of those things that you can do to hack maximizing your credit age. But the biggest one, because, and this is going to also depend on the bank as well. But the biggest one that I’m really driving home here is do not close your revolving lines of credit. Now the road to 800, I’ve already kind of alluded to this, but this is it. Payment history has to be at 100%, right? This is, this is, this is the first thing. The second thing, which means we’re not gonna miss any payments at all. The second thing is we want to make sure our credit card utilization is always between 1-7%. I’m going to get into utilization in our next module, but really I’m going to get into utilization of 14 K blueprint, but when we’re on our way to the road 800, we want to keep our utilization reporting at 1-7%. Then we have no derogatory remarks at all on their credit report. We understand exactly how to ensure that we no longer have derogatory marks. Age of credit, or our average age of credit is 9 years.

Again, we understand how to calculate our credit age and now we get why we should never close an account. And now we understand how we can get our average age up to nine years. So people who have 800 credit score have average of nine years of credit history. It doesn’t mean you can’t get to a 700, but when you’re really looking at that 800, we want to have at least nine years of credit history. Our total number of accounts going to be 21, and that’s between revolving and installment credit accounts, overall accounts. Because again, credit, the 800 credit score is a waiting game. It’s a strategic long-term play that’s going to take us. So you could have 21 accounts after 10 years that you just keep opened and you never closed. Then the other thing is we have no inquiries because again, we don’t want to have any type of inquiries on our credit file, but this is how you achieve 800 credit score, right?

This is what you do. So 700 is not that difficult. The 800, this is the path to it. So again like I was showing, this is just really breaking now what very poor credit looks like. I’ve shown this before in previous slides. In previous modules. But again, you see what excellent credit looks like. So at this point, this is the foundation of building excellent credit. You now have everything and you understand everything you need. So in the next module, I’m going to be breaking down the difference between revolving and installment credit. And I will see you there. Let’s take action on these things, which is, I want you to ensure that you understand your average credit age. So get that knocked out right now.