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Speaker 1: Hey, hey, ba fam, it's Mandy here with another episode

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Speaker 1: of Brown Ambition. This is our special B, A, Q

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Speaker 1: and A, which means I am taking y'all's questions now.

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Speaker 1: If you haven't submitted a question to us before, let

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Speaker 1: me tell you how to do it. Go to Brown

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Speaker 1: Ambition podcast dot com click ask us anything and head

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Speaker 1: on over and submit your questions right there. Or a

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Speaker 1: lot of y'all like to slide into our DMS on

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Speaker 1: ig and that is fine too. You can find us

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Speaker 1: at Brown Ambition Podcast on IG. I love taking y'all's

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Speaker 1: career and finance questions. Y'all know I can. I can

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Speaker 1: get at issues from both sides. I love any kind

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Speaker 1: of questions you guys have for me. Just throw me

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Speaker 1: the craziest questions, awkward relationship questions, awkward boss questions, whatever

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Speaker 1: it is. I love it. Remember we can keep y'all anonymous.

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Speaker 1: All you have to do is just let us know.

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Speaker 1: I'll create a fun little pseudonym for you. You can

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Speaker 1: be a super spy if you want to. That's fine,

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Speaker 1: But hit us up with your questions, all right. I

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Speaker 1: can wait to hear from you. In the meantime, let's

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Speaker 1: jump on into this mail bag and see what y'all

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Speaker 1: have for us this week. Got some personal finance questions

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Speaker 1: for today since we spent a lot of time on

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Speaker 1: career last week, so let's dive on in. Our first

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Speaker 1: question comes from listener Denisha, who says, hey, Mandy, we

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Speaker 1: all miss Tiffany, you're doing a great job. Thank you

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Speaker 1: for pushing through for us. Oh, thank you, Denisha. All right,

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Speaker 1: Denisha says, I will pay off my car and a

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Speaker 1: personal loan in the next few months. I have three

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Speaker 1: credit cards and a student loan remaining. My credit score

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Speaker 1: is over eight hundred across the three credit bureaus. So

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Speaker 1: my question is will I take a huge hit to

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Speaker 1: my score when those accounts are paid off? Should I

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Speaker 1: open new credit card accounts to preserve my history? Denisha? Okay, interesting,

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Speaker 1: So this is a good problem to have. You're paying

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Speaker 1: off your debt and you're worried that your credit score

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Speaker 1: is going to be taking a hit because when you've

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Speaker 1: got closed accounts, they kind of fall off your report.

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Speaker 1: They can reduce your total amount of credit ode, which

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Speaker 1: can have, you know, an impact on your credit score.

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Speaker 1: But let's look at the big picture here. More than anything,

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Speaker 1: paying off debt is good for your credit. Okay, it's

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Speaker 1: good for your credit. However, in your particular case, since

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Speaker 1: the loans that you're paying off are fixed loans. So

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Speaker 1: one is you have a car note, so that's a

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Speaker 1: fixed auto loan that you have, and a personal loan,

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Speaker 1: which is another fixed type of loan. Because you're paying

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Speaker 1: off those two types of accounts, and because they're very

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Speaker 1: different than a credit card account, you may see a

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Speaker 1: little ding to your credit score. Now, I don't want

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Speaker 1: you to just keep these debts open because you're afraid

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Speaker 1: of the ding, because obviously they come with an interest rate, right,

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Speaker 1: So it's going to be more expensive for you to

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Speaker 1: keep these this car note and personal loan open for longer,

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Speaker 1: you know, just to get a more a better credit

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Speaker 1: mix for your credit score. So think about your cost

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Speaker 1: savings first and foremost. That's what I think is most

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Speaker 1: important here. So pay off that car note, pay off

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Speaker 1: that personal loan. So yes, most likely you'll see a

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Speaker 1: little bit of a hit to your credit score because,

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Speaker 1: like I said, your credit mix, so that's the types

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Speaker 1: of different credit accounts you have, does factor into your

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Speaker 1: credit score. It is not the most important factor. The

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Speaker 1: most important factor is on time payments, followed by how

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Speaker 1: much credit you're using versus how much credit you have

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Speaker 1: access to, which is all about your utilization rate. So

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Speaker 1: in this case your mix does matter, but not that much. Okay,

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Speaker 1: it's another reminder of why it's good to have a

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Speaker 1: couple different kinds of credit on your credit file to

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Speaker 1: have the best possible score. But listen, if this is

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Speaker 1: the price you must pay for being semi debt free,

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Speaker 1: take it, girlfriend, take it, and then focus on those

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Speaker 1: three credit cards. And by the way, you say that

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Speaker 1: you have a student loan remaining well, a student loan

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Speaker 1: is a kind of non revolving credit, just like your

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Speaker 1: auto loan and your personal loan. So it's not like

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Speaker 1: once you pay off those two loans, your car note

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Speaker 1: and your personal loan, like you won't have any non

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Speaker 1: revolving debt on your credit file. You still have your

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Speaker 1: student loan, right, So that student loan is a part

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Speaker 1: of your mix. So those credit cards, as we all know,

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Speaker 1: when credit bureaus see a bunch of credit cards on

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Speaker 1: a credit file, even if you're paying them off on time,

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Speaker 1: still they like to favor and give a little bit

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Speaker 1: of a credit score boost to people who have a

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Speaker 1: good mix of credit who have beyond just credit cards,

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Speaker 1: people who have a student loan, a mortgage, an auto loan,

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Speaker 1: a personal loan. So at least you've got a student loan,

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Speaker 1: you know there right now. But first and foremost, just

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Speaker 1: focus on making those payments in full each month and

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Speaker 1: getting those credit cards paid down. And I promise you

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Speaker 1: your credit score will continue to be in the eight hundreds,

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Speaker 1: if not now, then definitely in the near future. So

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Speaker 1: just keep it focused on the big picture. Now you say,

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Speaker 1: should I open new credit card accounts to preserve my history? No,

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Speaker 1: big no, no no no no no no, no, no

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Speaker 1: no no. So here's why. One, you're not really helping

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Speaker 1: yourself here. The fact that you are opening new credit

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Speaker 1: card accounts isn't really going to help you here because

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Speaker 1: the types of loans that you're about to pay off loan,

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Speaker 1: your car loan, and your personal loan, those are non

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Speaker 1: revolving or like what they call installment debts. Okay, so

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Speaker 1: you're not replacing the installment debt with a new kind

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Speaker 1: of installment debt. You're actually just adding more credit cards.

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Speaker 1: And like I said, credit bureaus and credit scoring models

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Speaker 1: don't tend to favor lots and lots of lots of

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Speaker 1: credit debt, so I wouldn't necessarily recommend you go out

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Speaker 1: and open some new credit cards. And you also say

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Speaker 1: to preserve your history. So here's one of the little

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Speaker 1: known negative sides of opening new credit. When you open

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Speaker 1: a new credit card, that's your youngest credit account, right,

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Speaker 1: And immediately, what you're doing is you're lowering the average

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Speaker 1: age of your credit So we talked about credit mix

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Speaker 1: being one of the factors of your credit score. Credit

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Speaker 1: age is also a factor of your credit score, and

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Speaker 1: it's the average age of all of your accounts put together.

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Speaker 1: So when you open a new account, it's like it's

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Speaker 1: like having a new baby credit card, okay, And so

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Speaker 1: the average age of all of your accounts gets younger,

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Speaker 1: which can actually decrease your score in the grand scheme

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Speaker 1: of things. It's not the most important factor. I on't

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Speaker 1: think it's even the top three most important factors, but

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Speaker 1: it is a factor in your credit score. So before

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Speaker 1: you open new credit, just consider that I'm actually going

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Speaker 1: to lower the age of my credit. Plus it's going

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Speaker 1: to be a hit to my credit score because it's

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Speaker 1: a new inquiry, right. So there are some downsides to it,

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Speaker 1: so I don't necessarily think that opening credit is the

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Speaker 1: smartest way to rebalance things. After you have this personal

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Speaker 1: loan and your car loan falling off your credit report,

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Speaker 1: I would just let things live and let live if

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Speaker 1: you're really worried about those credit cards and how that

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Speaker 1: may hinder or hurt your credit score, you could see

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Speaker 1: how things go. You know, I don't know how long

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Speaker 1: it will take for your car note or your personal

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Speaker 1: loan to stop contributing to your credit score. Probably a

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Speaker 1: little bit after you make those final payments and the

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Speaker 1: loans the accounts are closed, but just wait for it,

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Speaker 1: see how things go. What you could then do is

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Speaker 1: take out another personal loan and consolidate the remaining credit

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Speaker 1: card debt that you have. And with that consolidation loan,

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Speaker 1: with that new personal loan, you'll get that nice credit

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Speaker 1: mix again where it's not just credit cards, but you've

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Speaker 1: also got an installment loan. And you may also save

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Speaker 1: on interest rates because if you're able to take out

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Speaker 1: a personal loan that's a much lower interest rate than

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Speaker 1: your credit cards, then you get double win. You make

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Speaker 1: your debt less expensive to pay down, and you get

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Speaker 1: the benefit of adding to the mix of your credit

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Speaker 1: and installment loan versus another credit card. Okay, Denisha, thank

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Speaker 1: you so much for the question. Thanks for making me

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Speaker 1: go back into my like the caverns of my brain

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Speaker 1: and remember all these credit scoring models and rules. Yeah,

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Speaker 1: it's not meant to be easy. This is why these

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Speaker 1: credit scoring models are so complicated, because they don't want

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Speaker 1: us to know all this stuff. So hopefully I broke

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Speaker 1: it down for you in a way that was easy

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Speaker 1: and simple to understand. Denisha, I really appreciate your question.

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Speaker 1: Let me catch my breath, take a little sip of water,

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Speaker 1: and I'll be right back with another of your personal

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Speaker 1: finance questions. This is Brown Ambition all right, Va, fam,

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Speaker 1: it's Mandy. I am back with another of your questions again.

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Speaker 1: You can hit us up at Brown Ambition Podcast at

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Speaker 1: gmail dot com or head over to our ig to

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Speaker 1: submit your question. We are at Brown Ambition Podcast on

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Speaker 1: the gram. All right, this question comes from a listener

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Speaker 1: who would like to remain anonymous. So what's your fun

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Speaker 1: spy super hero name going to be? For your pseudonym,

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Speaker 1: let's call you wonder Woman? Why not? Wonder Woman says

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Speaker 1: I am currently paying on debt, but I want to

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Speaker 1: buy a house in the next three to five years.

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Speaker 1: I live in North Carolina and the housing market is

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Speaker 1: just as crazy as the rest of the country with

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Speaker 1: it being a seller's market. I know your thoughts on DR.

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Speaker 1: Do you all know who DR is? Listen, we do

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Speaker 1: not speak his name. He is the voldemort of personal

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Speaker 1: finance in our world. But anyway, just imagine, just think

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Speaker 1: about it. Who could DR be? So back to our question.

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Speaker 1: I know your thoughts on DR. However, he was my

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Speaker 1: intro into finance and debt repayment. It's hard for me

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Speaker 1: to save for a down payment without thinking that all

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Speaker 1: of my excess funds should go toward my debt. Essentially,

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Speaker 1: I'm feeling bad or guilty that I'm not following those

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Speaker 1: DR steps to a t. I am now trying to

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Speaker 1: listen to more folks in the finance space to expand

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Speaker 1: my views. I have a little credit card debt. However,

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Speaker 1: I have about seventy thousand dollars in student loan debt,

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Speaker 1: which is down from ninety seven k a few years ago.

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Speaker 1: My question is should I continue throwing all my excess

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Speaker 1: money to my student loans and wait until I'm debt

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Speaker 1: free to start saving for a down payment or is

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Speaker 1: there a way for me to do both and still

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Speaker 1: see progress? Do I have too many financial goals? Please help?

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Speaker 1: I know I can't buy a house tomorrow, but I

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Speaker 1: do want to start taking steps to eventual home ownership.

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Speaker 1: Oh okay, wonder woman. Listen, you are not the first

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Speaker 1: DR follower who has found their way to to brown ambition. Okay, welcome,

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Speaker 1: it's nice here. We welcome you. We want you to

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Speaker 1: thrive young, We want you to thrive, live your best

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Speaker 1: financial life. Yes, achieve all of your goals, yes, but

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Speaker 1: we don't want to do things to such an extreme

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Speaker 1: extent that you are feeling guilty and feeling like making

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Speaker 1: the right decisions on a personal basis for yourself are

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Speaker 1: somehow bad or they are somehow wrong. And I think

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Speaker 1: that's one of the issues that we have with DR

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Speaker 1: and his advice is just that it can be so

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Speaker 1: it's either this or you're the scum of the earth.

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Speaker 1: You know, it's either this way or you're a hot

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Speaker 1: pile of steaming garbage. And that is just not our style,

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Speaker 1: you know, it's some people's style, and they seem to

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Speaker 1: dig it. He is a very wealthy man. Okay, but

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Speaker 1: we are open to a world where it's not either

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Speaker 1: or when it comes to saving or pain down debt.

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Speaker 1: But it's a both and kind of situation. And honestly, like,

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Speaker 1: if you want to buy a house in North Carolina

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Speaker 1: and if you're anywhere near Charlotte, that housing market is insane.

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Speaker 1: So if you wait to start saving for a down payment,

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Speaker 1: when are you ever going to have the money? Like

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Speaker 1: It's it's like time as a ticking and the market

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Speaker 1: is only getting more expensive. Right, So here's why I

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Speaker 1: want to kind of break down my answer into So,

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Speaker 1: you've got some debt, right, You got about seventy K

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Speaker 1: of student loan debt, well, at least until May. We

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Speaker 1: don't know about any longer, but at least until May,

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Speaker 1: you haven't had to make payments on that debt for

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Speaker 1: a couple of years now because of the pandemic. So

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Speaker 1: with those extra funds you've been earning, I feel like

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Speaker 1: there's nothing wrong with giving those extra funds a couple

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Speaker 1: of different jobs. One of those jobs can be working

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Speaker 1: on that credit card debt that you've been working to

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Speaker 1: pay down, and the other job can be putting it

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Speaker 1: in savings for your future down payment, and then that's okay.

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Speaker 1: It's okay to have multiple, multiple goals at one time.

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Speaker 1: That's just what it's like to be an adult. I

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Speaker 1: feel like in the working world today, there's never just

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Speaker 1: here's your one mission for today, and here's what you

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Speaker 1: can focus on. All of us like, we all feel

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Speaker 1: like our attention and our dollars are being pulled in

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Speaker 1: multiple deaths. So for me, it would make sense to say, Okay,

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Speaker 1: I've got some extra money this month, so how much

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Speaker 1: am I going to put toward my credit card debt?

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Speaker 1: And then how much am I going to put aside

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Speaker 1: for my future savings? And if that makes you feel

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Speaker 1: more excited about making progress toward your goal of saving

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Speaker 1: for a house, it makes you proud to have that

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Speaker 1: money sitting there in the bank, then yeah, I'm going

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Speaker 1: to say go for it. Now there's the mathematical argument here, right,

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Speaker 1: It's okay, Well, you've got credit card debt, and let's

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Speaker 1: just go ahead and assume that the interest rate is

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Speaker 1: double digits because it tends to be right, and you've

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Speaker 1: got a savings account for your down payment, and your

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Speaker 1: savings account rate is crappy because they all are because

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Speaker 1: fed's been slashing rates since the pandemic started, and yes

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Speaker 1: they're just starting to increase rates again, but it's barely anything.

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Speaker 1: And I don't even think it's hit savings rates quite

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Speaker 1: yet the impact of that. But you're not earning barely

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Speaker 1: anything at all with your money in a savings account

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Speaker 1: right Somatically, the logic says, put all your money towards

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Speaker 1: your credit card debt, because that's what's most expensive, right

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Speaker 1: And the sooner you paid off, the less money you'll

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Speaker 1: spend in the long run on that credit card debt.

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Speaker 1: But that's the mathematical side of things. And while I

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Speaker 1: do think it it's great to follow the math and

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Speaker 1: do things that make logical sense, a lot of the

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Speaker 1: time money is emotional, and I know how emotionally rewarding

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Speaker 1: it can be to see yourself putting dollars toward a

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Speaker 1: goal of home ownership. Okay, So I want to acknowledge

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Speaker 1: and validate those feelings and give you permission that I

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Speaker 1: want you to give yourself as well, which is that

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Speaker 1: it's okay to take the heart earn money that I

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Speaker 1: have and know that I'm setting it aside for my

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Speaker 1: future home down payment and start putting it aside, as

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Speaker 1: long as you're not also taking your eye completely off

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Speaker 1: that credit card debt. Now, it would be a different

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Speaker 1: story if your credit card debt was a huge amount.

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Speaker 1: You say, a little credit card debt, So I'm going

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Speaker 1: to say, like less than a thousand dollars. I don't know,

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Speaker 1: but something that you can reasonably be tackling on the

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Speaker 1: side while also saving towards your down payment. I think

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Speaker 1: one of the other things that can be really overwhelming

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Speaker 1: about saving up for a house is knowing how much

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Speaker 1: should I save, especially when you're in a very expensive

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Speaker 1: real estate market. So what I would like to recommend

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Speaker 1: you also do is start, like already kind of putting

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Speaker 1: yourself in the position of, Okay, if I were shopping

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Speaker 1: for a house, what's the average price of a house?

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Speaker 1: And then what kind of loan would I want to

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Speaker 1: take out? Do you qualify for any zero interest mortgage financing?

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Speaker 1: If you're a veteran, if you live in a rural area,

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Speaker 1: you may qualify for loans that have very low low

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Speaker 1: interest rates. But let's say you don't. Okay, Well, there's

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Speaker 1: actually loans like the FHA loan, which is like the

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Speaker 1: most most popular loan for first time home buyers. That's

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Speaker 1: a very low down payment. It's like three point five percent,

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Speaker 1: so it may be a little bit less than what

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Speaker 1: you may think you have to save. If you've been thinking, Okay,

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Speaker 1: I need like twenty percent down, that's just what everyone does. No, no, no,

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Speaker 1: no no, there are affordable financing options. So just start

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Speaker 1: with like, Okay, realistically, if I want to own a house,

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Speaker 1: what is a percentage that would be realistic for me

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Speaker 1: to put down three point five five percent whatever it

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Speaker 1: may be, and then make that the target, you know,

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Speaker 1: for your savings account, and then just start working towards

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Speaker 1: that goal. Your second goal, of course, is going to

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Speaker 1: be the credit card debt okay, which you're going to

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Speaker 1: pay down as you're bringing an extra income. So additional

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Speaker 1: information in your question that didn't really get around to

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Speaker 1: sharing is that you're working overtime at your full time

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Speaker 1: job to bring in extra money, and you're working part

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Speaker 1: time at a grocery store and you're side hustling with

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Speaker 1: a dolt with a job at DoorDash. Okay, So with

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Speaker 1: that extra money that you're bringing in, how much of

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Speaker 1: that will you put to work on your credit card debt?

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Speaker 1: And then how much of that do you want to

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Speaker 1: put toward your home down payment. That's up to you.

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Speaker 1: It may be like, I'm going to put fifty dollars

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Speaker 1: toward my home down payment fund, but that's going to

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Speaker 1: make me feel so freaking excited to take one step

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Speaker 1: close toward whole my goal of home ownership, then do it,

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Speaker 1: even if some personal finance gurus philosophy is to put

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Speaker 1: every last dollar incent you have toward the debt. First

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Speaker 1: we have to know ourselves right, and we have to

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Speaker 1: know what motivates us, and we have to know we

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Speaker 1: have to understand the emotional side to saving money. Neither

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Speaker 1: of these is a wrong decision, Like saving for a

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Speaker 1: house is not a wrong decision on any day of

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Speaker 1: the week. Neither is paying down credit card debt. These

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Speaker 1: are both right decisions. It's just up to you. You

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Speaker 1: know how much you want to put in nature of

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Speaker 1: those buckets, And either way I think it's like the

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Speaker 1: right decision. Is it the mathematical best decision? Maybe not,

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Speaker 1: But math is not the only thing that happens when

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Speaker 1: it comes not the only thing that matters when it

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Speaker 1: comes to personal finance. It's called a freaking personal finance

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Speaker 1: for a reason, and that's why here a Brand Ambition,

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Speaker 1: we get that. That's why we talk to y'all. We

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Speaker 1: level with y'all, and we want y'all to understand that

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Speaker 1: we see you, we feel you. I know what it's

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Speaker 1: like to make those two choices, you know. So that's

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Speaker 1: what I'll say on that topic. Thank you, wonder Woman.

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Speaker 1: I'm so glad I chose that name for you because

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Speaker 1: you are well wonder woman working to full time with

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Speaker 1: one full time job plus two side hustles like you

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Speaker 1: will achieve your dreams if you keep working that hard. Okay,

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Speaker 1: So I thank you for sharing your story. Thank you

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Speaker 1: for sharing your question, y'all. If you want to submit

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Speaker 1: a question to have read on the show, hit us

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Speaker 1: up at Brandnambisson podcast dot com. You can also go

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Speaker 1: to ig we are at Brandabission podcast or email us

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Speaker 1: directly at Brannamission podcast at gmail dot com. Until next week.

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Speaker 1: I am Mandy Woodrif Santos. Thank you so much for

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Speaker 1: listening to Brand Ambition.