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Speaker 2: So, then the next section is like my favorite section
Speaker 2: because it's about credit cards.
Speaker 3: Right.
Speaker 2: So this section, which is thirty percent of your credit profile,
Speaker 2: is called the amounts old section. Right. Some people refer
Speaker 2: to it, and I refer to it sometimes as credit utilization.
Speaker 2: But I wanted to make sure that you guys knew
Speaker 2: it was amounts old because there is more that goes
Speaker 2: into this category than just your utilization on your credit cards. Right,
Speaker 2: So your credit the factors that go into this section
Speaker 2: and will determine how many points you're getting, is your
Speaker 2: credit utilization ratio, so basically how much credit you're using
Speaker 2: versus the amount of credit that you have available to you,
Speaker 2: right on all of your credit cards. Another thing that
Speaker 2: goes into it is the number of accounts with balances.
Speaker 3: This is a big one.
Speaker 2: The next three that I'm going to refer to. These
Speaker 2: are going to be the small things that keeps most
Speaker 2: people out of ever gaining access to the top level
Speaker 2: of offers from a company.
Speaker 3: Right.
Speaker 2: So, in other words, if American Express has their tip,
Speaker 2: if they have a credit card and the ceiling for
Speaker 2: that credit card is a thousand dollars, right, you have
Speaker 2: to have certain qualifications in order to ever gain access
Speaker 2: to that eighty K line because most of their customers
Speaker 2: are only getting access to maybe twenty thousand, thirty thousand,
Speaker 2: forty thousand, Right, So, if you are wanting to actually
Speaker 2: increase your baring power and increase your capital, you know,
Speaker 2: amongst your entire credit profile, these are going to be
Speaker 2: the small things that makes the biggest difference, right, the
Speaker 2: number of accounts with balances, Right, So, the number of
Speaker 2: accounts with outstanding balances. This means any charge offs that
Speaker 2: you have, any charge it doesn't matter how old, if
Speaker 2: it's within If it's still in your credit report, it
Speaker 2: means it's under seven years old. Any charge offs that
Speaker 2: has an outstanding balance automatically affects your credit utilization. Right,
Speaker 2: most people only think that their credit cards affect your
Speaker 2: disc section.
Speaker 3: But it's not right. It does, it does.
Speaker 2: It does make up about eighty percent of it, like
Speaker 2: the utilization percentage that you are reporting on a month
Speaker 2: to mon basis to the credit buias, it makes up
Speaker 2: eighty percent of this section.
Speaker 3: However, the last twenty percent.
Speaker 2: Will will go to how many out how many outstanding
Speaker 2: charge offs do you have?
Speaker 3: You should always look to.
Speaker 2: Settle charge offs if you can, or get a paid
Speaker 2: delete we'll we'll discuss that next week.
Speaker 3: But those are affecting your credit utilization, so it.
Speaker 2: Doesn't matter how responsible you're being with your credit card,
Speaker 2: you will still have to weigh it against this outstanding
Speaker 2: balance until that is satisfied.
Speaker 3: Right, and then another thing is the proportion of loan
Speaker 3: balances to the original loan amounts.
Speaker 2: Now, all this means is if you have accounts on
Speaker 2: your credit report, installment accounts or aka loans, if you
Speaker 2: have ever gotten a defernment that messes up that specific point. Right,
Speaker 2: So if you have a car and you agree to
Speaker 2: have to take out a loan for let's say forty
Speaker 2: eight months, right, whatever, something happens along the lines and
Speaker 2: you get maybe two three deferments which extends the loan
Speaker 2: to fifty one months, fifty one, fifty two months. Yeah,
Speaker 2: so it extends your original loan term which was supposed
Speaker 2: to be forty eight to fifty two.
Speaker 3: Right.
Speaker 2: That immediately will impact your amounts old section because now
Speaker 2: you're overdue. Right.
Speaker 3: The only exception to defer payments.
Speaker 2: Are student loans, so they are the only accounts on
Speaker 2: our credit reports that you pretty much can get as
Speaker 2: many deferments as you You can get as many deferments
Speaker 2: as you want, it will not impact this section, which
Speaker 2: goes to my next point. Make sure that all of
Speaker 2: your student loan bound or I'm sorry, I need everyone
Speaker 2: to look at all their student loan accounts, right.
Speaker 3: Make sure that they say educational loans or student loans.
Speaker 4: Right.
Speaker 2: They will say installment credit because that's the account type
Speaker 2: that they are. But if they do not specifically notate
Speaker 2: that it is a student loan or an education loan,
Speaker 2: then your credit utilization is being impacted heavily, and you
Speaker 2: may not even realize it. Right, A great way to
Speaker 2: tell if your student loans are not reporting accurately or
Speaker 2: you know, reporting as I just stated, if you have
Speaker 2: ever been denied.
Speaker 3: For credit you apply for a credit card or whatever.
Speaker 2: And one of the denial reasons was the proportion of
Speaker 2: your loan balances are too high, or if it says
Speaker 2: and each company will word it a little differently, but
Speaker 2: what it what it'll what the basis will say is
Speaker 2: the balances on your installment accounts are too high, or
Speaker 2: it'll say, uh, it'll say along the lines of what
Speaker 2: I just said. Right, that's one of the clear cut
Speaker 2: signs that your student loans are reporting as regular installment loans.
Speaker 3: As opposed to educational loans.
Speaker 2: Because it absolutely matters because of this, because of what
Speaker 2: I just showed you, because that impacts your utilization.
Speaker 3: It's looking like you.
Speaker 2: Have a large larger utilization then you're saying, because this,
Speaker 2: the difference doesn't show on the credit in your credit score, right,
Speaker 2: but it does show on your barring power when you
Speaker 2: are doing credit applications or if lenders are looking at
Speaker 2: your credit report. All right, okay, so what is credit utilization?
Speaker 2: Credit utilization is calculated as the percentage of credit that
Speaker 2: you are currently using compared to the total available revolving
Speaker 2: credit that you have. So, if you have three credit
Speaker 2: cards with one hundred dollars on each of them, if
Speaker 2: you have a limit of one hundred dollars, that means
Speaker 2: you have a three hundred dollars limit total. Right. If
Speaker 2: you use one hundred and fifty of those amongst the
Speaker 2: three cards however you want, that means that you would
Speaker 2: be your utilization would be fifty percent. Okay, So a
Speaker 2: quick way to calculate your utilization, you take all of
Speaker 2: your balances, add them up on all of your active
Speaker 2: credit cards, and then you divide it by your total limits, right,
Speaker 2: and that'll get you what's called your aggregate utilization, right,
Speaker 2: which is it's that standard ratio that makes up your utilization. Okay, Now,
Speaker 2: what is an ideal utilization? An ideal utilization is always, always, always, always,
Speaker 2: always always going to be between one and three percent.
Speaker 2: One in three percent, And I know that may seem low,
Speaker 2: extremely low to a lot.
Speaker 3: Of people, right, especially if you're used.
Speaker 2: To abiding by the industry standard, which is thirty percent.
Speaker 2: As you can see on the chart that I'm showing
Speaker 2: you guys, thirty percent is extremely high. Right, So if
Speaker 2: you actually are wanting to improve your credit score, or
Speaker 2: if your credit score has just been stagnant, and you
Speaker 2: you like, what's going on? Why why is my credit
Speaker 2: not improving? I've been paying my accounts on time, my
Speaker 2: car on time, my credit card on time, and I'm
Speaker 2: just my credits card is just stuck, right, I can
Speaker 2: I can never increase it, right in a steadily paced
Speaker 2: Usually it's because it's because of utilization.
Speaker 3: It's because you've probably.
Speaker 2: Been reporting twenty percent, thirty percent or you know even higher. Right,
Speaker 2: thirty percent is our industry standard, So it's what's usually recommended,
Speaker 2: is what's usually taught, and that's because it's like that
Speaker 2: safe number.
Speaker 3: It's essentially like getting a C in school. So a
Speaker 3: C is not going to fail.
Speaker 2: A C is not going to cause you to fail
Speaker 2: a class, but it also will not cause you to be,
Speaker 2: you know.
Speaker 3: At the top of the class. Right.
Speaker 2: So if you if we're if we're looking at this
Speaker 2: in the lens of our credit reports, if we are
Speaker 2: trying to increase our credit score, a C or AKAA,
Speaker 2: thirty percent is not going to allow that to happen, right,
Speaker 2: you would absolutely have to report a one to three
Speaker 2: percent utili utilization, which is a sure sure way to
Speaker 2: increase your score, or at the very highest, between one
Speaker 2: and nine percent. Right, So, to to make it super specific,
Speaker 2: the only time that I am concerned about reporting a
Speaker 2: one to three percent utilization is if I'm actively shopping
Speaker 2: for something a car, a home, applying for a credit card,
Speaker 2: or something like that. Right, That's when I'll always lure
Speaker 2: my balances to between one and three the month prior
Speaker 2: to doing an application. That way, I'm able to maximize
Speaker 2: my score, get all of those points that I can
Speaker 2: out of credit utilization, get a small little booster or
Speaker 2: a boost in my credit score before I do my application. Right,
Speaker 2: you should always before you apply for somebod you should
Speaker 2: always know at least the billing cycle before, right, So
Speaker 2: a month in advance, you should be planning for any
Speaker 2: applications that you're going to do next month, simply because
Speaker 2: it takes a full billing cycle for your utilization to update,
Speaker 2: and if you don't wait for them to update, they'll
Speaker 2: just pull your your your old utilization or your old
Speaker 2: credit report.
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