Credit: The Key to Financial Freedom and Prosperity!

By Richard Le on March 25th 2021

Disclaimer: I am not in any way advising you to do, buy, or follow any specific plan with your credit. You are responsible for doing your own research and figuring out what best works for you, your goals, and what you’d like to get out of credit. YOU are responsible for your results. I do not assume any responsibility or liability as a result of your interpretation of the information below.

Think about it: credit is just like a tool. It can be used to help you, but it can also hurt you if you use it the wrong way.

Most people use credit in a way that ends up hurting them. They might even start to hate credit or be afraid of it. But credit is just a tool, like a hammer. If you use it the right way, it can be really helpful.

When you turn 18, banks and other lenders will lend you money just by you signing your name. They will lend you a lot of money to do whatever you want with it! But most people use credit the wrong way. They buy things they don't really need, like a new car or designer clothes, and they end up in a lot of debt. This can make it hard to change your financial situation.

Some people are able to use credit to make a lot of money. For example, a real estate investor I know uses credit cards to buy mobile home parks. He doesn't care what his interest rates or costs are as long as he makes a profit. Then he refinances the parks, pays off his credit cards, and does it all over again.

Your credit score is important when you're looking for a credit card, car, or home. It's a little like your health – you should work on it and take care of it every day. There are two main scoring models: Vantage and FICO.

They both look at the same things when they calculate your score.

Negative History
Utilization
Age of Accounts
New Accounts
Mixed Accounts

Most people know that they should pay their bills on time and not let things go into collections. This is a big part of your credit score. In fact, it's about 35% of your score! So, it's really important to make your payments on time, no matter what. If you have to skip a meal to do it, do it! You'll be glad you kept your credit clean later on.

Another big part of your credit score is called "utilization." This is how much credit card debt you have compared to your credit limits. If you always use all of your credit card limits, you are at a higher risk than someone who keeps their debt-to-credit ratios between 1-6%. To improve this, try using the "financial snowball" or "financial avalanche" method to pay off your credit cards as fast as possible.

Your credit score also looks at how old your relationships are with banks and other creditors. This is called the "age of accounts" and it's about 15% of your score. If you have a credit card that doesn't have an annual fee and you've had it for a while, keep it open. Just make sure you use it a little bit every now and then so the bank doesn't close it. If you have a card with a high annual fee and no real benefits, you might want to close it.

These three things are about 80% of your credit score. The other things are important too, but they only make up about 20% of your score. So, it's really important to focus on the first three.

One of the best types of credit to have is a credit card. They can affect your history, utilization, age of accounts, and mixed accounts. Credit cards are great because they give you basic financial literacy..

Richard Le

Are you ready to finally make your dream of homeownership a reality? With over a decade of experience, Richard Le is the expert you need to guide you through the credit and mortgage process. Don't waste any more time, book a call with him today and start your journey toward your dream home and successful real estate investments!

MFL MARKETING SOLUTIONS INC DBA Richard Le P3 Mortgage