“Whether you’re earning $7 an hour or $700,000 a year, it’s very important to protect your credit rating.” – Frank Abagnale
“Woah. I haven’t seen that happen before for someone your age. You got approved!”
Do you know how awesome that is to hear?
I have been hearing that for the past few months as I have been working on my business. At only 21, I am in the position where if I wanted to get 0% interest on anything possible, I will get approved. I bought a MacBook yesterday for $0. Not because I couldn’t afford it, but because I would rather pay $108 a month and build up my credit even higher.
My aim is to be capable of having over $200,000 worth of credit available by 23. And I will get there rapidly.
How do you get there?
Get A Good Paying Job/Career
Most of you guys and gals are in your 20s. Therefore, you are either in school or just starting a real career. Ensure that the job you are getting into pays well. It does not need to be $100,000+, it could even be $40,000. Your focus should be ensuring that you are getting paid more than you are spending. Your job is to look good to the banks, not the people around you. Control your spending and ensure that each paycheck is going towards savings, investing, and other assets.
Having a nice car but a zero in your balance puts you on the same level as the homeless. Don’t play yourself.
Pay Down Your Credit/Build Net Worth
You know this, I know this, we all know this. This is the basics. Pay your debts, build your credit.
It’s easy to say but hard to do. Especially when you are trying to pay off your credit but you are still having to use it to pay your necessities. Don’t get over 80% of your allowed credit limit. Stay under 80% and even better if you stay under 30%.
You have to get over this belief that by having credit, it means you have money. NO, it doesn’t. It means that you have money to use to pay banks interest!
By paying off your debts, you ultimately increase your net worth. School loans can hinder your net worth if they are exceedingly high or are higher than your savings and investments combined.
Apply For Credit Increase
If you have started to pay off your credit and you keep your balances in control, apply for a credit increase. Do not increase your balance to spend more. Rather, increase it in order to keep your credit utilization rate low (keeping your balance low while you have higher amount available).
Utilization Rate: measures the amount of your credit limit that’s being used. For example, if your balance is $300 and your credit limit is $1,000, then your credit utilization for that credit card is 30%.
By raising your limit, you can gain the trust of banks. They know you can pay your balance over time and you are willing to pay them through interest. If they can’t make money from you, you are not worth their time.
Please do not ask for a credit limit of $50,000 when you currently have a limit of $1,000. You will be denied instantly. Instead, go up every so often in increments of $1000 to $5,000. Depending on the bank, they will either deny you if it’s too high or put you below your asking to where they think you can handle.
Have 2 Credit Cards
Sounds outlandish? I know. I thought so too. BUT, it actually helps your credit according to a trusted accountant of mine. By being able to handle two credit cards, you are showing the bank that you can handle a lot of money at any given time. You should have even more credit cards but don’t overwhelm yourself if you know you can’t handle it.
Start A Business
Yes, this does allow you to do more in life. Yes, you can make a lot of money. But even in the starting stage, if you want some money to start off with, getting a business line of credit and a business credit card will be easier to obtain if you have had good credit history and your credit score is attractive.
Working on the things I have outlined above will allow you to take your business and your life to the next level. The billionaires that you idolize and study all have credit and debt, in the BILLIONS.
You have been taught that debt is a bad thing. It is…to people who cannot handle credit and do not know how to use credit to their advantage. The wealthy love debt because it opens doors. You should love it too.
Do you never want to hear “no” again from any bank or place of business? Get that credit score over 700 and start experiencing life differently. There are perks to having good credit. You have NO idea.
Until next time,
Live Long and Prosperous.
J.M.
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