Hey: what's up Sean, you know, let's talk about something that I see so many people get wrong. What exactly gets factored into your credit score and what determines what your score actually is. So the short answer is you do so we all start out on the same playing field when it comes to credit. We all have this zero credit, no credit.

Whatever score, you want to call it all starting out on the same playing field, and essentially the financial decisions you make is what determines your score and a lot of people really hate. This whole credit term are really how to build credit or everything about credit. But it's actually relatively simple and is a really great guide, as actually determining what your financial prowess is all about. You know, you'll have your guys who have really high credit scores.

You pretty much go up to you and say hey. My name is Sean. I've got a good credit score and you've got the other people who don't have the good credit scores. You never like talk about credit at all.

Well, no matter where you fall in the spectrum, it's okay, whether you got good credit, bad credit, no credit! My buddy Simon actually says it be absolute best when it comes to credit. Your score reflects the decisions you made in the past, which might have brought them down, but the decisions you will be making can bring them back up. So, let's do it here is a breakdown of the five major components that affect your credit scores, so take it all in, as you can see in the pie, chart it's broken up into your payment. History amounts owed length of credit, history, new credit and the different types of credit.

So, let's briefly touch on each payment. History is the first one on payment. History is exactly what it sounds like. How is your history in regards to making the payments? Are you consistent? Are you not consistent? Are you even making payments? Are you not making payments payment? History is a big one and it is where a lot of people get into trouble when they don't make their payments on time.

That can negatively impact your scores, and everyone knows that right. So I want to talk about something else that a lot of people don't usually known. It's the consistency in your payments, so are you a predictable borrower is essentially what the credit companies want to know if you're gon na apply. For my credit, I want you to be consistent.

Are you gon na be making a payment of $ 400 one month, three dollars the next and $ 100? The next after that, I want to know. Are you gon na be making that hundred dollar a month payment consistently consecutively, everything about it? I want you to be predictable if I'm a credit company, so if you can prove to them that you are consistent and predictable and let's say you make a payment of $ 200 every single month. That's gon na affect your score positively, because that credit company is gon na, say hey this guy actually is a consistent person. If we give them a line of credit, I know we're gon na be getting x, y & z every single month from him.

The next one is amounts owed how much money do you actually owe, and this is also in regards to a percentage, because essentially, if it wasn't a percentage, the super rich would be like super negatively impacted this, so it comes down to a percentage. How much do you owe in comparison to how much you're allowed to spend so if you've got a ten thousand dollar line of credit, and you owe nine thousand dollars on that? Ten thousand dollar line of credit, your scores are gon na, be negatively impacted because you're utilizing so much of that credit limit. A credit card company knows that it's very low risk if they're giving you a ten thousand twenty thousand thirty thousand dollar limit. If they know hey, this guy really only uses a couple thousand dollars a month to utilize his credit.

He really doesn't spend the full amount so he's a relatively low risk individual. Let's take this scenario, for instance, we got dude, a who's got a ten thousand dollar credit limit and he only uses two thousand dollars of it. But we've got dude B, who has a two thousand dollar credit limit and he uses all $ 2,000 of it. Who do you think is gon na? Have the higher score? It's my man, a he's got ten thousand dollars he can spend, but he's like.

I don't really need all that ten thousand just give me two thousand and I'm happy with that credit card companies love that and that will positively impact your score over. That was relatively easy to follow, along with because credit utilization is probably the biggest thing to actually know about when it comes to your credit scores now, the next one, the third one is gon na, be your actual history, your credit history. How long have you had credit? Are you brand new? Do you have one card that you've had for a month or two, because you're gon na be a lot higher risk than someone who's had a credit card for 300 months? I mean they've had it for years and years and years. If you have a long long credit history, you're gon na be a relatively low risk.

If that credit Street is good credit history, so that's why it's relatively hard for younger individuals to have a really high credit scores, because you just don't have the history, you don't have the time, like some older individuals actually do now. The time I'm making this video on 22 years old and my credit scores are in the low eight hundreds because I've utilized them effectively since I was 18, so it's very rare to have that usually younger individuals. Just don't have that credit history to be able to actually have a higher score because of it, but that's okay, because if you've got 10 years of terrible credit history, that is gon na be much worse than not having history at all. But the fourth one is actually new credit.

How often are you applying for new credit lines, or how often do you need more money to spend? How ambitious are you with your liabilities is essentially what the credit bureaus are trying to figure out? Are you needing a new card every single month, maybe every single year? How often are you applying for new credit, because, ultimately, the credit card companies want you to be able to live and manage with what you have and very rarely apply for new lines of credit? What's the timetable that we're actually working with here now, it's kind of vague. It really depends on a per-person situation, but basically just don't get a new card every single month. If you get a new card once a year that still may be pushing a little bit, you really shouldn't need that. Honestly, if you have a card, just tell your credit card company, hey I'm making more mine now I need more money.

Just raise my limit on it, you don't need tons of different cards and, lastly, the different types of credit. Yes, there are different types of credit. So, for example, do you have just a credit card or do you have a secured line of credit? Do you have a car payment and do you have two regular credit cards? All three of those are different and are acted and treated differently on your credit report. So how diverse are you essentially, you want to diversify your credit portfolio? If that's even a thing, you want to diversify what you actually have, so you can prove to the credit card companies.

Hey look! Not only am I always on time with my car payment, but I've got this secured line of credit that I barely utilize and I've got these other two major credit cards that I don't utilize as much as well, so you can show them that hey, I'm making My payments on time, I'm not utilizing all the credit that and I've got multiple different types of credit, so you can actually see that hey, I'm good for my money, diversified, diversified, diversified, but those are the five major components that actually impact your scores and break up. What your credit score is all about. So if you want to learn more about credit scores or learn more about this types of stuff, I made some more videos on this. You can check out everything will be linked down below for you to look at again.

There's a lot that goes into determining your credit score. Hopefully you learn something too. A lot of people don't know about this. No one ever teaches this.

No one ever talks about it. Unless you go and research it and look up what other people are saying about it, like you watching this video right now so again, hopefully you did learn something new and feel free to pass the information along by sharing this video, but again more information below and If you wan na, learn more about me, then consider sticking around and looking at all the other content that I have that'll, hopefully help you out in regards to credit, or maybe finances or really just anything. I love helping out. But if you have one thing to take away from this entire video, just remember your credit scores are affected by the decisions you make.

Hopefully you make some good decisions and I'll see you in the next video.