Great video Nick! After lots of research over the years I have a pretty good understanding of most of these now, but I still had confusion around myth 5 (closing acct always hurts/helps the score). So your super clear explanation on this one was really helpful (thanks!). Also congrats on the upcoming house buying! Interest rates will certainly be in your favor 👍
Hey Thanks Andy! So glad that helped clear some things up for you on the account closer. It can definitely be confusing. And appreciate the congrats! We’re very excited about it and yes, the interest rates are nice :)
Listened to the podcast on this but this really solidified the info for me. Used to be scared of using a credit card (parents had debt issues) even though my other money habits make me a perfect candidate to use one as a financial tool.
Hey Rachel, so glad this was helpful for you. I totally understand how scary this can be, especially if you've seen others around you struggle with debt. I 100% get that. So glad the video helped clarify the info for you! Reach out if there's ever anything I can do to help Nick
I’m in the process of rehabilitating my credit score - coming off a bankruptcy. Got a secured c.c from discover. Can confirm the utilization. Rating jumps when utilization was under 30%....when it wasn’t ( need to plan to pay card off at least a week before it is due), rating score flatlined. Also, I am now knocked for having a thin credit report - just a single line of credit. I plan to get with a local credit union to get another secured card and maybe, in 6 months, a (secured?) loan to diversify mix and thicken my report. You know with YNAB, there is cash available to pay off the credit cards - so that part is easily managed. I’m looking to resurrect my credit score to eventually buy a place myself too. But right now, and maybe for the next 2-3 years that bankruptcy is like kryptonite to my credit score - and to getting a mortgage or credit.
Great info you're passing onto everyone... you forgot one vital fact of credit utilization, the statement closing date. If you spend $500 and pay it off by the due date, you'll still show you used $500 for utilization... but if you pay the $500 (or down to 1%) by the statement closing date, your due date will only reflect that $0 balance (or 1%) and so will your utilization. Your due date for the current statement closing date is usually 30 days away, so if you pay down to 1% by your statement closing date and then pay the 1% within that 30 days (or like I do, the next day), you won't pay any interest on it and you'll still carry a 1% utilization rate. Very important to let people know about that statement closing date, it’s just as important as your due date.
Great addition! And yes, it's somewhat correct, but it's not exactly always the closing date either. You're spot on that the closing date amounts will show up on your report. But whenever you get your credit checked, it happens right at that very moment. So if you apply for a loan and have your credit checked, they look at the utilization right at that moment. This means it could be much higher if you were waiting until closer to the statement closing date. So for that reason, I just aim to average 10% all the time and whenever I'm going to be applying for a loan I'll pay it down further right before then. Otherwise, if I ever creep above 10% I go ahead and pay it down immediately to keep my average at 10%. This means that if you have a low credit limit, you're probably paying down the card weekly or just not using the card as much until you can get that limit higher. But yes, you're definitely right that the statement closing date is helpful as well.
@@mappedoutmoney On credit cards, it’s on the statement closing date that the card reports the total balance you have on that specific date... so running your credit will just show what your cards reported on that statement closing date. I worked in the banking industry for many years and worked closely with the mortgage teams... one of their recommendations for potential mortgage loan applicants was to bring their balances down to 1% by the statement closing date and then pay off that 1% the very next week. That way it would show a 1% utilization rate when they pulled your credit from all three bureaus. Before learning about the statement closing date, I just made sure to religiously pay 5 days before the due date... but my utilization was still higher. Then I started paying down to 1% on the statement closing date for each card and then paying off that 1% the next day, and my credit score (FICO) has never looked better. I think if more people knew about the statement closing date "trick" and paid by it, they would be amazed at how much their credit scores would rise. Anyway, love the channel and keep up the good work. Since they won't teach this information in school, it’s up to people like us to help educate people.
@@koiphish Spot on. That's definitely helpful. And as you point out, very confusing for the average person since not many people teach this. Really appreciate you taking the time and sharing all this and helping folks. Most people don't fully know the difference between statement close, due date, and grace periods. Hoping to do a video about that soon as well. Really appreciate you!
@@mappedoutmoney koiphish is correct. On credit cards only the statement balance is reported to credit bureaus. So when the statement is generated, if it shows 4k owed and a 5k limit, even if you pay it in full the next day, it's too late, that 80% utilization was already reported to the bureaus, and won't update again for another month. So the hack is to know when the statement is going to be generated and a few days before that happens, make a payment to get your balance very low (but not zero). Do this 1-2 months before you plan to apply for a mortgage! The other option is what you mentioned in the video -- keep increasing your credit limits. It is possible to have such high limits that it effectively doesn't matter. if you have 100k limits and never charge more than a couple grand a month, your utilization will always be low (
This is the most complex part IMHO. I actually was able to raise my credit score by actually making sure to have a balance on EVERY credit card on the "statement" date. This really sucks because almost none of your credit cards will have the same statement date. Although some of them you can ask to move the date. I would not recommend for most people because it takes a lot of time and effort to keep up with statement dates. I think the best phrasing would be to have a balance on your cards statement date and paying it before interest starts to occur. its not about "Carrying" a balance. It is about having 1-9% of your balance on the statement date for that card. If you pay attention and do this correctly you will still never pay interest. I've been doing it for about a year now and my credit score went up between 50-100 points from this change in behavior. My biggest issue is that several cards I was not making sure there was a balance AND I had a card I rarely used. Now I use that rarely used card to buy Amazon Gift card account on my fund. In YNAB you cannot easily put the card statement date in the name of the account as far as I can tell. So I put it in the notes section and then organize them by date.
This was great! I also think it would be interesting to show what happens when you pay off a mortgage early... rather than, say, paying 95% of the principal and keeping that mortgage loan going. I would think that would help both the utilization & the mix, and maybe even average account age?
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I am now consumer debt-free and nearly entirely debt-free. I hate debt but still appreciate a good credit score, responsible credit card use and 0% for x#months of financing.
You did dispel lone myth I held - I guess Dave Ramsey did too: always thought credit card companies wanted you to be a little in debt, at the very least. Paying some interest to them. And that they’d knock you for paying off your credit cards completely each month. Good to know the truth.
Some months back I tried renting an apartment from TRUILA but I had a low credit score of 616 due to my unpaid student loans. So I was being denied of every offer due to my credit. I had lived with my sister for quite some time ,when she put to birth the house became cramped. I was recommended to Credit MasterFix LLC by a co worker. I contacted them at [Roy@creditmasterfix.com]. They got back to me almost immediately, we came to an agreement and they started to work on my credit profile. 10days after the work my score jumped +170 points , they marked all late payments as on time payments and cleared the negatives affecting my file. I issued for the rental again this time on Zillow and was given a home. I’m glad I met Credit MasterFix LLC.
I have been buried in CC debt twice, even looked into bankruptcy once because it seemed too overwhelming to ever dig our way out, but after many years we finally did. Thankfully we kept a good credit score by making min payments until we could add to it.The interest alone was like another mortgage payment. I was finally able to start opening new cards with the zero percent balance transfer offers and just kept moving the balances. Anyway, now I have 16 open credit cards that I'm not using and want to start closing. After watching your video, I will start with the lowest available credit that is the newest. How often could I close a card do you think without it hurting my score? I'm not expecting to need any loans, but still. Thank you for sharing your knowledge! Love your channel and podcasts!
Some months back I tried renting an apartment from TRUILA but I had a low credit score of 616 due to my unpaid student loans. So I was being denied of every offer due to my credit. I had lived with my sister for quite some time ,when she put to birth the house became cramped. I was recommended to Credit MasterFix LLC by a co worker. I contacted them at [Roy@creditmasterfix.com]. They got back to me almost immediately, we came to an agreement and they started to work on my credit profile. 10days after the work my score jumped +170 points , they marked all late payments as on time payments and cleared the negatives affecting my file. I issued for the rental again this time on Zillow and was given a home. I’m glad I met Credit MasterFix LLC.
I've checked several of my cards, and the Closing Date is for example on one of them, the 7th of the month. The due date is just 4 days ahead of that date or the 3rd of the month. Should I be paying the minimum amount of $25 on the due date, and then paying 99% on the closing date just 4 days later? Since the dates are so close, it seems that if I pay the 99% on the due date, it should be good enough for the optimal utilization rate since the dates are so close. As noted by other posters, the due date for the current statement is usually 30 days after the previous closing date, but if I miss the due date to time payment for the closing date, I run delinquent. Please help me see the correct picture here. And thanks ahead of time.
Nick one interesting thing in my case my mortgage is a 5/5 Arm so resets to current interests rate every 5 years. Every time this happens FICO treats as a new loan instead of continuation of existing loan so it is treated as a new account with no payment history when the reset first happens which dings my FICO then gets better over time as I pay. Just a little quirk.
I have a credit repair recommendation, I set up a business profile in July but I’ve been struggling because of my poor credit score and the little bad items I had in my report but just few weeks after hitting them up using the link I found under their name 'Roy@creditmasterfix.Com' I have been approved for 9 business credit cards now, I must say Credit Masterfix LLC is the best.
