5 Mistakes that RUIN your Credit Score

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once of you guys it's Graham here so

I've said it before and I've said it

again but building your credit is

probably one of the most important

things that you can do to improve your

financial future like not only can

having a good credit score get the

lowest interest rate anytime you buy a

house finance a car rent an apartment or

build a business but it's also extremely

easy to do once you just understand the

basics of how it works however the bad

news is that because the concept of

building your credit tends to be so

simple it also means that it's often

very simple to ruin as well without even

realizing it so in this video we're

gonna be going over the five things you

absolutely must avoid at all costs that

will totally destroy and ruin your

credit score and the best part about all

of these is that they're extremely easy

to prevent as long as you just smash

that like button if you haven't done

that already greatly helps of the

channel and rumor has it is that it

might actually help increase your credit

score it's not verified but only one way

to find out so make sure to hit the like

button and let's get in the video so the

first and probably worst thing that you

can do that will totally destroy your

credit score is by missing a payment or

paying it off late now this is probably

one of the most detrimental mistakes

that you could make because your payment

history makes up about 35% of your

overall credit score this means that if

you have a 780 credit score but then you

miss a payment by more than 30 days that

could potentially drop your score all

the way down to 690 or below missing a

payment could quite literally be the

difference between qualifying for the

home you've always wanted to buy or

getting denied for your loan all for one

single late or missed payment and what's

even worse is that your payment history

stays on your report for seven years so

if you have one single late payment

that's going to be with you for quite

some time like that pesky friends who

always overstays their welcome by seven

years so when it comes to preventing

these from happening here are two things

I always do the first is always having

Auto Pay enabled to at the very least

make the minimum payment this way no

matter what happens I will always pay

off the minimum amount I owe so that it

shows I've always paid on time and this

is because when credit cards report late

payments they consider a late payment as

no payment at all but as long as you

just make the minimum payment which

as low as $25 then technically you've

still paid your bill on time as agreed

even though you've carried a balance now

secondly I use a combination of mint

calm and creditkarma.com to keep track

of my credit card balances every few

weeks if I see any credit card sim with

a balance usually what I'll do is I'll

just go and pay it off in full just so I

don't forget about doing it later and

doing all of this maybe takes me a few

minutes every other week just to manage

and make sure it's all taken care of so

it's very easy to do however with all of

that said there is some good news when

it comes to this kind of sort of that is

if you miss a payment by really just a

few days usually nothing will happen

even though you'll still be hit with a

credit card late fee usually they will

not report a late payment to the credit

bureaus until you were more than 30 days

late this means that in most situations

if you end up paying your credit card

off like 29 days late usually you'll be

okay as far as your credit score is

concerned now of course don't ever push

it that late obviously but just in the

event something happens and you paid off

a few days late usually it's not the end

of the world

so anyway moral of the story but always

make sure you pay off your credit card

on time in full and always have Auto pay

enabled just in the rare occurrence that

something happens and you accidentally

forget number two the second ruiner of

credit scores and this is something that

many many people are guilty of at some

point or another and that is by maxing

out their credit cards that is because

30% of your credit score is broken down

by what's called credit utilization

which is basically how much credit you

have available to you versus how much of

that you actually use so this means if

you have a three thousand dollar credit

line and you go and spend all three

thousand dollars on that then guess what

congratulations you're now seen as a

higher risk borrower to lenders because

you've used all the credit you have

available to you and then statistically

from that you're less likely to repay it

so when it comes to avoiding this

mistake thankfully it's very easy to do

in a few very simple steps the first one

is to always keep your credit

utilization under 30% which means for

every $1,000 of credit you have

available to you you're not gonna spend

more than $300 that seems to be the

sweet spot for credit bureaus and under

a 30% utilization gives you enough

wiggle room to be seen as a low risk


and therefore have a slightly higher

credit score the second thing you can do

if you need to make larger one-time

purchases is to pay off your credit card

as soon as you exceed 30 percent for

example I had to get a new roof and that

was going to be $14,000 so I put it on a

credit card to get the points even

though that credit card had a credit

line of twenty thousand dollars so

pretty much once that $14,000 charge

posted on my credit card I just went and

paid it off in full so that way it would

never be reported to the credit bureaus

and it would show that I had no

remaining balance and you could do the

exact same thing as well even if you

don't pay off your credit card in full

what you can do is still make a very

large payment to get your credit

utilization below 30 percent so that way

you still get the best credit score and

the third strategy that I've utilized is

to have multiple lines of credit open so

that way it lowers your overall credit

utilization for example if I have the

three thousand dollar credit available

to me overall and I go and spend three

thousand dollars like the next day well

there we go that just hurt my score

however if I have 10 credit cards with

$100,000 overall limit and I go and make

that same three thousand dollar purchase

well that's fine because it shows on my

credit report that I'm only using three

percent of my overall credit limit but

now with all that said the good news

when it comes to this is that this only

temporarily lowers your score until you

pay it down so yes it could affect your

score in the short term but in the long

term you really have nothing to worry


as long as you just pay it off in full

alright so number three the third ruiner

of credit scores and this is something

that we're all probably gonna have to

deal with at some point or another if we

haven't dealt with this already and that

is by opening too many lines of credit

too quickly like this is when you go and

apply for multiple credit cards at the

same time or you apply for a credit card

and then apply for a mortgage and then

apply for an auto loan because you want

to flex on YouTube and each time you

apply for a new line of credit it's

called a hard inquiry which means a

third party company runs your credit

indicating that you've applied for a new

loan and each time this happens it

lowers your score between three and five

points and also affects your credit

report for the next six months now this

one is a bit of a double-edged sword

because the more credit you have

available to you the more diverse your

credit report is and because of that the

higher your score will be long term in

the short term however the more cards

you apply for at the same time will show

that your wrist

your borrower to lenders and because of

that you'll tend to have a lower credit

score and that's why it's very common

for people to think that they don't want

to open up new credit cards because it's

going to lower their score and that is

very true but in the short-term but this

is almost like an evil necessity because

in order to get a larger credit limit

and have a larger credit portfolio and a

larger credit history you'll need to go

through a phase where your credit score

is lowered as you apply for new credit

cards in the short term so when it comes

to doing all of this here is my advice

if you're planning to finance any large

purchases over the next six to eight

months like a car or a house do not open

up any new lines of credit to me this is

just too risky to do and you risk

lowering your score at a time you need

it the most and that can be absolutely

detrimental to your loan however if you

have no upcoming plans to finance any

large purchases over the next eight

months then I think it's pretty safe to

say that your safe opening up new lines

of credit take the hit short term

knowing that long term you're gonna come

out ahead even stronger I do this myself

as soon as they buy a property like as

soon as that loan closes I will go and

apply for new credit cards to get the

sign up bonus knowing that by the time I

buy my next property within about 12 to

16 months my credit score will be back

to normal and I get the new lines of

credit so anytime you go and do this

just at least plan ahead be strategic

about it and don't do this anytime

you're within about 8 months of making a

very large purchase that you're going to

be financing no number four the fourth

biggest ruiner of credit scores and this

is also probably one of the ones that's

so easily preventable from everything

here and that is by not closing any old

credit lines that you have open this is

something that can have a hugely

detrimental effect to your credit score

without even realizing it that's because

the average length of your credit

history makes up 15% of your credit

score so when you go and cancel an old

credit line you inadvertently also lower

the average age of your credit history

this is why it's so important to keep

your oldest accounts active and open

even if you never use them because this

weighs down your credit history showing

that you've opened it longer and even

though this one makes absolutely no

sense to me but when you go and cancel

an old credit card it also cancels the

active account length of that card as

well and I don't get this one either but

for some reason credit report

agencies love only factoring in active

account history not total account

history doesn't make sense to me

whatsoever I think they should go based

off total account history but you know

what I didn't make the rules this is

just the way it is

so anyway always and I repeat always

keep old credit cards open and active

even if you never use them because doing

that will affect your score about

fifteen percent from the average account

history and finally number five the

fifth ruiner of credit scores and this

is something that I was so guilty of

until I was about 21 years old and this

is so common I see so many people making

this mistake and it's the worst and that

is by not having any credit history at

all these are the people who pay for

everything with a debit card these are

people who pay their car off in cash

these are the people that never borrow

any money whatsoever because they don't

need to and to them that just means debt

trust me when I say this but I was this

person growing up and even though you

would think that these are the people

who should have the best credit score

possible because these are the people

who have never needed to borrow money

the entire system when it comes to this

is backwards

if you don't have any credit history

whatsoever you're just an unknown to

lenders and they have absolutely nothing

to go off of and because of that no

lender will ever loan you money for a

house or a car or anything you want to

finance in the future even though you

could be the best borrower in the world

because you've never needed to have a

credit card lenders don't see it that

way because they want proof that you've

handled debt responsibly and you can

actually pay it off and this system is

so backwards because even with someone

who has just a few credit cards and

maxes them out and pays late and has a

terrible credit score it's still going

to chances are get the loan at a really

high interest rate then someone who

doesn't have any score whatsoever who's

just denied because of that like having

something on your report even though

it's negative is still better than

having nothing on your report at all and

I had to learn this lesson the hard way

when I was 21 years old I was making

about $100,000 a year as a real estate


I had no debt whatsoever had never had a

credit card before I had paid off my

cars in cash had basically nothing to my

name except for a high

income and cash however when I wanted to

go and buy an investment property even

though I offered like 20 30 40 50

percent down every single lender said no

they're not going to lend to me because

I had no credit history whatsoever and

it sounds so stupid to say this but had

I just opened up a credit card when I

was 18 years old

gone and put a make donald's on it once

every six months and then just paid it

off I would have probably gotten

approved for that property rather than

having no credit history whatsoever so

if this one sounds like you just learned

from my mistake and get a credit card

just get something even if you go and

spend $2 on it every single month and

you pay it off in full that is going to

be a thousand times better than never

having a credit card at all so with that

said those are the five biggest credit

card mistakes that can absolutely ruin

your credit score without even realizing

it that's totally preventable and when

it comes to the foundation of building

your wealth investing and eventually

becoming lambo rich in the future I

really believe that building your credit

and smashing that like button if you

haven't done that the first time it's

really one of the most important things

that you can do that will set you up for

the rest of your life so with that said

you guys thank you so much for watching

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thank you again for watching and until

next time