How to Build Credit with Credit Cards

Let's talk about building credit when you're young or in your 20s, how credit cards work, how credit scores are factored and more!

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Using a credit card is similar to someone loaning you money, you basically are "borrowing" money to pay for the charges that you're going to put on your card, and eventually you'll have to pay that money back.

Credit scores range from 300-850, and generally anything above 670+ is considered good. To get to a score above 700 and even up to 800 - you need to be perfect in 5 areas.

These 5 areas are called Credit Score factors, and again, you can't mess any of these up if you want the highest score.

The factors are the following:

35% of its weighting is payment history - how often do you pay your payments on time. To get the highest score possible, you'll need to pay off your credit card bill on time, and never miss a payment. It's imperative that you do NOT miss a payment because even 1 missed payment can lead to a bad score. Now, you don't have to pay it off in full every month, but you MUST make the minimum payment. Just turn on auto-pay - it'll save you a bunch of time and headache when it comes to your credit score.

30% is amounts owed - this is basically credit utilization. Lets say you have available credit of 10,000 dollars - if you're using more than 20-30% of this available credit, it may impact your score negatively.

Other factors include Length of Credit History (15%) - this just takes time - that's why it's good to start as young as possible. This is calculated as the average length of your credit history, not your total length. So it's best to start building your credit as soon as possible and leaving accounts that are in good standing as long as you can.

Credit mix (10%), and New Credit (10%). With credit mix, just having a good mix of debt is a positive indication, that means you're more reliable because you are able to pay many different things off at a time. Now don't go add credit mix if you don't need to. And then with new credit - they're just checking to ensure you aren't opening a bunch of new accounts quickly - because this looks risky in their eyes.

So how do we improve our score quickly?

Well it takes a long time to build credit no matter what - and you have to play by the rules - so paying off on time, not owing too much, and just consistently paying it off will be good for your score.

There is one hack I want to mention that can improve it fast:

- Get added as an authorized user on another person's credit card (your parents) and you can piggy back off their credit history, so long as their credit is good.
- If you have no credit, one of the best is the Discover It Secured - for a non-secured card for beginners, I like the Visa Petal, Citi Doublecash or Bank of America Cash Rewards card.

If you guys want me to make a video specifically on Beginner Credit Cards or my opinion of the best cards, let me know in the comments below, this may be something I dive into in another video.

👊 If you like the work and appreciate the value it may bring, please show it some love and drop me a Like and a Comment (I reply to every single one!). If you're feeling extra 💥⚡️🔥 you can share this video with your friends and on social media!

🙋🏻‍♂️ Who am I? My name is Humphrey Yang, I am an entrepreneur who has built businesses and am passionate about Personal Finance. This channel is dedicated to helping people (whether you're 21 or 81) become better with their Money, Personal Finances, and Entrepreneurship, I hope these videos help.

Disclaimer: I am not a financial advisor, any investment commentary are my opinions only. Some of the products and services that appear on this channel are from companies that I have an affiliate relationship with, such as Robinhood, for which I recieve a small percentage made via those links, but it doesn’t cost you anything extra!

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[humphrey]

Hey all! Let me know if you have any questions about Credit, Building Credit, Cards, etc in the comments. Also if you have any tips or stories you'd like to share about your credit score - SHARE them here! My next video is gonna be about how much I make on YouTube with 22k subscribers - I think it will be fun to go through the analytics to show you all! That video should be live THURSDAY!

[zafireshadows]

I love the tip about authorized users. I did this for my fiance, since his score was in the lower 500s (poor financial advice at a young age bit him in the butt), while mine was in the upper 600s. Mine is now in the 700s and his is in the 600s. We're getting him up there!

[zayneali]

They really just gave us tests and "test scores" for 12+ years in school instead of teaching and quizzing us on real life tools . Wow

[moneybee]

Great video, covering a great concept! Credit cards certainly have their perks, and building credit is important, but knowing how to use them to avoid the pitfalls is critical. Nice!

[ilyjustinluuga]

This was a great and informative video! The authorized user of a credit card to someone with outstanding credit is such a good tip! I wish my parents did that for me and my siblings but hey, they didn't know. Credit Utilization is also another good topic you touched upon. Some of my friends "MAXED" their credit cards under the assumption that it would not negatively impact them. It's great to know that the "safe route" is always 20-30% of the limit you were allotted. Finally, I would like for you to do a video on how to repair credit or boast credit for those who made mistakes in the past (e.g. collections). It would be so helpful for Gen Z epsecially! Like always, thank you for the quality content!!!

[shmeaf]

I just watched this and I applied for a credit card. Not knowing if I was supposed to pay off the whole balance that’s available to use, even if I don’t touch it. Now it makes a bit more sense, I only pay back what I spend and if I pay it back in full I won’t be charged interest, got it👌

[amka]

I was told by someone that credit score increases quicker if you pay each credit card purchase off right away instead of waiting for the statement to be paid off in full.

[Phoenix-tody]

Quick question: If my credit limit is $300 and I only use $10-$20 a month (under 30% utilization) if I turn on auto pay and pay the $10-$20 a month in full, my credit score will go up over time? I don’t need a credit card I just want to build my credit. I also would rather have auto pay on to just pay the whole thing off every month so I don’t forget. Can I do it this way? Thank you for the amazing video it helped me a lot.

[positivevybes]

Good sense of humour😊 explain so well and thank you.. I really needed to know how to use my credit card well.

[DiscipleToki]

Thank you for this video, wanted to share some info useful to the less fortunate, another option which is how I did it was to use Experian, it allowed me to use my internet and streaming services as payment history and since I always paid those early it boosted my credit quickly, I was able to bypass the secured credit card route entirely, it does take longer but if you don't have the funds due to disability or something similar it is a useful option. I had no established credit at all and no family to aid, it took me almost one year using Experian to get to the point of my first credit card, great rates as well, 0% apr and only 30% of max, key is never go over 30% in order to build. Maybe this will help someone. Love to you. <3

[bekahcunn]

Love this video! Please make a video talking about your favorite credit cards, and maybe touching on airline credit cards if you know about those!

[ericlam]

Great video, can you go over the billing dates, and closing dates? Or how many times you should pay off a credit card bill per month? How can I go about credit utilization if I recently got my first credit card ? Is it okay to use the card over 30% as long as you pay it back on time every month?

[SalasDiana]

I’m really glad I subbed to your channel

[billyrowe]

I have paid on time for years and my credit still sucks. I think utilization is a huge factor so it’s best to pay in full so it doesn’t carry a balance. If that isn’t true then idk what I’m doing wrong.
4 years is history of my credit and I e made 100% payments on time.

[josebarrios]

Can you make a video going deep into what an Authorized User is please ?

[francisthunderhawk]

I wish i watched this 3 years ago lol thanks bro hope to see more vids

[vjiggy]

I have a long history of paying late. I have a score of 630. Would like too boost that way up. So i got the chase freedom card. There making me set goals too improve my credit. Hopefully that gets noticed.

[edpast]

I think I missed it. But I’m 18. And I’m wondering should you pay your balance in full. Or pay the statement balance.

[elymorales]

This is dope!!! Thank you for all your help

[lavinatam]

hey! I'm a Canadian so these credit card recommendations aren't the most useful to me but would you be able to make a video on some key features I should be looking for when looking for a new credit card ?(not beginner) Thank you!