5 Wrong Ideas About Building Credit People Believe

So in this video, I’m going to break down 5 wrong ideas people believe about credit. And I use to believe every single one of these until I figure out exactly how credit actually works.

1. Big Purchase And pay I overtime to build your Credit Score
– This is to build up your payment history
– But it’s the wrong way to do it
– Because by carrying a balance it’ll actually lower your credit score and also cost you money in interest

The point is this:
– Don’t buy anything on a credit card you cant pay back at the end of the month
– The best thing to do is just put your recurring bills on the credit card
– And then pay it off in full every month. ( that way you build your credit score payment history, but don’t pay money in interest)

Tip: I did the same thing when I was in college with a laptop that cost 3k, and paid off over 24 months, but it was interest-free because of a credit card promotion.

2. Checking your Credit Score Will Lower it
– Some people only check their credit score once a year
– Because they think that if you check it over and over
– It’ll lower your credit score

However:
– By the law, you can check your credit score as much as you want
– And it will not have a negative effect on your credit score
– That’s why I use credit karma to check, however, if you want more details you can pull your annual free credit report ( but if you want to check it more, it’ll cost you some money)

Tip: you can’t improve what you don’t track if you want a higher credit score check it and see where you can make small changes. Same for a lot of things in life.

3. Freezing your credit score will hurt you
– Now it credit freeze is basically putting your credit score on pause
– Meaning that lenders cant extend you credit and that you can improve your credit temporarily
– Now this is actually a good thing

Here is why:
– Fraud: say you are about to apply for a mortgage and you got all your documents in order but all of sudden some fraud comes into your credit report, that someone took a loan out in Florida under your name. ( but you live in California – by freezing your credit, that scammer would have never been able to take a credit line in your name)

– How to: You have to call all 3 credit BEARUOUS and ask them to freeze your score, and verify your identity.
– It’s also free

Tip: its something I would do this, when I have something important coming up, and the last thing I want is some unknown situation happening.

4. Closing a Credit Card will help your Credit score
– it might increase your credit utilization ( which will lower your credit score)
– and it might hurt your length of credit history ( for example if you close your older credit card that might hurt your credit score)

The Solution:
– the best thing to do is basically put a small bill on it and pay it off in full every month
– However I do know that some people have credit cards with annual fees, that they don’t use anymore, try to get it downgraded by the company
– and if they say no, remember the effect will be temporary in the run, so instead of paying 100 bucks a year, it might be a better idea to close it.

Tip: this is different for people that just get credit cards and close them within 3 months or 9 months just to get the bonus.

5. Professionals can Fix your Score
– In reality,yes, but you can also do it yourself
– Most of these people are just putting your account on default and then negotiating down the price
– But it will trash your credit score temporarily

The Best thing to do:
– Is follow the 2 rules
– Don’t spend money that you don’t have on a credit card
– And pay it off in full every month to avoid interest
– If you do that you’ll never have to worry about negating debt.

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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I’m an Accountant but I’m not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

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