July 20, 2025 • 58 mins
Dominate Your Credit Score: Rondi Lambeth, a certified FICO expert, demystifies credit scores and reveals the secrets to achieving an 800+. Learn the five key factors influencing your FICO score, the crucial role of credit cards, and how to leverage authorized users to build credit fast. Discover how poor credit impacts your finances and how to take control of your financial future.
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Episode Transcript
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(00:00):
76% of Americans live paycheck to paycheck and according to
Forbes, 93% of business owners pay more than legally required
to pay an income tax. And nearly 50% of all Americans
have bad credit, but not you, atleast not anymore.
See, this is the school of wealth where you learn how to
(00:22):
maximize your credit, minimize your taxes and multiply your
assets so you can create generational wealth.
Hi, I'm Randy Lambert, certifiedFICO credit professional,
author, speaker and tax strategist.
For the last 20 years, I've helped 10s of thousands of
Americans just like you take control of their money, fix
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their credit, wipe out their debt, cut their taxes by 50% and
multiply their assets. If you're ready to break free
from the rat race and start building a life of freedom and
abundance, then you're in the right place.
Welcome to the School of Wealth.Hello and welcome to the show.
(01:04):
I'm your host, Rodney Lamb, certified FICO credit
professional, author, speaker, and tax strategist.
It is so good to be here with you today.
I want to spend the next hour orso.
I'm going to try to get it done in an hour if I can.
I might have to do multiple episodes to get it all done, but
in the next hour or so, I'm going to go over the five things
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that make up your credit score, specifically your FICO credit
score. Now, there are lots of different
credit scores out there. There's FICO, there's Vantage,
there's Trans Risk, there's Paydex, there's Intela, on and
on and on. In fact, there are thousands of
credit bureaus out there and I bet you only thought there were
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three, Experian, Equifax, and TransUnion, but there's actually
thousands. In fact, if you live in Texas,
there's not even Equifax there. There's inveness.
If you live in Mississippi, there's actually a credit Bureau
of Mississippi. There used to be hundreds of
thousands of credit bureaus out there.
And as time has gone on, the credit bureaus have started
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merge together, if you will. They've the big boys, have
started buying out the small boys, if you will.
And so that's why we really havebig three that you know about.
But, and I'll do a different episode on the history of credit
bureaus, but today I wanted to go over the history of FICO and
why FICO and how your FICO credit score is created.
(02:34):
Now, FICO was created in 1956 bya mathematician and an engineer,
Bill Ferr and Earl Isaac. And what they did in 1956 is
they created a very complicated algorithm.
Not only was it complicated, it was extremely accurate.
In fact, since 1956, it has generated hundreds of billions
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of credit scores. And these credit scores are very
special. And the reason why they're
special is they predict the future.
That's right. FICO, the Fair Isaac Company,
also known as a Fair Isaac Corporation, has predicted the
future hundreds of billions of times accurately.
(03:24):
Now they are trusted by over 90%of the banks throughout the
world. They are the most trusted.
They're the Rolls Royce, if you will, of credit scores.
Now soon Vantage, which has beenaround not as long as FICO, but
Vantage just released just this week, Vantage Model 5.
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Now FICO just released a few years ago.
Model 10 TT stands for trending.But Vantage, why I brought up
the Vantage is if you are going to be buying a mortgage or
buying a house rather and getting a mortgage, you will
start seeing Vantage credit scores on credit reports.
Now, FICO, the US government andVantage have been in a long
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drawn out lawsuit for over a decade.
And FICO lost. And so one of the settlements
was that the government would start allowing credit bureaus to
use Vantage. And why did credit bureaus want
to use Vantage? For competition?
For one reason. And #2 because it get, it's a,
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it's a more accurate credit score when it comes to certain
things. But FICO didn't want to give
that up. And they didn't go down
fighting. They didn't go down without
fighting and it was supposed to go into effect January 1st,
2025, this new Vantage FICO credit scoring system on
mortgage credit reports. But for some reason they decided
(04:55):
to postpone it. And I don't know when it's going
to come back. They said right now it's
postponed indefinitely, but maybe we'll see it at the after
the end of this year. I I don't know.
It'll be good for the industry to have something other than
just FICO. So let's get into it.
Bill Ferrer and Earl Isaac created the FICO credit scoring
system and they've changed it now many, many times.
(05:18):
Like I said, they're on version 10.
TT stands for Trending now. There are over 4000 different
scorecards. Now.
The reason I'm bringing in some of this and not just getting
right into the meat and potatoesis you really need to understand
how the system works. Because one of the things I hear
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on a regular basis is I went to the car dealership to pull my
credit to buy a car. So they went to the car
dealership to buy a car and theypulled their credit is what I
should have said. Listen, I'm from Idaho.
I barely got an education. I grew up very poor.
I had to fight my way into school.
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My parents didn't want me go to school and that's one of the
reasons I left home at 15. Not only was I tired of eating
out of the dumpster, I was tiredof being beat up, but I really
wanted to go to school. And they rarely let me go to
school in elementary school and they very rarely let me go in
middle school in 6th, 7th, and 8th grade.
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So I left home when I was a freshman in 9th grade.
And part of that was I, I reallywanted to get an education.
My parents taught me that education was dumb.
Rich people were evil. Money was the root of all evil.
The only way you could get wealthy is to rob people,
etcetera, you know, be a criminal.
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And so I just wanted out of it. So there are, I'm not the most
educated person, not the most intelligent person.
There's things that I know very,very well, tax strategies,
corporate law, how to fly an airplane, how to do lots of
other things. But there are certain words.
Just so you know, I have what's called a tied tongue.
(07:05):
And what that just means is my tongue doesn't work as well as
some other people I'm supposed to.
I was supposed to get surgery tocut it so I could say certain
words, and I never did it. I didn't want to mess with it.
It works good enough. My good friend and mentor Joel
Bauer says you're good enough. You're good enough.
You don't have to be perfect. So I'm definitely not perfect.
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So there are back to FICO now there's 4000 different
scorecards and why this matters is depending on what scorecard
you're in could determine what your credit score actually is or
what it maxes out at or what it could drop down to.
So when people come to me and they say, hey, I went to the car
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dealership to buy a car and theypulled my credit 50 times and my
credit score dropped 200 points.I don't believe them.
And when I say I don't believe them, it's because it's not
accurate. Now maybe the score that they're
looking at at the car dealershipis different than the credit
score they were looking at online.
(08:09):
See, the car dealership credit score is generally a beacon.
It's in the beacon model. So Model 5 where the score you
look at online, if it's a free site, it's not even a FICO
credit score, it's a Vantage credit score.
See the Vantage credit score, again, it's the competitor to
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FICO. The only place you will see a
FICO credit score is at myfico.com and a couple credit
monitoring services that you payextra to have a FICO credit
score created instead of a Vantage credit score.
Because remember, Vantage is much, much less expensive to
buy. See, there's no such thing as a
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free credit score. It's not free.
Somebody's paying for it. Now, it might not cost you
anything, but someone had to payFICO for it.
Someone's having to pay Vantage for it.
I'll give you a good example. One of my companies is Credit
Mojo. So Credit mojo.com is a credit
monitoring service. So if you ever need someone to
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monitor your credit, protect youfrom identity theft, let you
manage your bills, manage your money, etcetera, learn about
credit, how to maximize your credit score, etcetera, Credit
mojo.com is the place to go. Now with Credit Mojo, you can
get a subscription there for 3995.
That's a Vantage credit score. But if you want a FICO credit
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score, it costs me an additional15 dollars, $5 per Bureau.
There's three bureaus. So instead of it being 3995, I
would have to charge you 5495 tomake the same money as the 39
because FICO cost that much more.
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So when someone says my credit score dropped 200 points, it
it's not that their credit scoredropped 200 points.
What generally happens is they're comparing it to a
different score. They're comparing a Vantage
credit score, like a creditkarma.com or
creditmojo.com or any of the other ones to a FICO credit
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score that the car dealership had.
And to add to that confusion, remember I said FICO has 10
different versions. In fact, they actually have more
than that because it's now 10 T So that's 11 different versions.
And then inside those different versions are scorecards.
Now, what is a scorecard? Think about it like this.
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When you were going to high school or college, we had what
was called the bell curve. And the way the bell curve works
is the teacher would disqualify the lowest grades and disqualify
the highest grades and only count the people in the middle,
the average, the median. That's the scorecard, if you
will. So what FICO figured out was
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there are certain types of people based on their credit
report of they, they figured outthat just because you all live
in the same area, you all have the same job, you're all the
same age, you all have the same education, that doesn't mean
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that you're going to have the same credit score.
See, when I said earlier that FICO has predicted the future
accurately hundreds of billions of times, I mean they predicted
the future and the the future. What they're predicting.
This is what the entire FICO score system is in your FICO
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score. It's whether or not you will
have a major derogatory hit yourcredit over the next two years.
That is all your FICO credit score is, is whether or not you
will have a major derogatory on your credit over the next two
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years. Now what does that mean?
Whether or not you're going to be late, whether or not you're
going to have a 90 day late, a collection, a charge off a repo
or bankruptcy, what they call a major derogatory hit your credit
over the next two years. I forgot to hit that one.
Sorry about that guys. Got it turned off and my phone
didn't turn off. There we go.
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So that's all your credit score is, is what's the likelihood of
you missing a payment over the next two years?
That's the simplest way to say it.
And that's what that number is, 300 to 850.
Now, any guess of how they came up with 300 to 850 back in 20,
not, not 20 years ago now, 5070 years ago?
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How did Bill fare and Earl Isaac, how did they come up with
the FICO score range 300 to 850?Here's how they did it.
They just made it up. They just made-up the number.
There's a little bit of science behind it, a little bit of math.
Now, this is not accurate. It's not 100% accurate.
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I learned this from doing my training at FICO.
I was taught this by FICO, but it's not an exact science.
But here it is. Your FICO score, 300 to 850, is
a direct or a prediction rather,of whether or not you're going
to pay your bills on time over the next two years.
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I've said that. I've said it multiple times.
I want you to really hear that because you're probably never
heard that before. All of these talking heads and
these gurus on social media, most of them don't know what
they're talking about. They're just regurgitating
information and I hope on this show you're going to learn a lot
about credit scores and taxes and debt and and factual
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information, not just regurgitated information from
some real estate agent or mortgage broker or your cousin
Daryl. So that 308 fifty think about it
like this. It's a representation of whether
or not you're going to pay your bills on time over the next two
years. So if you have a 300 credit
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score, that basically means there's a 30% chance you will
pay your bills on time over the next two years.
If you had an 850 credit score, then there's a 85% chance you'll
pay your bills on time over the next two years.
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That's it guys. It's not any more complicated
than that. Now, yes, it actually is much
more complicated than that, but that's the the layman's way of
understanding the score. So now I want you to, if you
don't have credit monitoring, goto creditmojo.com.
It's Credit mojo.com. It's going to cost you $1.00 to
sign up for a free trial for a week and then after a week, if
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you don't cancel, it's going to be 25 bucks a month.
Credit mojo.com. If you need credit repair then
go to Credit Mojo dot ai.com twodifferent sites.
Credit mojo.com is just strictlycredit monitoring.
Credit Mojo dot AI brings in thecredit repair software so you
can fix your credit. Don't have to know anything
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about our software It automatically.
Over the last 20 years, almost 20 years now, I've kept track of
every single letter I've ever sent, every single response
we've ever gotten. Credit Bureau trained an AI bot
to create credit repair letters for you.
So you don't even know anything about credit repair.
You just log in and put in your username and password up.
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It automatically brings in your credit report.
You select the items that you want to dispute and have removed
from your credit report. You hit save.
You print them, sign them, put them in an envelope and mail
them off. That's it, That's simple.
So for less than 50 bucks a month, because Credit Mojo AI is
either 3995 or 49. And when you if you do the
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$49.00 option, you get training with me and I show you how you
can send a credit repair disputeletter or two pennies, not your
typical 5759 cent stamp, whatever it is right now, 2
pennies, a 2 cent stamp. You can actually use that 2 cent
stamp on anything. I'll shoot you a little hack on
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how our Postal Service works. So back to the credit score.
So when you look at it, it's that range, 300 to 850.
So if you, if you don't have credit monitoring, go to
creditmojo.com and figure out where your credit score is.
If you know what your credit score is, let's say you're a
650, then there's a 65% likelihood you'll pay your bills
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on time. Got a 7:40?
There's a 74% likelihood you'll pay your bills on time.
Got 800? There's an 80% chance you'll pay
your bills on time. See how that works?
Now, that's not an exact science, but it's close enough
that it'll help you remember if you have good credit or bad
credit because people ask me allthe time, what's a good credit
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score? Well, it depends.
It depends on what you want. If if you're trying to get a
mortgage, you need to have a 580.
If you're trying to get a statedincome mortgage.
So if you're trying to get a agricultural loan or FHA loan,
little money down, low risk in certain areas, 580 if you're
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trying to do a stated income loan and that is you state, you
tell the bank how much money youmake.
And yes, these exist. We do them all the time here at
fortress. At my company you need at least
760 credit score or 76 right? 76 like percent likelihood
you'll pay your bills on time and with a 760 credit score and
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30% down you can buy any home that you would qualify for with
no with no financials, just yourbank statements.
That's it. In a letter from your CPA
stating that it is your bank statements that you gave us and
that yes you did make X amount of money gross.
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See, they look at the gross revenue of your business, not
your net income, your business. So if you're business owner, you
want to buy a $3,000,000 house but can't qualify for it because
you've structured your business in a way that you don't make a
lot of money, so you don't have to pay the taxes.
I got you. I can help you out on that.
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So if you have a 760 credit score, 76% likelihood you'll pay
your bills. That's all that number means.
Now, there are five things that FICO wants to see in order to
calculate your credit score. Or I should say, there's five
areas that Fico's looking at. These podcasts are are a little
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different for me when there's nobody here and it's just me
flopping my lips. But I still have a good time.
So I hope you're getting a lot out of this.
So there are five areas that Fico's looking at #1 And this is
what everybody else looks at. This is what all of the talking
heads on social media talk about.
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It's payment history, payment history, payment history.
And this is what people focus on.
When they would call our office to get their credit fixed, they
were like, yeah, I got these late payments I need removed, or
I got a collection or I got a bankruptcy.
They focus on the 35%. Now.
I'm a pilot. I spent 15 years in the National
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Guard on a medevac helicopter. And then after I got out of the
military, I got my private pilot's license.
I have my own plane. Generally when I travel, I
travel on my own plane, so I don't have to deal with all of
the nonsense you got to deal with at the airport.
Now, if it's over 1000 miles, like next week, I'm flying to
Houston. I'll fly commercial.
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But if I was going to be flying to Salt Lake, I live in Boise,
or if I was going to go to Las Vegas, I'd just fly my own
plane. Because it's faster, it's
cheaper, and it's easier. Put my dog in there, put my guns
in there, put in my girlfriend and anything else I want.
I got room for four more people.So as a pilot, one of the first
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things they teach you is don't get tunnel vision.
Just constantly scan. You're scanning your
instruments. You're looking at everything.
Don't just focus on one instrument.
You know what happens when you focus on one instrument and
you're in a helicopter, you fly into an airplane and you kill
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everybody? That's what happens when you get
hyper focused or tunnel vision. I ride motorcycles.
One of the things that they taught me in the advanced
motorcycle school is you look where you want to go, not at
what you don't want to hit. Because if you look at what you
don't want to hit, you're going to hit it.
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I've been told same thing in racing school.
You look where you want to go, you don't look at the wall.
So if you look at the wall, nextthing you know, you hit the
wall. So when a lot of people, they
will call us and they're like, Igot this collection and they're
focused. They got tunnel vision on the
negative payment history. That my friend, is less than 20%
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of your credit score. Your negative payment history is
110 points. That's it.
It's 20% of your score and they focus on the 20% and ignore the
80%. And This is why most people that
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have poor credit have poor credit is because they're
focusing on the 20. Think about it in the in the gym
world or an exercise world and healthy world.
Imagine if you focused on just going to the gym and you ignore
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what you eat, what you put in your mouth.
You can't outrun your mouth. If you eat nothing but garbage,
but you work out seven days a week and you hammer down on that
treadmill or on that spin bike and you lift and you crush those
weights, but you eat just garbage.
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You are not going to have the body, the physique that you
want. You got to focus on the 80% plus
the 20%. So we focus on all of it.
So the first thing is payment history.
That represents 35% of your credit score.
That's the first of the five areas that Fico's looking at.
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Now. I said 35%.
You might be thinking, wait a minute, if you were paying
attention early, I told you 20%,that's right, 20% of your score
is the negative payment history.35% of your credit score is the
payment history. That's negative and positive.
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So 35% of your credit score is payment history.
Then you have amounts owed. That's 30% of your credit score.
This is not debt to income ratio.
I hear this all the time. In fact, I was just on a
podcast, someone else's podcast and the guy said the guest, he's
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like, and he's from, he's from Brazil.
So not that that matters becausepeople from America still say
this. They will say stuff like my debt
to income ratio is really high, therefore I have bad credit or I
have a poor credit score. No, your income does not come
into play when FICO creates yourcredit score.
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Neither does your sex. Whether you're male or female
doesn't matter. Whether you're black, white,
brown, yellow, purple, does not matter.
Whether you have hair or no hairlike me, whether you have a
beard or no beard, whether you're short or tall, skinny or
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fat, young or old, it doesn't matter.
FICO doesn't care. They don't care if you're
Christian or Muslim, they don't care where you live.
They don't look at any of that. That data, it's called empirical
data. It's they don't look at any of
it. What they look at is what's on
your credit report, your paymenthistory, the amount you owed,
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new credit, length of credit andcredit mix.
And I'm gonna get into the rest of them.
So when someone says my debt to income ratio is too high, that's
why I have bad credit, it's not accurate 'cause they don't look
at your income. What that does pertain to is how
much money you owe. And here's a secret.
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FICO doesn't care how much moneyyou owe on a car, a motorcycle,
an airplane or mortgage. They don't care much.
They care a little bit, a littlebit.
I'll give an example. If you were a veteran like I am,
you can go in and you can buy a house with no money down.
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The house that I live in, I purchased it in August 2021 and
I put down $550. That's it, 550 bucks.
I wrote the earnest money check for whatever it was.
I think it was $30,000 at the time I went to closing.
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They gave me a refund of the earnest money check and charged
me and they kept $550 to pay forthe inspection.
That's all I paid $550. So when you're a veteran, you
can buy a house with no money down.
If you are not a veteran, you can buy a house.
If you haven't purchased a home in the last five years, then you
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qualify as first time home buyer.
Even if you bought a home before, so long as you haven't
owned a home in the last five years, you can qualify for first
time home buyer again. And you can put down 3 1/2%
through FHA. Now if you don't want to do FHA
and pay all the extra taxes and all of that, not the taxes, the
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extra fees, the private mortgageinsurance, then you put
generally down 20 to 25 percent,20% for the down payment, 3 to
5% for the closing costs. OK, back to the 30% owed.
When I bought my house, I put $550 down.
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The mortgage showed up on my credit report.
A month later, my credit score went up about 25 points.
That's about all you're going toget when you buy a house.
About 25 points, somewhere in there.
OK, depends on your scorecard again, 'cause they back to the
scorecard. There's lots of different
scorecards and I'll, I'll get into scorecards a little later.
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So 30% is how much you owe. But they almost always ignore
mortgages and car loans and student loans and other types of
loans. They really only carry about one
thing. Lines of credit, also known as a
credit card. See, a credit card is a line of
credit. It's just a card.
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It's the same thing as if you just went to the bank and got a
line of credit with a checkbook or debit card.
Not to be confused with the homeequity line of credit.
That's different. So a credit card's a line of
credit. When FICO creates that credit
score, they're looking at how much money you owe on your line
of credit or your credit cards. This is a big thing here.
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This is the most impactful thingon your credit.
Your credit score is credit cards.
So it's 30% of your credit scorebasically has to do with how
much money you owe on a credit card.
Now if you go back to the 35% with payment history, it's
payment history on the credit cards.
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Now we're at 65% on just credit cards.
So that's two areas. Now let's get into the third
area and that's new credit. This is where people get really
confused. They think that inquiries are
new credit, the 10% of the credit score.
Now, if you figured out 10% of your credit score is new credit
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and you went to the car dealership and they pulled your
credit 50 times and you dropped 200 points, that is impossible.
Here's why. Because there's only 55 points
even associated with new credit 5555.
How did I come up with 55 points?
Well, it's 10% of your credit score.
(29:24):
If your credit score is 850, wouldn't that be 85 points?
No, it would not. Here's why.
Because your credit score is 300to 850.
So you need to subtract 300 points from 8:50.
So if you subtract 300 from 850,you're left with 550 points.
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That's how many points you have.550 points.
So when you do 10% of 550, it's 55 points.
When you do 30% of 550, it's 165points.
Guess what happens when you Max out all of your credit cards?
(30:13):
You lose 165 points. See how that all ties together?
Your credit cards, how you manage the credit cards, how
many credit cards you have, how much you spend on the credit
cards, when you pay off your credit cards, that's the most
important thing when it comes toyour credit score.
(30:34):
It's the most impactful thing. So 10% of your credit score is
new credit, not just inquiries, it's do you have new credit or
do you not have new credit? What is classified as new
credit? Anything that's been open in the
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last 24 months. So anything that's been open the
last 24 months, so that's 55% ofyour score.
So if you go out and you buy, you go into car dealership and
they pull your credit 50 times. That only counts as one inquiry.
By the way, one inquiry. Because under the FICO rules, if
you go and have your credit pulled for the same reason in a
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45 day window, counts as one inquiry, even if you go to
different car dealerships countsas one inquiry.
That's it. So if it's 100 inquires or 200
inquires or 300 inquires all within a 45 day window, it's one
inquire. So it's 55 points total
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including the new credit. So how does that work?
Well, FICO has figured somethingout.
Remember I told you they have predicted the future accurately
hundreds of billions of times over the last now 7, almost 70
years. What they figured out was 90%,
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nine, zero, 90% of all late payments that ever hit a credit
report. 90% of it happens in thefirst two years.
Let that sink in. 90% of all late payments that ever hit a
credit report happened in the first two years of the account
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being open. And the reason why your score
dropped so much after getting a new car or a new credit card is
because the likelihood of you being late is so much higher now
because you have new credit. And So what they'll do is
they'll auto artificially lower your credit score to see if
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you're going to make payments. And then as you start making
payments on that new loan, your score will come back up.
But that's 55 points. So if you're the kind of person
that's constantly getting a new car every two years, always
getting new credit cards every two years, applying for new
credit all the time, you, my friend, will never have great
credit because you're just churning it all the time.
(33:07):
I have a friend, his name's BradLee.
You might have heard of him. There's a little podcast called
Dropping Bombs. When I first met Brad, he had a
very poor credit score. And I'm not sharing any
confidential information about Brad right now because I am the
guy in the book that he wrote and he talks about how he had
poor credit score. He was a victim of identity
(33:30):
theft, and then he also was a victim of liking cars and he
would go buy a new car. I mean, after all, he was from
the car world. Every six months or so, he'd go
buy a new car and then when he'dget these credit card offers, 0%
interest, he would close his oldcredit card and get the new
credit card. And he was always doing this
churning. And so he had a very low credit
(33:51):
score because he just didn't know how to manage it.
Now, once I removed the identitytheft, which took me less than
72 hours, that he'd paid an attorney over $10,000 and it
took years of nothing and 72 hours of fixed his identity
theft, his score went up, but not great, but good enough that
(34:11):
I was able to get him good credit cards.
And then he just did what I toldhim in over a matter of about
four years. Last time I saw he posted
something on Instagram recently,an 847 credit score, up almost
300 points from when I met him. All because he started managing
his credit the way FICO wanted him to manage it.
(34:35):
So to recap, 35% of your credit score is payment history, 20% of
it is your negative payment history.
So we break that down. 15% is +20% is negative, and then 20%
of your credit and then 30% of your credit score then is
amounts owed, which is primarilywhat you owe on your credit
cards. If you Max out your credit card,
(34:57):
whether it's a $500 credit limit, 50,000 or 5 million, you
Max it out, you're going to lose165 points, pay it off, you get
the points back and then 10% is new credit anything less than
two years old. So whatever you do, if you want
to have good credit, you want tohave great credit.
(35:18):
Don't open and close accounts before they're at least two
years old, preferably four yearsold.
Four years is when you start really seeing the benefit of it.
Most people think fixing their credit takes money, time, and
endless back and forth. But what if you had AI doing all
of the hard work for you? Credit Mojo uses a powerful
technology based on over 2 decades of proven strategies to
(35:42):
find errors on your credit report, create custom
one-of-a-kind letters for you, and then guide you through the
process of how to mail them to the credit bureaus.
You stay in control without doing any of the heavy Go to
credit mojo dot AI forward slashSchool of wealth to get started
today for only $1.00. That's right, you can get
started today fixing your creditfor only $1.00 at credit.
(36:05):
Mojo dot AI forward slash schoolof wealth brings me to the
fourth section of the FICO credit score and that is length
of credit history. How long have you had credit?
And that's 15% of your credit score. 15% of what?
(36:28):
Of 550. So what is that 75 points
somewhere there 72 points, something like that. 15% of your
credit score is length of payment history.
How long have you had credit? How long have you used your
credit? This is why when you turn 18,
when you get your first credit card, you're going to have a low
(36:51):
credit score. Why?
One, you don't have any payment history, 2, it's new credit, and
three, the length of credit history.
You just don't have it. So you as an 18 year old or 20
year old and you get your first credit card, you're going to
that will give you a credit score because before you get
(37:11):
that first credit card or the first student loan, you have no
credit score because there's nothing to calculate.
That's why Dave Ramsey so wrong when it comes to credit.
He's right in many other ways. But when it comes to credit,
almost every single thing Dave Ramsey says about credit is
wrong. He's afraid of credit.
(37:33):
On this show, we're not afraid of credit.
On this show, you learn how to maximize that credit so you can
Max multiply, maximize and multiply your assets.
See, it is so much easier to become financially free to
become wealthy if you use and utilize your credit properly.
So much easier. Yes, you can get wealthy paying
(37:57):
cash and bootstrap and everything.
It's just a lot harder. It's going to take a lot longer.
So if you want to supercharge itand speed it up, maximize your
credit. If you just get started, you're
going to have a low credit scorefor a while.
It's going to probably be about four years until you get up into
the seven hundreds. It takes 10 years, 10 years to
(38:18):
hit 800. It takes 20 years of credit
history to 8 hit 850. Ten years to hit 820 years to
hit 850. Now side note, if you're a
business owner, you can do the equivalent in three to six
(38:38):
months. Three months have an 800 FICO
through your business. Six months have an 850 or the
equivalent. That's called the Paydex score,
80 Paydex or 85 Paydex. But back to personal credit.
So 15% is your length of credit history.
So you can do it one of two ways.
You can start out with your own credit or you can do what's
(39:04):
called authorized user accounts.Piggybacking what that is, I'll
give an example. All of my kids, when they
graduated high school and they turned 18, all of them had 800
credit scores. My grandson, who will be 14 in
October when he turns 18. So in four years, 4 1/2 years
(39:25):
from now when he turns 18 and I get him his very first credit
card, he will have an 800 creditscore.
Now you might be thinking, wait a minute, Rhonda, you just said
it takes 10 years to get 800. It does.
It takes 10 years on your own. But if you can add have someone
(39:46):
add you to their credit card as an authorized user, all of their
credit history will then report on your credit report as credit
history. So if you were a parent or a
grandparent or an aunt or uncle,and you really want to give
someone a jump start to buildingcredit so they'd become wealthy,
(40:12):
they can become financially free.
Add them to your long your oldest credit cards doesn't
matter about credit limit. Remember, FICO doesn't care what
your credit limits are. They care about how much money
you owe. So if you can add someone to the
credit card, your credit historywill show up on their credit
history 30 to 45 days later. In fact, this is one of the
(40:35):
services that ioffer I have overthe last now 20 years fixed
hundreds of thousands of people's credit.
And over those 20 years I have people that we fixed their
credit, got them credit cards, and now they have a part time
job with me selling their creditcard or renting their credit
(40:55):
cards. See, one of the things that I
teach inside my private coachingas well as on this show is how
much money you make is not as important as how much money you
keep. Let me repeat that.
How much money you make is not as important as how much money
(41:16):
you keep. What do I mean by that?
Well, if you go out and make $1,000,000 and you give half of
it to the IRS, 500,000 of it, which is not an exaggeration by
any means, and you're left over a 500,000 and you spend it all,
you're worse off than someone who makes $50,000 a year and
(41:38):
keeps 5000. How much money you make is not
as important as how much money you keep.
You need to learn how to keep more of your money.
So one of the things I teach is how to keep more of the money.
Well, as AW2 employee, there's not a lot you can do.
You have to be a business owner.That's where all of the tax
deductions are. That's where all the tax
strategies, like 99% of tax strategies are for business
(42:01):
owners. See W two people are what
they're called takers. They take from the economy.
Business owners and entrepreneurs give to the
economy. Therefore the IRS says, hey, if
you give to the economy, if you're a maker, it's versus a
taker. You don't have to pay income tax
or you can at least significantly reduce your income
(42:23):
tax. So be a maker and not a taker.
But what if you're AW2 employee like I was when I was a fireman?
Then you start a side hustle andthat side hustle could be
renting your credit. So I have now 5000 credit cards
that I can rent called Authorized users.
You can go to ronnielambert.com and click on credit and then you
(42:45):
can learn about the credit cards.
So how does that help you? Well, if you're just starting
out or you listen to Dave Ramseyand you cut up your credit cards
and you lived off the grid and you ate beans and rice and rice
and beans and drove a beater andpaid cash for everything, you're
starting all over. Or you were like me and you
filed bankruptcy and it wiped out everything.
(43:09):
Now you got to rebuild or COVID hit and you lost your business
and you defaulted and charged all the credit cards off and
lost the house and the cars. That happened to millions of
people, unfortunately. Well, the authorized user
program will Fast forward that where you can come to me and
(43:31):
say, hey, I need a, a $10,000 credit card that's been open for
at least 10 years. In about 72 hours, I'm going to
have that $10,000 credit card that had been open for 10 years
show up on your credit report. And now you have payment
history. You have credit cards that are
not maxed out. It's not new credit, and now you
have a long credit history. See how that plies?
(43:55):
Which brings me to the last thing, and that is credit mix.
That's the last of the five things that FICO does or looks
at when creating your credit score.
Credit mix. What is credit mix?
A mixture of your credit. FICO wants to see five things on
every single credit report in order to have the best FICO
(44:18):
scores. You don't have to have all 5 to
have a FICO credit score, but ifyou want to have a 800 or 8:50,
you got to have all five things.Here they are #1 and most
important. So the number one thing and most
important thing to have on your credit report at all times is a
(44:41):
minimum of three credit cards. I'm going to repeat that because
I want to make sure you really heard that.
The most important thing for youto have on your credit report in
order to have the maximum creditscore, it's three credit cards.
I prefer that you would have 4 in this order.
(45:04):
American Express, Discover, MasterCard and Visa have one of
the four. Not all Visas, not all
Discovers, not all American Express have one of each
American Express, a Discover, a MasterCard and a Visa, but a
minimum of three. That's the first thing of the
(45:26):
credit mix, the 10% or 55 points.
The next thing they want to see is a installment loan.
What's an installment loan? That was a motorcycle loan.
Like my daughter just bought a motorcycle over the weekend.
She listen to me, she financed it.
She kind of, She could have paidcash, but why would you pay cash
when interest is only 4% and inflation was at 15?
(45:48):
Now I know inflation is not fixed.
It's now come down. Now that sleepy Joe's out,
inflation's kind of neutralized or balanced out, if you will.
But again, I like to use debt when you can if it's a low
interest rate. Now, if the loan on that
motorcycle is 1214%, I said absolutely not.
(46:09):
But I think she got it at 3.9%. She can now use that money
instead of paying cash for her $5000 motorcycle.
She could now invest it, do a lot better in the stock market
than 3.9% and then just make thepayments because after all, it
builds her credit up. Later on.
I'll teach you how you can get the loan and pay no interest or
(46:32):
very, very little interest. So they want to see an
installment loan on your credit.They also want to see a mortgage
if possible. So they want to see at least
three credit cards. They want to see at least one
installment loan and then a mortgage.
Now, do you remember in the beginning when I was talking
about the house that I bought in2021, how many points I got?
(46:53):
Do you remember what I said? It's 25 points.
That was it. So when I got my mortgage,
because I'd already had a house before, I sold it, and then Fast
forward two years, bought a new house, and my score went up 25
points. See, when the mortgage was sold
(47:14):
and I closed the previous Lake Tahoe house, my score went down
by 25 points. When I got the Idaho house, my
score went back up 25 points. It's not the end of the world.
See, you can have credit scores in the 8 hundreds without a
mortgage and without a Stallman loan, but you will never ever
(47:38):
ever ever have an 800 plus credit score without credit
cards. It is impossible.
Why? Because 80% of your credit
score, like I've been telling you for the last now 47 minutes
is credit cards. They are the most important
thing. So when Dave Ramsey says cut up
your credit cards, close them. Use cash, use the envelope
(48:00):
system, use your debit card. It's the absolute worst advice
when it comes to credit. Now listen, if you are a
credaholic and you cannot be trusted with credit and you want
to become debt free so you eventually become financially
free, then stop using the creditcards, but don't close them.
(48:25):
Please do not close them becauseif you close them, it will
destroy your credit score because you're going to start
losing the payment history, you're going to lose the amounts
owed, you're going to lose the length of credit history and
you're going to lose the mix. And now you end up with bad
credit again. And when you have bad credit,
(48:46):
you pay more for everything. Did I say everything?
Yes, I said everything. Gas, groceries, electricity,
your car insurance, your life insurance, your home owner's
insurance, your renter's insurance.
Everything costs more if you have poor credit, and here's
(49:08):
why. Your insurance company pulls
your credit at least twice a month.
I mean, twice a year, sometimes once a month, but at least twice
a year to check you actually have a insurance credit score.
If you sign up at creditmojo.comfor credit monitoring, you can
click on different types of scores.
There's different scores. There's bankruptcy scores,
there's mortgage scores, there'scar loan scores, there's credit
(49:30):
card scores, there's recreation vehicle scores, and there's
insurance scores. There's even life insurance
scores, homeowners insurance scores.
Why would why would an insurancecompany care about what your
credit score is? What?
What is your credit score? Again, what?
Remember, it's the likelihood ofyou paying your bills on time
(49:51):
over the next two years. That's all it is.
But it's more than that. See, what the insurance
companies have figured out is ifsomeone has a poor credit score,
they're more likely to have an insurance claim and therefore
you pay more for car insurance. If you have poor credit, pay
(50:15):
more for life insurance. If you have poor credit, you pay
more for your mortgage, the insurance, the property, the
home owner insurance. You pay more.
Why? Because people with poor credit
are more likely to have a claim.Now, some of it, not all of it.
Some of it's because they're more likely to commit fraud.
(50:36):
The other side of it is because they're distracted, they're
stressed out, they're sleep deprived, they're struggling
financially. I'll give you an example.
You got 2 employees. One is getting harassed
constantly by debt collectors, can't pay his bills, ites with
(50:56):
his wife, lost his car and got repo.
You got the other employee. There's just smooth sailing.
His finances are all under control.
Credit cards are paid off, car loans paid off, mortgage is paid
on time. It's got a little bit of money
in the bank for savings. Who's the better employee?
The guy with good credit. This is why 76% of employers
(51:20):
look at credit now. They're not supposed to look at
scores, but most people don't know the difference.
They don't know how to read a credit report without looking at
scores. Back to the insurance.
You got a driver. One's getting texted constantly
like I was earlier because I didn't turn off the damn thing
on my computer, Turn it off on my phone, forgot it on the
computer. They're getting texted
(51:43):
constantly. They're getting called by
collection companies. They're not sleeping at night
'cause they're stressed out. They're fighting with their
spouse. They're worried about their job
because they're so tired. They're not doing a good job.
Who's more likely to have a car accident?
The person is stressed out, sleep deprived.
(52:05):
The person is just enjoying life.
The person is stressed out, right?
So this, the insurance companiesknow this, and so they base how
much you pay on your credit score.
And what about electricity, cellphone, gasoline?
How does that apply? Here's how.
If you and I pulled up the gas station at the same time, then
(52:30):
we both got $20 worth of gasoline.
Gas is $4.00 a gallon. That's just for easy math.
For me, gas is $4.00 a gallon. You get 20 gallons, I get 20
gallons, $4.00 a gallon. How much does that cost?
80 bucks. Now if you pay cash, it's $80.
(52:51):
You paycheck it's 80 bucks, pay debit card, 80 bucks.
But I'm not going to use cash, debit or cheque.
I'm going to pay with a credit card where I get 5% cash back.
So now instead of me paying $4.00 a gallon, I'm paying $3.80
a gallon. I've seen people in lines at
(53:15):
Costco that are an hour long to save 10-15 cents.
What about the $0.20 they're throwing away by not having good
credit? Now you might say, well, it's
only $0.20, it's not that big ofa deal.
It is over a year or a decade ora lifetime.
(53:36):
It's a lot of money. What if you're a truck driver
and you're spending 10s of thousands or you're like my
friend Ed Mylette that spends over a million a year on fuel
for his jet and he if he paid with a debit card $1,000,000, a
(53:56):
5% cash back, that's $50,000. Everything costs more, my
friend, if you have poor credit,everything.
So if you want to become wealthy, if you want to become
financially free, then the firstthing you need to start focusing
on is maximizing your credit. And that's one of the first
(54:20):
thing I teach. I teach how to maximize credit,
minimize taxes and multiply assets.
So focus on maximizing your personal and your business
credit. I'll talk about business credit
later on some other episodes, but for now, maximize your
personal credit. So to recap, you need at least
(54:40):
three credit cards open at all times.
Later on, I'll do an episode of how to manage those credit
cards, how to know when to pay them off, how much money you
just spend. But just for now, if you don't
have at least three credit cards, you need to make your
mind up that in a while you're going to learn how to maximize
your credit score a little bit more so you can get better
(55:01):
credit cards. But you need three credit cards.
Now, if you have family friends that could put you on their
credit cards, I recommend that you reach out to them.
Just say, hey, I'm listening to this crazy bald guy on YouTube
and he says I need three credit cards.
And if you put me on your creditcard, it really helped me out.
(55:22):
They don't have to give you the credit card.
In fact, a lot of these banks won't even issue the credit
card. So there's nothing you can do.
It's kind of like, imagine this,I'm flying to Houston next week.
Imagine if you're my Uber driver, because I will be
getting an Uber or shuttle van, whatever.
(55:43):
Does my driving record affect the Uber driver's insurance
rates? Nope.
Am I responsible for the maintenance, the insurance, the
gasoline, the loan payments on the Uber car?
No, it's totally separate. But am I benefiting from the
(56:03):
Uber driver? Yes.
Now if the Uber driver got in anaccident, that could hurt me.
Whereas if someone, if they added you their credit card and
they miss a payment, it could hurt you.
But that's easy to fix. But generally speaking, if
someone puts you on their creditas an authorized user, it
doesn't affect them at all. You just get all the benefit.
(56:24):
Just like when I get in that Escalade for the Uber, I benefit
from the car. I don't have to pay anything
outside of what I paid for the Uber ride.
Just like with the authorized user, you simply just pay for
the authorized user. You don't have to make the
payments on the card or the annual fee or any of that.
(56:44):
So if you don't have at least three credit cards and you have
family members that have great credit, go to them.
The other thing you should do ifyou're married or have a
significant other partner, put each other on your credit cards
as authorized users, Put your kids on your credit cards as
authorized users, your grandkids, brothers, sisters,
(57:04):
aunts, uncles, whatever doesn't cost you anything, doesn't hurt
you, doesn't affect your credit score unless you give them a
credit card and then they go outand Max out.
So don't give them a credit card.
It will still report even if there's no physical card issued.
So those are the five things that Fico's looking at when
creating your credit score. Payment history, amounts owed,
(57:29):
new credit, length of credit andcredit mix.
You need at least three credit cards on your credit at all
times. It's going to take you 10 years
to get to 820 years to get 850 unless you do authorized users.
And then you can speed that up because if you get 3 authorized
user accounts that are 20 years old, you now have 20 years of
(57:51):
credit history on your credit report.
If you need some help with your credit, you can always go to
credit mojo dot AI. That's credit mojo dot AI.
If you just want credit monitoring, go to
creditmojo.com. If you like the show, please
give me a thumbs up and share itwith a loved one.
Share it on your social media. Appreciate it.
And if you're watching this on YouTube, ask your questions, put
(58:12):
in some comments, want to engagewith you.
All right, have a good day.
76% of Americans live paycheck to paycheck and according to
Forbes, 93% of business owners pay more than legally required
to pay an income tax. And nearly 50% of all Americans
have bad credit, but not you, atleast not anymore.
See, this is the school of wealth where you learn how to
(00:22):
maximize your credit, minimize your taxes and multiply your
assets so you can create generational wealth.
Hi, I'm Randy Lambert, certifiedFICO credit professional,
author, speaker and tax strategist.
For the last 20 years, I've helped 10s of thousands of
Americans just like you take control of their money, fix
(00:43):
their credit, wipe out their debt, cut their taxes by 50% and
multiply their assets. If you're ready to break free
from the rat race and start building a life of freedom and
abundance, then you're in the right place.
Welcome to the School of Wealth.Hello and welcome to the show.
(01:04):
I'm your host, Rodney Lamb, certified FICO credit
professional, author, speaker, and tax strategist.
It is so good to be here with you today.
I want to spend the next hour orso.
I'm going to try to get it done in an hour if I can.
I might have to do multiple episodes to get it all done, but
in the next hour or so, I'm going to go over the five things
(01:26):
that make up your credit score, specifically your FICO credit
score. Now, there are lots of different
credit scores out there. There's FICO, there's Vantage,
there's Trans Risk, there's Paydex, there's Intela, on and
on and on. In fact, there are thousands of
credit bureaus out there and I bet you only thought there were
(01:48):
three, Experian, Equifax, and TransUnion, but there's actually
thousands. In fact, if you live in Texas,
there's not even Equifax there. There's inveness.
If you live in Mississippi, there's actually a credit Bureau
of Mississippi. There used to be hundreds of
thousands of credit bureaus out there.
And as time has gone on, the credit bureaus have started
(02:11):
merge together, if you will. They've the big boys, have
started buying out the small boys, if you will.
And so that's why we really havebig three that you know about.
But, and I'll do a different episode on the history of credit
bureaus, but today I wanted to go over the history of FICO and
why FICO and how your FICO credit score is created.
(02:34):
Now, FICO was created in 1956 bya mathematician and an engineer,
Bill Ferr and Earl Isaac. And what they did in 1956 is
they created a very complicated algorithm.
Not only was it complicated, it was extremely accurate.
In fact, since 1956, it has generated hundreds of billions
(03:02):
of credit scores. And these credit scores are very
special. And the reason why they're
special is they predict the future.
That's right. FICO, the Fair Isaac Company,
also known as a Fair Isaac Corporation, has predicted the
future hundreds of billions of times accurately.
(03:24):
Now they are trusted by over 90%of the banks throughout the
world. They are the most trusted.
They're the Rolls Royce, if you will, of credit scores.
Now soon Vantage, which has beenaround not as long as FICO, but
Vantage just released just this week, Vantage Model 5.
(03:47):
Now FICO just released a few years ago.
Model 10 TT stands for trending.But Vantage, why I brought up
the Vantage is if you are going to be buying a mortgage or
buying a house rather and getting a mortgage, you will
start seeing Vantage credit scores on credit reports.
Now, FICO, the US government andVantage have been in a long
(04:11):
drawn out lawsuit for over a decade.
And FICO lost. And so one of the settlements
was that the government would start allowing credit bureaus to
use Vantage. And why did credit bureaus want
to use Vantage? For competition?
For one reason. And #2 because it get, it's a,
(04:33):
it's a more accurate credit score when it comes to certain
things. But FICO didn't want to give
that up. And they didn't go down
fighting. They didn't go down without
fighting and it was supposed to go into effect January 1st,
2025, this new Vantage FICO credit scoring system on
mortgage credit reports. But for some reason they decided
(04:55):
to postpone it. And I don't know when it's going
to come back. They said right now it's
postponed indefinitely, but maybe we'll see it at the after
the end of this year. I I don't know.
It'll be good for the industry to have something other than
just FICO. So let's get into it.
Bill Ferrer and Earl Isaac created the FICO credit scoring
system and they've changed it now many, many times.
(05:18):
Like I said, they're on version 10.
TT stands for Trending now. There are over 4000 different
scorecards. Now.
The reason I'm bringing in some of this and not just getting
right into the meat and potatoesis you really need to understand
how the system works. Because one of the things I hear
(05:39):
on a regular basis is I went to the car dealership to pull my
credit to buy a car. So they went to the car
dealership to buy a car and theypulled their credit is what I
should have said. Listen, I'm from Idaho.
I barely got an education. I grew up very poor.
I had to fight my way into school.
(06:00):
My parents didn't want me go to school and that's one of the
reasons I left home at 15. Not only was I tired of eating
out of the dumpster, I was tiredof being beat up, but I really
wanted to go to school. And they rarely let me go to
school in elementary school and they very rarely let me go in
middle school in 6th, 7th, and 8th grade.
(06:22):
So I left home when I was a freshman in 9th grade.
And part of that was I, I reallywanted to get an education.
My parents taught me that education was dumb.
Rich people were evil. Money was the root of all evil.
The only way you could get wealthy is to rob people,
etcetera, you know, be a criminal.
(06:42):
And so I just wanted out of it. So there are, I'm not the most
educated person, not the most intelligent person.
There's things that I know very,very well, tax strategies,
corporate law, how to fly an airplane, how to do lots of
other things. But there are certain words.
Just so you know, I have what's called a tied tongue.
(07:05):
And what that just means is my tongue doesn't work as well as
some other people I'm supposed to.
I was supposed to get surgery tocut it so I could say certain
words, and I never did it. I didn't want to mess with it.
It works good enough. My good friend and mentor Joel
Bauer says you're good enough. You're good enough.
You don't have to be perfect. So I'm definitely not perfect.
(07:27):
So there are back to FICO now there's 4000 different
scorecards and why this matters is depending on what scorecard
you're in could determine what your credit score actually is or
what it maxes out at or what it could drop down to.
So when people come to me and they say, hey, I went to the car
(07:48):
dealership to buy a car and theypulled my credit 50 times and my
credit score dropped 200 points.I don't believe them.
And when I say I don't believe them, it's because it's not
accurate. Now maybe the score that they're
looking at at the car dealershipis different than the credit
score they were looking at online.
(08:09):
See, the car dealership credit score is generally a beacon.
It's in the beacon model. So Model 5 where the score you
look at online, if it's a free site, it's not even a FICO
credit score, it's a Vantage credit score.
See the Vantage credit score, again, it's the competitor to
(08:30):
FICO. The only place you will see a
FICO credit score is at myfico.com and a couple credit
monitoring services that you payextra to have a FICO credit
score created instead of a Vantage credit score.
Because remember, Vantage is much, much less expensive to
buy. See, there's no such thing as a
(08:51):
free credit score. It's not free.
Somebody's paying for it. Now, it might not cost you
anything, but someone had to payFICO for it.
Someone's having to pay Vantage for it.
I'll give you a good example. One of my companies is Credit
Mojo. So Credit mojo.com is a credit
monitoring service. So if you ever need someone to
(09:13):
monitor your credit, protect youfrom identity theft, let you
manage your bills, manage your money, etcetera, learn about
credit, how to maximize your credit score, etcetera, Credit
mojo.com is the place to go. Now with Credit Mojo, you can
get a subscription there for 3995.
That's a Vantage credit score. But if you want a FICO credit
(09:36):
score, it costs me an additional15 dollars, $5 per Bureau.
There's three bureaus. So instead of it being 3995, I
would have to charge you 5495 tomake the same money as the 39
because FICO cost that much more.
(09:58):
So when someone says my credit score dropped 200 points, it
it's not that their credit scoredropped 200 points.
What generally happens is they're comparing it to a
different score. They're comparing a Vantage
credit score, like a creditkarma.com or
creditmojo.com or any of the other ones to a FICO credit
(10:22):
score that the car dealership had.
And to add to that confusion, remember I said FICO has 10
different versions. In fact, they actually have more
than that because it's now 10 T So that's 11 different versions.
And then inside those different versions are scorecards.
Now, what is a scorecard? Think about it like this.
(10:45):
When you were going to high school or college, we had what
was called the bell curve. And the way the bell curve works
is the teacher would disqualify the lowest grades and disqualify
the highest grades and only count the people in the middle,
the average, the median. That's the scorecard, if you
will. So what FICO figured out was
(11:08):
there are certain types of people based on their credit
report of they, they figured outthat just because you all live
in the same area, you all have the same job, you're all the
same age, you all have the same education, that doesn't mean
(11:30):
that you're going to have the same credit score.
See, when I said earlier that FICO has predicted the future
accurately hundreds of billions of times, I mean they predicted
the future and the the future. What they're predicting.
This is what the entire FICO score system is in your FICO
(11:51):
score. It's whether or not you will
have a major derogatory hit yourcredit over the next two years.
That is all your FICO credit score is, is whether or not you
will have a major derogatory on your credit over the next two
(12:12):
years. Now what does that mean?
Whether or not you're going to be late, whether or not you're
going to have a 90 day late, a collection, a charge off a repo
or bankruptcy, what they call a major derogatory hit your credit
over the next two years. I forgot to hit that one.
Sorry about that guys. Got it turned off and my phone
didn't turn off. There we go.
(12:35):
So that's all your credit score is, is what's the likelihood of
you missing a payment over the next two years?
That's the simplest way to say it.
And that's what that number is, 300 to 850.
Now, any guess of how they came up with 300 to 850 back in 20,
not, not 20 years ago now, 5070 years ago?
(12:58):
How did Bill fare and Earl Isaac, how did they come up with
the FICO score range 300 to 850?Here's how they did it.
They just made it up. They just made-up the number.
There's a little bit of science behind it, a little bit of math.
Now, this is not accurate. It's not 100% accurate.
(13:22):
I learned this from doing my training at FICO.
I was taught this by FICO, but it's not an exact science.
But here it is. Your FICO score, 300 to 850, is
a direct or a prediction rather,of whether or not you're going
to pay your bills on time over the next two years.
(13:44):
I've said that. I've said it multiple times.
I want you to really hear that because you're probably never
heard that before. All of these talking heads and
these gurus on social media, most of them don't know what
they're talking about. They're just regurgitating
information and I hope on this show you're going to learn a lot
about credit scores and taxes and debt and and factual
(14:07):
information, not just regurgitated information from
some real estate agent or mortgage broker or your cousin
Daryl. So that 308 fifty think about it
like this. It's a representation of whether
or not you're going to pay your bills on time over the next two
years. So if you have a 300 credit
(14:28):
score, that basically means there's a 30% chance you will
pay your bills on time over the next two years.
If you had an 850 credit score, then there's a 85% chance you'll
pay your bills on time over the next two years.
(14:49):
That's it guys. It's not any more complicated
than that. Now, yes, it actually is much
more complicated than that, but that's the the layman's way of
understanding the score. So now I want you to, if you
don't have credit monitoring, goto creditmojo.com.
It's Credit mojo.com. It's going to cost you $1.00 to
sign up for a free trial for a week and then after a week, if
(15:12):
you don't cancel, it's going to be 25 bucks a month.
Credit mojo.com. If you need credit repair then
go to Credit Mojo dot ai.com twodifferent sites.
Credit mojo.com is just strictlycredit monitoring.
Credit Mojo dot AI brings in thecredit repair software so you
can fix your credit. Don't have to know anything
(15:32):
about our software It automatically.
Over the last 20 years, almost 20 years now, I've kept track of
every single letter I've ever sent, every single response
we've ever gotten. Credit Bureau trained an AI bot
to create credit repair letters for you.
So you don't even know anything about credit repair.
You just log in and put in your username and password up.
(15:54):
It automatically brings in your credit report.
You select the items that you want to dispute and have removed
from your credit report. You hit save.
You print them, sign them, put them in an envelope and mail
them off. That's it, That's simple.
So for less than 50 bucks a month, because Credit Mojo AI is
either 3995 or 49. And when you if you do the
(16:17):
$49.00 option, you get training with me and I show you how you
can send a credit repair disputeletter or two pennies, not your
typical 5759 cent stamp, whatever it is right now, 2
pennies, a 2 cent stamp. You can actually use that 2 cent
stamp on anything. I'll shoot you a little hack on
(16:39):
how our Postal Service works. So back to the credit score.
So when you look at it, it's that range, 300 to 850.
So if you, if you don't have credit monitoring, go to
creditmojo.com and figure out where your credit score is.
If you know what your credit score is, let's say you're a
650, then there's a 65% likelihood you'll pay your bills
(17:01):
on time. Got a 7:40?
There's a 74% likelihood you'll pay your bills on time.
Got 800? There's an 80% chance you'll pay
your bills on time. See how that works?
Now, that's not an exact science, but it's close enough
that it'll help you remember if you have good credit or bad
credit because people ask me allthe time, what's a good credit
(17:22):
score? Well, it depends.
It depends on what you want. If if you're trying to get a
mortgage, you need to have a 580.
If you're trying to get a statedincome mortgage.
So if you're trying to get a agricultural loan or FHA loan,
little money down, low risk in certain areas, 580 if you're
(17:43):
trying to do a stated income loan and that is you state, you
tell the bank how much money youmake.
And yes, these exist. We do them all the time here at
fortress. At my company you need at least
760 credit score or 76 right? 76 like percent likelihood
you'll pay your bills on time and with a 760 credit score and
(18:05):
30% down you can buy any home that you would qualify for with
no with no financials, just yourbank statements.
That's it. In a letter from your CPA
stating that it is your bank statements that you gave us and
that yes you did make X amount of money gross.
(18:26):
See, they look at the gross revenue of your business, not
your net income, your business. So if you're business owner, you
want to buy a $3,000,000 house but can't qualify for it because
you've structured your business in a way that you don't make a
lot of money, so you don't have to pay the taxes.
I got you. I can help you out on that.
(18:46):
So if you have a 760 credit score, 76% likelihood you'll pay
your bills. That's all that number means.
Now, there are five things that FICO wants to see in order to
calculate your credit score. Or I should say, there's five
areas that Fico's looking at. These podcasts are are a little
(19:11):
different for me when there's nobody here and it's just me
flopping my lips. But I still have a good time.
So I hope you're getting a lot out of this.
So there are five areas that Fico's looking at #1 And this is
what everybody else looks at. This is what all of the talking
heads on social media talk about.
(19:34):
It's payment history, payment history, payment history.
And this is what people focus on.
When they would call our office to get their credit fixed, they
were like, yeah, I got these late payments I need removed, or
I got a collection or I got a bankruptcy.
They focus on the 35%. Now.
I'm a pilot. I spent 15 years in the National
(19:55):
Guard on a medevac helicopter. And then after I got out of the
military, I got my private pilot's license.
I have my own plane. Generally when I travel, I
travel on my own plane, so I don't have to deal with all of
the nonsense you got to deal with at the airport.
Now, if it's over 1000 miles, like next week, I'm flying to
Houston. I'll fly commercial.
(20:16):
But if I was going to be flying to Salt Lake, I live in Boise,
or if I was going to go to Las Vegas, I'd just fly my own
plane. Because it's faster, it's
cheaper, and it's easier. Put my dog in there, put my guns
in there, put in my girlfriend and anything else I want.
I got room for four more people.So as a pilot, one of the first
(20:37):
things they teach you is don't get tunnel vision.
Just constantly scan. You're scanning your
instruments. You're looking at everything.
Don't just focus on one instrument.
You know what happens when you focus on one instrument and
you're in a helicopter, you fly into an airplane and you kill
(20:58):
everybody? That's what happens when you get
hyper focused or tunnel vision. I ride motorcycles.
One of the things that they taught me in the advanced
motorcycle school is you look where you want to go, not at
what you don't want to hit. Because if you look at what you
don't want to hit, you're going to hit it.
(21:20):
I've been told same thing in racing school.
You look where you want to go, you don't look at the wall.
So if you look at the wall, nextthing you know, you hit the
wall. So when a lot of people, they
will call us and they're like, Igot this collection and they're
focused. They got tunnel vision on the
negative payment history. That my friend, is less than 20%
(21:44):
of your credit score. Your negative payment history is
110 points. That's it.
It's 20% of your score and they focus on the 20% and ignore the
80%. And This is why most people that
(22:04):
have poor credit have poor credit is because they're
focusing on the 20. Think about it in the in the gym
world or an exercise world and healthy world.
Imagine if you focused on just going to the gym and you ignore
(22:25):
what you eat, what you put in your mouth.
You can't outrun your mouth. If you eat nothing but garbage,
but you work out seven days a week and you hammer down on that
treadmill or on that spin bike and you lift and you crush those
weights, but you eat just garbage.
(22:47):
You are not going to have the body, the physique that you
want. You got to focus on the 80% plus
the 20%. So we focus on all of it.
So the first thing is payment history.
That represents 35% of your credit score.
That's the first of the five areas that Fico's looking at.
(23:09):
Now. I said 35%.
You might be thinking, wait a minute, if you were paying
attention early, I told you 20%,that's right, 20% of your score
is the negative payment history.35% of your credit score is the
payment history. That's negative and positive.
(23:32):
So 35% of your credit score is payment history.
Then you have amounts owed. That's 30% of your credit score.
This is not debt to income ratio.
I hear this all the time. In fact, I was just on a
podcast, someone else's podcast and the guy said the guest, he's
(23:53):
like, and he's from, he's from Brazil.
So not that that matters becausepeople from America still say
this. They will say stuff like my debt
to income ratio is really high, therefore I have bad credit or I
have a poor credit score. No, your income does not come
into play when FICO creates yourcredit score.
(24:14):
Neither does your sex. Whether you're male or female
doesn't matter. Whether you're black, white,
brown, yellow, purple, does not matter.
Whether you have hair or no hairlike me, whether you have a
beard or no beard, whether you're short or tall, skinny or
(24:35):
fat, young or old, it doesn't matter.
FICO doesn't care. They don't care if you're
Christian or Muslim, they don't care where you live.
They don't look at any of that. That data, it's called empirical
data. It's they don't look at any of
it. What they look at is what's on
your credit report, your paymenthistory, the amount you owed,
(24:58):
new credit, length of credit andcredit mix.
And I'm gonna get into the rest of them.
So when someone says my debt to income ratio is too high, that's
why I have bad credit, it's not accurate 'cause they don't look
at your income. What that does pertain to is how
much money you owe. And here's a secret.
(25:22):
FICO doesn't care how much moneyyou owe on a car, a motorcycle,
an airplane or mortgage. They don't care much.
They care a little bit, a littlebit.
I'll give an example. If you were a veteran like I am,
you can go in and you can buy a house with no money down.
(25:46):
The house that I live in, I purchased it in August 2021 and
I put down $550. That's it, 550 bucks.
I wrote the earnest money check for whatever it was.
I think it was $30,000 at the time I went to closing.
(26:08):
They gave me a refund of the earnest money check and charged
me and they kept $550 to pay forthe inspection.
That's all I paid $550. So when you're a veteran, you
can buy a house with no money down.
If you are not a veteran, you can buy a house.
If you haven't purchased a home in the last five years, then you
(26:30):
qualify as first time home buyer.
Even if you bought a home before, so long as you haven't
owned a home in the last five years, you can qualify for first
time home buyer again. And you can put down 3 1/2%
through FHA. Now if you don't want to do FHA
and pay all the extra taxes and all of that, not the taxes, the
(26:50):
extra fees, the private mortgageinsurance, then you put
generally down 20 to 25 percent,20% for the down payment, 3 to
5% for the closing costs. OK, back to the 30% owed.
When I bought my house, I put $550 down.
(27:11):
The mortgage showed up on my credit report.
A month later, my credit score went up about 25 points.
That's about all you're going toget when you buy a house.
About 25 points, somewhere in there.
OK, depends on your scorecard again, 'cause they back to the
scorecard. There's lots of different
scorecards and I'll, I'll get into scorecards a little later.
(27:31):
So 30% is how much you owe. But they almost always ignore
mortgages and car loans and student loans and other types of
loans. They really only carry about one
thing. Lines of credit, also known as a
credit card. See, a credit card is a line of
credit. It's just a card.
(27:53):
It's the same thing as if you just went to the bank and got a
line of credit with a checkbook or debit card.
Not to be confused with the homeequity line of credit.
That's different. So a credit card's a line of
credit. When FICO creates that credit
score, they're looking at how much money you owe on your line
of credit or your credit cards. This is a big thing here.
(28:16):
This is the most impactful thingon your credit.
Your credit score is credit cards.
So it's 30% of your credit scorebasically has to do with how
much money you owe on a credit card.
Now if you go back to the 35% with payment history, it's
payment history on the credit cards.
(28:38):
Now we're at 65% on just credit cards.
So that's two areas. Now let's get into the third
area and that's new credit. This is where people get really
confused. They think that inquiries are
new credit, the 10% of the credit score.
Now, if you figured out 10% of your credit score is new credit
(29:04):
and you went to the car dealership and they pulled your
credit 50 times and you dropped 200 points, that is impossible.
Here's why. Because there's only 55 points
even associated with new credit 5555.
How did I come up with 55 points?
Well, it's 10% of your credit score.
(29:24):
If your credit score is 850, wouldn't that be 85 points?
No, it would not. Here's why.
Because your credit score is 300to 850.
So you need to subtract 300 points from 8:50.
So if you subtract 300 from 850,you're left with 550 points.
(29:47):
That's how many points you have.550 points.
So when you do 10% of 550, it's 55 points.
When you do 30% of 550, it's 165points.
Guess what happens when you Max out all of your credit cards?
(30:13):
You lose 165 points. See how that all ties together?
Your credit cards, how you manage the credit cards, how
many credit cards you have, how much you spend on the credit
cards, when you pay off your credit cards, that's the most
important thing when it comes toyour credit score.
(30:34):
It's the most impactful thing. So 10% of your credit score is
new credit, not just inquiries, it's do you have new credit or
do you not have new credit? What is classified as new
credit? Anything that's been open in the
(30:54):
last 24 months. So anything that's been open the
last 24 months, so that's 55% ofyour score.
So if you go out and you buy, you go into car dealership and
they pull your credit 50 times. That only counts as one inquiry.
By the way, one inquiry. Because under the FICO rules, if
you go and have your credit pulled for the same reason in a
(31:17):
45 day window, counts as one inquiry, even if you go to
different car dealerships countsas one inquiry.
That's it. So if it's 100 inquires or 200
inquires or 300 inquires all within a 45 day window, it's one
inquire. So it's 55 points total
(31:37):
including the new credit. So how does that work?
Well, FICO has figured somethingout.
Remember I told you they have predicted the future accurately
hundreds of billions of times over the last now 7, almost 70
years. What they figured out was 90%,
(31:57):
nine, zero, 90% of all late payments that ever hit a credit
report. 90% of it happens in thefirst two years.
Let that sink in. 90% of all late payments that ever hit a
credit report happened in the first two years of the account
(32:21):
being open. And the reason why your score
dropped so much after getting a new car or a new credit card is
because the likelihood of you being late is so much higher now
because you have new credit. And So what they'll do is
they'll auto artificially lower your credit score to see if
(32:44):
you're going to make payments. And then as you start making
payments on that new loan, your score will come back up.
But that's 55 points. So if you're the kind of person
that's constantly getting a new car every two years, always
getting new credit cards every two years, applying for new
credit all the time, you, my friend, will never have great
credit because you're just churning it all the time.
(33:07):
I have a friend, his name's BradLee.
You might have heard of him. There's a little podcast called
Dropping Bombs. When I first met Brad, he had a
very poor credit score. And I'm not sharing any
confidential information about Brad right now because I am the
guy in the book that he wrote and he talks about how he had
poor credit score. He was a victim of identity
(33:30):
theft, and then he also was a victim of liking cars and he
would go buy a new car. I mean, after all, he was from
the car world. Every six months or so, he'd go
buy a new car and then when he'dget these credit card offers, 0%
interest, he would close his oldcredit card and get the new
credit card. And he was always doing this
churning. And so he had a very low credit
(33:51):
score because he just didn't know how to manage it.
Now, once I removed the identitytheft, which took me less than
72 hours, that he'd paid an attorney over $10,000 and it
took years of nothing and 72 hours of fixed his identity
theft, his score went up, but not great, but good enough that
(34:11):
I was able to get him good credit cards.
And then he just did what I toldhim in over a matter of about
four years. Last time I saw he posted
something on Instagram recently,an 847 credit score, up almost
300 points from when I met him. All because he started managing
his credit the way FICO wanted him to manage it.
(34:35):
So to recap, 35% of your credit score is payment history, 20% of
it is your negative payment history.
So we break that down. 15% is +20% is negative, and then 20%
of your credit and then 30% of your credit score then is
amounts owed, which is primarilywhat you owe on your credit
cards. If you Max out your credit card,
(34:57):
whether it's a $500 credit limit, 50,000 or 5 million, you
Max it out, you're going to lose165 points, pay it off, you get
the points back and then 10% is new credit anything less than
two years old. So whatever you do, if you want
to have good credit, you want tohave great credit.
(35:18):
Don't open and close accounts before they're at least two
years old, preferably four yearsold.
Four years is when you start really seeing the benefit of it.
Most people think fixing their credit takes money, time, and
endless back and forth. But what if you had AI doing all
of the hard work for you? Credit Mojo uses a powerful
technology based on over 2 decades of proven strategies to
(35:42):
find errors on your credit report, create custom
one-of-a-kind letters for you, and then guide you through the
process of how to mail them to the credit bureaus.
You stay in control without doing any of the heavy Go to
credit mojo dot AI forward slashSchool of wealth to get started
today for only $1.00. That's right, you can get
started today fixing your creditfor only $1.00 at credit.
(36:05):
Mojo dot AI forward slash schoolof wealth brings me to the
fourth section of the FICO credit score and that is length
of credit history. How long have you had credit?
And that's 15% of your credit score. 15% of what?
(36:28):
Of 550. So what is that 75 points
somewhere there 72 points, something like that. 15% of your
credit score is length of payment history.
How long have you had credit? How long have you used your
credit? This is why when you turn 18,
when you get your first credit card, you're going to have a low
(36:51):
credit score. Why?
One, you don't have any payment history, 2, it's new credit, and
three, the length of credit history.
You just don't have it. So you as an 18 year old or 20
year old and you get your first credit card, you're going to
that will give you a credit score because before you get
(37:11):
that first credit card or the first student loan, you have no
credit score because there's nothing to calculate.
That's why Dave Ramsey so wrong when it comes to credit.
He's right in many other ways. But when it comes to credit,
almost every single thing Dave Ramsey says about credit is
wrong. He's afraid of credit.
(37:33):
On this show, we're not afraid of credit.
On this show, you learn how to maximize that credit so you can
Max multiply, maximize and multiply your assets.
See, it is so much easier to become financially free to
become wealthy if you use and utilize your credit properly.
So much easier. Yes, you can get wealthy paying
(37:57):
cash and bootstrap and everything.
It's just a lot harder. It's going to take a lot longer.
So if you want to supercharge itand speed it up, maximize your
credit. If you just get started, you're
going to have a low credit scorefor a while.
It's going to probably be about four years until you get up into
the seven hundreds. It takes 10 years, 10 years to
(38:18):
hit 800. It takes 20 years of credit
history to 8 hit 850. Ten years to hit 820 years to
hit 850. Now side note, if you're a
business owner, you can do the equivalent in three to six
(38:38):
months. Three months have an 800 FICO
through your business. Six months have an 850 or the
equivalent. That's called the Paydex score,
80 Paydex or 85 Paydex. But back to personal credit.
So 15% is your length of credit history.
So you can do it one of two ways.
You can start out with your own credit or you can do what's
(39:04):
called authorized user accounts.Piggybacking what that is, I'll
give an example. All of my kids, when they
graduated high school and they turned 18, all of them had 800
credit scores. My grandson, who will be 14 in
October when he turns 18. So in four years, 4 1/2 years
(39:25):
from now when he turns 18 and I get him his very first credit
card, he will have an 800 creditscore.
Now you might be thinking, wait a minute, Rhonda, you just said
it takes 10 years to get 800. It does.
It takes 10 years on your own. But if you can add have someone
(39:46):
add you to their credit card as an authorized user, all of their
credit history will then report on your credit report as credit
history. So if you were a parent or a
grandparent or an aunt or uncle,and you really want to give
someone a jump start to buildingcredit so they'd become wealthy,
(40:12):
they can become financially free.
Add them to your long your oldest credit cards doesn't
matter about credit limit. Remember, FICO doesn't care what
your credit limits are. They care about how much money
you owe. So if you can add someone to the
credit card, your credit historywill show up on their credit
history 30 to 45 days later. In fact, this is one of the
(40:35):
services that ioffer I have overthe last now 20 years fixed
hundreds of thousands of people's credit.
And over those 20 years I have people that we fixed their
credit, got them credit cards, and now they have a part time
job with me selling their creditcard or renting their credit
(40:55):
cards. See, one of the things that I
teach inside my private coachingas well as on this show is how
much money you make is not as important as how much money you
keep. Let me repeat that.
How much money you make is not as important as how much money
(41:16):
you keep. What do I mean by that?
Well, if you go out and make $1,000,000 and you give half of
it to the IRS, 500,000 of it, which is not an exaggeration by
any means, and you're left over a 500,000 and you spend it all,
you're worse off than someone who makes $50,000 a year and
(41:38):
keeps 5000. How much money you make is not
as important as how much money you keep.
You need to learn how to keep more of your money.
So one of the things I teach is how to keep more of the money.
Well, as AW2 employee, there's not a lot you can do.
You have to be a business owner.That's where all of the tax
deductions are. That's where all the tax
strategies, like 99% of tax strategies are for business
(42:01):
owners. See W two people are what
they're called takers. They take from the economy.
Business owners and entrepreneurs give to the
economy. Therefore the IRS says, hey, if
you give to the economy, if you're a maker, it's versus a
taker. You don't have to pay income tax
or you can at least significantly reduce your income
(42:23):
tax. So be a maker and not a taker.
But what if you're AW2 employee like I was when I was a fireman?
Then you start a side hustle andthat side hustle could be
renting your credit. So I have now 5000 credit cards
that I can rent called Authorized users.
You can go to ronnielambert.com and click on credit and then you
(42:45):
can learn about the credit cards.
So how does that help you? Well, if you're just starting
out or you listen to Dave Ramseyand you cut up your credit cards
and you lived off the grid and you ate beans and rice and rice
and beans and drove a beater andpaid cash for everything, you're
starting all over. Or you were like me and you
filed bankruptcy and it wiped out everything.
(43:09):
Now you got to rebuild or COVID hit and you lost your business
and you defaulted and charged all the credit cards off and
lost the house and the cars. That happened to millions of
people, unfortunately. Well, the authorized user
program will Fast forward that where you can come to me and
(43:31):
say, hey, I need a, a $10,000 credit card that's been open for
at least 10 years. In about 72 hours, I'm going to
have that $10,000 credit card that had been open for 10 years
show up on your credit report. And now you have payment
history. You have credit cards that are
not maxed out. It's not new credit, and now you
have a long credit history. See how that plies?
(43:55):
Which brings me to the last thing, and that is credit mix.
That's the last of the five things that FICO does or looks
at when creating your credit score.
Credit mix. What is credit mix?
A mixture of your credit. FICO wants to see five things on
every single credit report in order to have the best FICO
(44:18):
scores. You don't have to have all 5 to
have a FICO credit score, but ifyou want to have a 800 or 8:50,
you got to have all five things.Here they are #1 and most
important. So the number one thing and most
important thing to have on your credit report at all times is a
(44:41):
minimum of three credit cards. I'm going to repeat that because
I want to make sure you really heard that.
The most important thing for youto have on your credit report in
order to have the maximum creditscore, it's three credit cards.
I prefer that you would have 4 in this order.
(45:04):
American Express, Discover, MasterCard and Visa have one of
the four. Not all Visas, not all
Discovers, not all American Express have one of each
American Express, a Discover, a MasterCard and a Visa, but a
minimum of three. That's the first thing of the
(45:26):
credit mix, the 10% or 55 points.
The next thing they want to see is a installment loan.
What's an installment loan? That was a motorcycle loan.
Like my daughter just bought a motorcycle over the weekend.
She listen to me, she financed it.
She kind of, She could have paidcash, but why would you pay cash
when interest is only 4% and inflation was at 15?
(45:48):
Now I know inflation is not fixed.
It's now come down. Now that sleepy Joe's out,
inflation's kind of neutralized or balanced out, if you will.
But again, I like to use debt when you can if it's a low
interest rate. Now, if the loan on that
motorcycle is 1214%, I said absolutely not.
(46:09):
But I think she got it at 3.9%. She can now use that money
instead of paying cash for her $5000 motorcycle.
She could now invest it, do a lot better in the stock market
than 3.9% and then just make thepayments because after all, it
builds her credit up. Later on.
I'll teach you how you can get the loan and pay no interest or
(46:32):
very, very little interest. So they want to see an
installment loan on your credit.They also want to see a mortgage
if possible. So they want to see at least
three credit cards. They want to see at least one
installment loan and then a mortgage.
Now, do you remember in the beginning when I was talking
about the house that I bought in2021, how many points I got?
(46:53):
Do you remember what I said? It's 25 points.
That was it. So when I got my mortgage,
because I'd already had a house before, I sold it, and then Fast
forward two years, bought a new house, and my score went up 25
points. See, when the mortgage was sold
(47:14):
and I closed the previous Lake Tahoe house, my score went down
by 25 points. When I got the Idaho house, my
score went back up 25 points. It's not the end of the world.
See, you can have credit scores in the 8 hundreds without a
mortgage and without a Stallman loan, but you will never ever
(47:38):
ever ever have an 800 plus credit score without credit
cards. It is impossible.
Why? Because 80% of your credit
score, like I've been telling you for the last now 47 minutes
is credit cards. They are the most important
thing. So when Dave Ramsey says cut up
your credit cards, close them. Use cash, use the envelope
(48:00):
system, use your debit card. It's the absolute worst advice
when it comes to credit. Now listen, if you are a
credaholic and you cannot be trusted with credit and you want
to become debt free so you eventually become financially
free, then stop using the creditcards, but don't close them.
(48:25):
Please do not close them becauseif you close them, it will
destroy your credit score because you're going to start
losing the payment history, you're going to lose the amounts
owed, you're going to lose the length of credit history and
you're going to lose the mix. And now you end up with bad
credit again. And when you have bad credit,
(48:46):
you pay more for everything. Did I say everything?
Yes, I said everything. Gas, groceries, electricity,
your car insurance, your life insurance, your home owner's
insurance, your renter's insurance.
Everything costs more if you have poor credit, and here's
(49:08):
why. Your insurance company pulls
your credit at least twice a month.
I mean, twice a year, sometimes once a month, but at least twice
a year to check you actually have a insurance credit score.
If you sign up at creditmojo.comfor credit monitoring, you can
click on different types of scores.
There's different scores. There's bankruptcy scores,
there's mortgage scores, there'scar loan scores, there's credit
(49:30):
card scores, there's recreation vehicle scores, and there's
insurance scores. There's even life insurance
scores, homeowners insurance scores.
Why would why would an insurancecompany care about what your
credit score is? What?
What is your credit score? Again, what?
Remember, it's the likelihood ofyou paying your bills on time
(49:51):
over the next two years. That's all it is.
But it's more than that. See, what the insurance
companies have figured out is ifsomeone has a poor credit score,
they're more likely to have an insurance claim and therefore
you pay more for car insurance. If you have poor credit, pay
(50:15):
more for life insurance. If you have poor credit, you pay
more for your mortgage, the insurance, the property, the
home owner insurance. You pay more.
Why? Because people with poor credit
are more likely to have a claim.Now, some of it, not all of it.
Some of it's because they're more likely to commit fraud.
(50:36):
The other side of it is because they're distracted, they're
stressed out, they're sleep deprived, they're struggling
financially. I'll give you an example.
You got 2 employees. One is getting harassed
constantly by debt collectors, can't pay his bills, ites with
(50:56):
his wife, lost his car and got repo.
You got the other employee. There's just smooth sailing.
His finances are all under control.
Credit cards are paid off, car loans paid off, mortgage is paid
on time. It's got a little bit of money
in the bank for savings. Who's the better employee?
The guy with good credit. This is why 76% of employers
(51:20):
look at credit now. They're not supposed to look at
scores, but most people don't know the difference.
They don't know how to read a credit report without looking at
scores. Back to the insurance.
You got a driver. One's getting texted constantly
like I was earlier because I didn't turn off the damn thing
on my computer, Turn it off on my phone, forgot it on the
computer. They're getting texted
(51:43):
constantly. They're getting called by
collection companies. They're not sleeping at night
'cause they're stressed out. They're fighting with their
spouse. They're worried about their job
because they're so tired. They're not doing a good job.
Who's more likely to have a car accident?
The person is stressed out, sleep deprived.
(52:05):
The person is just enjoying life.
The person is stressed out, right?
So this, the insurance companiesknow this, and so they base how
much you pay on your credit score.
And what about electricity, cellphone, gasoline?
How does that apply? Here's how.
If you and I pulled up the gas station at the same time, then
(52:30):
we both got $20 worth of gasoline.
Gas is $4.00 a gallon. That's just for easy math.
For me, gas is $4.00 a gallon. You get 20 gallons, I get 20
gallons, $4.00 a gallon. How much does that cost?
80 bucks. Now if you pay cash, it's $80.
(52:51):
You paycheck it's 80 bucks, pay debit card, 80 bucks.
But I'm not going to use cash, debit or cheque.
I'm going to pay with a credit card where I get 5% cash back.
So now instead of me paying $4.00 a gallon, I'm paying $3.80
a gallon. I've seen people in lines at
(53:15):
Costco that are an hour long to save 10-15 cents.
What about the $0.20 they're throwing away by not having good
credit? Now you might say, well, it's
only $0.20, it's not that big ofa deal.
It is over a year or a decade ora lifetime.
(53:36):
It's a lot of money. What if you're a truck driver
and you're spending 10s of thousands or you're like my
friend Ed Mylette that spends over a million a year on fuel
for his jet and he if he paid with a debit card $1,000,000, a
(53:56):
5% cash back, that's $50,000. Everything costs more, my
friend, if you have poor credit,everything.
So if you want to become wealthy, if you want to become
financially free, then the firstthing you need to start focusing
on is maximizing your credit. And that's one of the first
(54:20):
thing I teach. I teach how to maximize credit,
minimize taxes and multiply assets.
So focus on maximizing your personal and your business
credit. I'll talk about business credit
later on some other episodes, but for now, maximize your
personal credit. So to recap, you need at least
(54:40):
three credit cards open at all times.
Later on, I'll do an episode of how to manage those credit
cards, how to know when to pay them off, how much money you
just spend. But just for now, if you don't
have at least three credit cards, you need to make your
mind up that in a while you're going to learn how to maximize
your credit score a little bit more so you can get better
(55:01):
credit cards. But you need three credit cards.
Now, if you have family friends that could put you on their
credit cards, I recommend that you reach out to them.
Just say, hey, I'm listening to this crazy bald guy on YouTube
and he says I need three credit cards.
And if you put me on your creditcard, it really helped me out.
(55:22):
They don't have to give you the credit card.
In fact, a lot of these banks won't even issue the credit
card. So there's nothing you can do.
It's kind of like, imagine this,I'm flying to Houston next week.
Imagine if you're my Uber driver, because I will be
getting an Uber or shuttle van, whatever.
(55:43):
Does my driving record affect the Uber driver's insurance
rates? Nope.
Am I responsible for the maintenance, the insurance, the
gasoline, the loan payments on the Uber car?
No, it's totally separate. But am I benefiting from the
(56:03):
Uber driver? Yes.
Now if the Uber driver got in anaccident, that could hurt me.
Whereas if someone, if they added you their credit card and
they miss a payment, it could hurt you.
But that's easy to fix. But generally speaking, if
someone puts you on their creditas an authorized user, it
doesn't affect them at all. You just get all the benefit.
(56:24):
Just like when I get in that Escalade for the Uber, I benefit
from the car. I don't have to pay anything
outside of what I paid for the Uber ride.
Just like with the authorized user, you simply just pay for
the authorized user. You don't have to make the
payments on the card or the annual fee or any of that.
(56:44):
So if you don't have at least three credit cards and you have
family members that have great credit, go to them.
The other thing you should do ifyou're married or have a
significant other partner, put each other on your credit cards
as authorized users, Put your kids on your credit cards as
authorized users, your grandkids, brothers, sisters,
(57:04):
aunts, uncles, whatever doesn't cost you anything, doesn't hurt
you, doesn't affect your credit score unless you give them a
credit card and then they go outand Max out.
So don't give them a credit card.
It will still report even if there's no physical card issued.
So those are the five things that Fico's looking at when
creating your credit score. Payment history, amounts owed,
(57:29):
new credit, length of credit andcredit mix.
You need at least three credit cards on your credit at all
times. It's going to take you 10 years
to get to 820 years to get 850 unless you do authorized users.
And then you can speed that up because if you get 3 authorized
user accounts that are 20 years old, you now have 20 years of
(57:51):
credit history on your credit report.
If you need some help with your credit, you can always go to
credit mojo dot AI. That's credit mojo dot AI.
If you just want credit monitoring, go to
creditmojo.com. If you like the show, please
give me a thumbs up and share itwith a loved one.
Share it on your social media. Appreciate it.
And if you're watching this on YouTube, ask your questions, put
(58:12):
in some comments, want to engagewith you.
All right, have a good day.
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