BiggerPockets Money Podcast - 515: How I Paid Off $150K in Debt and the 5 Factors That Boost Your Credit Score

Episode Date: March 29, 2024

Want to know how to get out of debt for good? It’s not as easy as it sounds! The more you chip away at that number, the harder it becomes to resist frivolous spending. But by fostering a healthy money mindset, building credit, and using credit cards the right way, you can stay out of the red! Welcome back to the BiggerPockets Money podcast! Ashley is a business owner and rental property investor who is well on her way to financial independence. But only a few years ago, she had racked up tens of thousands of dollars in debt on not one, not two, but THREE occasions. In this episode, she shares why she struggled to break free from the snare of consumer debt and why a drastic mindset shift was needed to climb out of a $150,000 hole. Ashley also takes a deep dive into credit history and touches on each of the five factors that impact your credit score. Along the way, she offers several personal finance tips that will help you pay off debt and raise your score—such as “tiering down” from credit cards you no longer use, increasing your credit age with one simple hack, and striking the perfect mix of credit accounts. Finally, how important is credit? Is it a trap to avoid or a necessary evil that can help propel you toward financial freedom? Stick around to find out! In This Episode We Cover How Ashley paid off over $150,000 of debt in just a few years Why sixty-five percent of your credit score is within YOUR control Common methods of paying down debt and which one to use When to keep your old credit cards open (and when to close them instead!) The credit card “hack” you can use to make your credit age appear longer Revolving credit versus installment loans (and why you should have both) And So Much More! Links from the Show BiggerPockets Money Facebook Group Network with Other Investors on The Path to FIRE Through the BiggerPockets Forums Finance Review Guest Onboarding Join BiggerPockets for FREE Mindy on BiggerPockets Scott on BiggePockets Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! Find an Investor-Friendly Agent in Your Area Find Investor-Friendly Lenders How to “Travel Hack” Like a Pro and Get FREE Flights, Hotel Stays, and More! w/Eli Facenda The Secret to Saving More, Spending Less, and a Perfect Credit Score How to Pay Off Credit Card Debt FAST ($30K+ in 1 Year!) How to Pull Yourself Out of Car, Student, or Credit Card Debt Learn more about your ad choices. Visit megaphone.fm/adchoices

Today we're talking about credit card debt. Credit card debt accounts for a whopping $1.1 trillion dollars here in the U.S. That's trillion with a T. So I'm sure many of our listeners, like most Americans, are using credit, but maybe aren't using it to their advantage. That's right, Mindy. A lot of folks are misusing credit. So on today's episode, we're going to talk to Ash All About Money, who has a massive TikTok platform teaching folks how to get out of credit card debt and increase their credit scores. So stick around because today's episode is meant to serve as a comprehensive foundational crash course on the factors that make up your credit score. We want you to come out of this episode understanding the concrete steps to take so that you are in the habit of practicing

good credit hygiene. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen, and today I'd like to give some credit to my co-host, Scott Trench. On a scale of 1 to 10, Scott, you're in 850. Thanks, Mindy. I'll give you a high score for that particular intro. All right, we're here to make financial independence less scary, less just for somebody else, to introduce you to every money story and every part of personal finance because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting, or how much debt you have. Ashley, from Ash, about money. Welcome to the Bigger Puckets Money podcast. I am so excited to talk to you today. Thank you. I'm so

excited to be here. So Ashley, you started making videos about debt and credit because you were on a journey to get out of debt. First, thank you so very much because this journey can feel like such a solitary endeavor. And, you know, oh, I'm in debt. I'm embarrassed by it. I'm not going to talk to anybody else about it. And it turns out that, yeah, you're not special. Everybody's in debt. everybody is trying to get out of debt. So let's talk about your journey to get out of debt. So I actually got out of or was getting out of debt twice, two other times. And I was doing it really restrictive. And that worked while I was paying off debt. But then once I got the debt paid off, I went crazy celebrating afterwards. So I found myself in debt for a third time. And then I decided that

I needed to change the way that I was managing money. And I started to understand that using credit cards, that wasn't supposed to be an extension of our income. That really helped. And I feel like I actually have a handle on at this time because I'm still spending some, but I'm also, you know, trying to pay down the debt. So I'm being careful of what I'm spending, but budgeting and planning what I'm going to put on my credit cards instead of just going crazy. So could we go back in time to the first time? How did you rack up all the debt and how did you pay it off the first time?

Can you tell us a little bit about that story, the ins and outs? The first time was I was just young and I wasn't making a lot of money. and I had eventually started a business. So that was a lot of the debt. But then even in the business, I wasn't making a lot of money the first couple years. And then when I started making good money was when COVID hit. And then I had to take three months off and pay expenses. And I also have renters who weren't able to pay because they weren't working. So that was the first time. And then I went to buy a house. So I decided I was going to pay everything down. I did good. I bought the house. I celebrated. So let's let's unpack this a little bit. How much debt did you write?

So you have renters, but you didn't know in a house. Were these roommates basically on your lease that weren't paying you? No. So I had, I rented out a business space for my business and I also rented out the back half of it and they were renting from me. And then I had my primary residence before I bought the second house, which was the one that was during that year of COVID. But like I said, having three months off, I think the amount was only like only $40,000 that time. So it was much more the third time. And the higher my income got, the higher the debt amount got without me managing the money. So that was trouble.

So what was your business at this point in time? I do permanent hair removal. So a lot of people, it's like skincare type stuff, really, but permanent hair removal, electrolysis is what I do. Okay. So we have a business permanent hair removal. It's going pretty well. It just sounds like you're earning a good income, fluctuating, but good income.

you rack up a ton of debt, and that's compounded by the fact that the people you're sub-leasing your office space to stop paying, and then you go through a cycle of getting serious about paying it off. You pay off $40,000 in debt the first time. What was it like paying that off and how long did that take to pay it off the first time? I didn't pay it completely off, but I had paid it way down to where my credit score was happy for the mortgage and things like that. So I was very close to having it paid off. But like I said, I started celebrating. I celebrated the fact that. that we got the new house and all those things. So tell us about the celebration. What were some of the goodies we got for the new house at this point in time? Well, it was really just me saying I can

spend money again. Like I said, I had this mode of either being super restrictive or super spender. And there was no in between. I was really good at being restrictive, but only for that short amount of time because I would do it within a matter of months, pay down the debt. But after it was over, I was like, okay, I can spend again. And like I said, I just, didn't understand that the credit cards shouldn't be used as an extension or any kind of credit shouldn't be used as an extension of the income. And I think that's where a lot of people get messed up with credit cards is they use their whole paycheck and they're also using their credit cards. So that 100% was my problem. Luckily, I've learned the lesson after the third time.

So, so let's get let's let's let's let's let's feel here. I would love to hear the whole story because this is fascinating. And I think it's so important to the rest of what we're going to talk about today, how much did we end up racking up for time number two? If time number one was 40,000, what was time number two? The second time, I think, was 60,000. And I honestly have no idea where, I can't even remember now what the debt was. But same thing with that. I was going to buy another property, so I needed to pay it back down. So I did that quickly. And then again, same thing, the third time. Was this another primary residence? No, this was. So I had the, original house that we were living in. Then we bought another house to live in. That one stayed as a

rental, the current house that I had. And then the third property was the business property that I was first renting. And I told the guy, you know, if you ever want to sell this, let me know. And I'd like to buy it. Awesome. So what was the lifestyle change like going from racking up 60,000 in debt to paying it off? What were the, what was the difference in your day to day? Spending on everything versus spending on absolutely nothing. Like trying to spend $10 at the grocery store for dinner or it was a huge change because usually when I wanted something, I just bought it. And I pretty much had been like that my whole life.

I don't know where that comes from, but that's how I am. So I have frequently equated getting out of debt with losing weight. when you're on a diet or you want to lose weight, you know that you should eat whole vegetables, whole fruits, natural grains, yada, yada, yada. But those are also really boring. Who dreams of an apple? You dream of apple pie, which is a little bit different than an apple. So when you're in debt, you know that you're supposed to spend only on the basics and put all the extra money towards your debt and pay it down. But that's not fun either. That's like eating an apple. Okay, yeah, I'm supposed to, but I don't get any real joy out of it, except Scott. Scott loves apples, but you know,

Scott's a big weirdo. I love apples. So you know what you're supposed to be doing, but what happens in reality is that, oh, I had a small win. I'm going to go celebrate. Or I had, you know, what's one piece of apple pie? It's my birthday or I'm on vacation. Like, what's, what's, you know, I just bought a house. I need a new couch. It's just one couch. It's just one thing. And like, it starts to snowball. After the break, Ashley will walk us through the biggest and most important three factors that impact your credit score. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going. And more importantly, where your tax refund can make the biggest impact.

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At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leen or Stronger for Fitness, the anxious generation for parenting perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful is its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app.

If you're looking to turn everyday moments into real progress, Audible has been in indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP money. Welcome back to the Bigger Pockets Money podcast. We're talking to Ashley from Ash All About Money about how to tackle your credit score by changing your credit habits. You said you were in debt the first time 40,000, the second time 60,000.

I don't know if you didn't say or if I didn't catch how much debt the third time. The third time, it was around 112,000. Part of that was another business investment that I knew another business investment that I knew that we were going to have to put money towards. So I included that in that number. So the debt itself actually wasn't quite that high, but it was close. What was the business investment? A dispensary. So a lot of cash has to go into that.

How long did it take you to pay off the $40,000 the first time? Maybe five or six months. And then the 60,000 the second time. Probably about the same. And then how about this last one? And the last one, it's been nine months. So it started, let's say it at the 112. It's down to about 60.

So I'm hoping to have that paid off by the end of the year. Fantastic. That's awesome. It's not really awesome. Well, it's an awesome amount of progress that you made in nine months. You paid off 60 grand in debt. Right. It is great progress.

I'm happy that I learned the lesson. Like you said, it is very simple. to weight loss, but you can have dessert sometimes. You just can't have it all the time. And it's the same with spending. And I'm really happy that I was able to find a balance now between I'm still spending, but I'm also still paying off my debt. So finding the balance was nice rather than having the two super spender and super restrictive because that didn't work for me. You know, I said you're not alone in your debt journey. You're not alone in this as well. It's not like you're the only person and whoever got out of debt and then fell back into it. That's a really common cycle.

And like the weight loss, it takes lifestyle changes that you have to maintain over a period of time to get where you want to be and stay where you want to be instead of the up, down, roller coaster. So the lifestyle changes are huge. And I think once I realized that as well, that was a big part of, okay, you know, let's get this debt paid off and then work towards the financial independence part of things. So you use the word financial. independence, was that a motivating factor at any point in this debt cycle? And when did it become a motivating factor? When did it become a goal? So that's always been my motivating factor. And I just couldn't understand why do I keep ending up in these messes of debt. So that was what

really made me take a hard look. And luckily, I have the real estate where my net worth is still positive. So I always felt comfortable. And that's another thing. I could just sell one of my other properties to get out of this debt. But that would be taking the easy way, which would open me back up to the celebration and the spending and I'm not learning any lessons if I do it that way, which I've done that with personal loans too. Okay, I'm going to take out this personal loan, pay off my credit cards. Yay, my cards are paid off. I'm going to go spend some money. It just doesn't. I don't want to take the easy way anymore. I want to do it. I want to do it the right way. And so that's what we're doing. But yes, the overall goal is financial independence. Love it. So what's going to be different this time

when to get the, in terms of your approach to knocking out the remaining $60,000 in debt and what you're going to do afterwards? Well, like I said, I'm just really continuing to spend, but very carefully. And I now budget the things that I'm going to spend on my credit cards instead of just swiping them whenever I want to. So I basically only use my credit cards and then whatever money I have in my bank account, I don't touch that. And then I pay that towards the credit cards plus the extra to get the balances down. So I'm being responsible with the credit cards, which I've always pretty much used the cards, but like I said, I'm planning more now what I'm going to put on them. So if I want to buy something a larger purchase, then I will plan for that.

And I know which credit card is going on and how much I'm going to have to pay back or pay more extra to the following month by doing that. And I think that your content that you do on TikTok, you realize that this credit card situation was something that confused a lot of people. What were some of the things, like this is not just you. This is a lot of people that are confused by this. Can you tell us what some gaps are in people's knowledge around this stuff? When I started posting, so I knew my cards were maxed out and I knew that I knew how to

improve my credit score while I was paying those cards down. So I started posting the credit card balance, the amount I was going to pay the due date, the statement date and things like that. And then there was just a lot of questions specifically around the statement date because people didn't understand that at all. and then they didn't understand how to monitor their credit or where to check it or how often they can check it. Does it ding them if they check it? There was just so many questions around credit cards and credit scores. And I'm like, hey, I know this information. And that was another reason that I kind of started to post it was because when I got out of debt that first time or, you know, younger trying to look up information about credit cards, I could never find the information that I wanted as far as increasing my credit score and what would be best. Like if I do this, then this is probably going to happen with my score. And I was never able to find that. So I knew how to do those things. So I'm like, I'm going to show other people because I know this will help. Okay, let's talk about

credit scores and credit cards. Can you break down for us what goes into a credit score? So the credit score is five different factors. The payment history, credit utilization, credit age, credit mix, new credit. And what do each of those mean? Let's talk about payment history. So payment history makes up 35% of our credit score and that's the amount of on-time payments we have. So if we miss any payments, that's where those are going to show. And it's super important to always make on-time payments. I've also made that mistake before, too. When I was getting my very first mortgage, they asked me about some, like one late payment that I got like, I don't know, it was like three or four years beforehand. I was like, I'm supposed to remember that? I don't even remember what I had for breakfast.

Yep. I had, I got in a car accident and they said, So the car accident was 2016. I think I made three late payments, but one of them was on a mortgage. And when I went to get the mortgage in 2020, they said, what was that late payment from 2016? And, you know, it's easy to explain. I was in a car accident and I didn't have the money. And that's all that was. But they don't like it.

So how are you teaching people to use their payment history to their advantage? Well, if they've been making on-time payments, they obviously want to continue to make on-time payments. but if they have late payments on their report, they just need to continue to now make those on-time payments because eventually over time, those late payments have less of an impact, and their scores will eventually recover from that and they'll eventually fall off of their credit too. What counts as an on-time payment? Sometimes you can pay the minimum, you can pay more than the amount due. How do I, what are the rules around how much I have to pay to get full marks here?

To make the on-time payment, you have to make the minimum payment by the due date. But a lot of people don't know, too. If you miss the due date, say that your payment was due on the first and you forgot about it until the third or the fourth. And you realize, oh, shoot, I didn't make that payment. You usually have 30 days with the creditors before it's reported to the credit bureau as being late. Now, in my head, I've been in these bad financial situations before. Instead of saying 30, I say 28 days just to give myself that extra two-day buffer. if I do have to make a late payment or if I plan to make something late at least 28 days

after the payment was new, you need to make the payment. But it's technically 30 days for most creditors. So the different, on my, on, and another part of it that confuses some people is when I look at my credit card statement and my credit card balance, those are different numbers. Can you walk us through the difference between those two items and why that might confuse people and which one to pay? Right. So we have a statement balance. We have a current balance and then we have the minimum amount due. So we always have to at least make the minimum amount due if we don't want the late fees or that late payment reported on our credit report. But then the statement balance is the balance from the end of the last billing cycle. So whenever the last statement closed, that balance is

what our statement balance is. And we have to pay that if we don't want to be charged any interest on our credit cards. And then the current balance is the statement balance plus or minus any charges that we've made in the current billing cycle. Yeah, it's confusing. It's a language you got to learn if you want to feed in this thing. Right. And those details are the things that people don't always understand. A lot of people don't even realize that there's two different balances because they just look at the current balance. They don't really look at their statement too much to see that there's a statement balance. And if they do see it, they may not know what it means. So let's walk through the next factor in your credit score, which is credit you don't.

Can you define credit utilization and tell us what it is? Credit utilization is the amount of the available credit that we are using. And that makes up 30% of our credit scores. And the reason that I talk about utilization so much is because we have a lot of control over the utilization on our credit cards. So if we're looking to improve our credit score, that's one of the easiest places for us to start because it's the simplest for us to fix. You can't really get rid of late payments.

You can't always make your credit age longer. you can pay down your credit cards to have a lower utilization rating to improve your credit score. So, Ashley, you have a lot of information out there about credit utilization. Let's start off with what percentage do you recommend to stay under when you're trying to either keep your good credit score or raise your credit score? So most of the time you'll hear stay at 30% or under, which if you're at 10 to 29% utilization, that's considered good as far as the ratings on utilization go. but if you're at zero to nine percent, that's considered excellent.

So usually for like if you're going to get a mortgage or something, under 30 percent is going to be acceptable to the lenders, which I think is where that comes from. But if you want to have the best credit score, you want your utilization to be as low as you can get it. But ideally in that zero to nine percent range. Then why do they give us such high credit scores or credit limits if they don't want us to use it? They should give us higher ones.

That's so frustrating. Okay. you have a credit utilization chart that someone can use on their journey of paying off credit card debt. Can you explain that to our listeners? Yeah. So I made the credit utilization chart because, like I said, when I was trying to figure out how to improve my credit score, I was reading a lot on credit utilization. But it also breaks down the balances, especially if you have maxed out credit cards. It's a lot easier to break the balances down into smaller goal balances along the way of paying off the card completely because you see the progress you're making.

you can still celebrate those small wins along the way while your balance is going down. So it kind of just gives you like hurdles as you're going, you know, okay, I got the first one down. Now I'm going to the next stage of the utilization. But it does help you with progress, I think, just to see you had a goal. You made the goal. Now you move on to the next goal, even though the overall goal is not done yet, but you're still making progress along the way. That sounds a lot like the debt snowball, the Dave Ramsey method of like paying your small one and then your next one. Are you debt snowball or debt avalanche? I actually don't do either. I pay

all of my cards down at the same time. I have done the snowball before and the problem that I found with snowball was it was really easy for me to pay off the lower cards, but I was always stuck with that high balance on the highest card at the end. And that was the hardest for me to get down. So I would rather almost start with the highest one first. But I do. I kind of pay them all down. I probably do a combination of snowball because the cards that have lower limits are obviously easier to pay down the utilization on those. So a lot of times if I have a couple hundred dollars and that will change the utilization, I'll put it towards the lowest card, but still continue to make sure that those higher card balances are coming down at the same time. Yeah. At the end of the day, it comes down to

you will eventually have to pay off that large amount. I prefer the avalanche because mathematically it's a better choice, but I understand the snowball because you get those small. You're wins and that can help you, you know, propel you forward. Oh, I've got $30,000 on my credit card and I paid down $100. Yay. It's so easy to get discouraged. It works well for some people. And I always say that people should do whatever method they feel like works best for them. And whichever method they can stick to is the method that is best for them. So I mean, I would stick to the snowball for a period of time. I've never tried the avalanche just because I thought snowball was easier, but I ultimately didn't stick to that either because those larger cards never got paid off. But people really have to

find what works best for them and do what works best for them in their situation because what motivates me may not motivate other people. And some people, they like to kind of argue in my comments that it doesn't matter what our credit score is. Well, it does if that's what motivates you, you know, So it just depends on what you're motivated by. And some people aren't motivated by a credit score. And that's totally fine. So they can do it a different way that they prefer. But I know a lot of people that are motivated by the credit score.

So let's talk about that for a second here. There's some games we can play here around debt, right, and how we pay off things. So there's the debt avalanche, debt snowball. But there's also, if I want to boost my credit score, at least temporarily, I can pay down something that's close to my credit limit, for example, instead of paying down my car load, for example. Can you explain, maybe give us a framework on thinking about that and maybe help us understand also. There's another layer, I think, that you've talked about how there's a difference between credit due date and the statement date. And knowing that difference in playing games there

can help you with your credit utilization, I believe. So our statement dates are the dates that our cards report to the credit bureau. So we always want to keep our credit card balances low on those dates. So the statement date is usually three to five-ish days after the due date. So what I try to do is make the payment on the due date and then I won't make any more spend any more on the credit cards until after the statement closes. That way it reports at that lower balance, whatever I had paid a couple days previous. And then other certain things show utilization like our credit cards and lines of credit will show utilization, but our mortgages, our car loans, personal loans, those don't show utilization. So you're right there. If you're wanting to improve your credit score, you really should

focus on credit cards or revolving accounts that are showing utilization first. Well, I love it. These are some awesome tips on how to handle these first two items. Okay, so you just said that payment history is 35% of your score and credit utilization is 30%. So fully 65% of your score is absolutely under your control. You control if you make your payments on time. And look, like I said, I have had a late payment in my past. It's so easy to just not pay it on time. But if you've got the funds in your account and you really should not be spending more, but that's a different story.

If you've got the funds in your account and you know you're bad at making payments on time, automate it. Right there, 35% of your score is under your control because you're not leaving it to chance. Your bank can set this up. And back when I had my late payment, this is before. online banking before, barely before the internet. So it was a lot, I don't want to say harder because how hard is it to write a check and mail it in? It's not that difficult. Come on, I'm an adult. But there's so many other things going on in your life that it's easy to forget. So your credit

utilization, the amount of credit that you have available to you, don't charge up your cards all the way. Two factors makes up more than half, almost two thirds of your credit score. The other ones. Right. And those are both the high impact factors. to our scores, and then another one is medium, and then we have too low impact. But if anything to focus on, it's definitely payment history and credit utilization 100%. All right, we're going on a quick break. When we're back, Ashley from Ash All About Money will tell us how to monitor and keep track of your credit while you're paying back large sums of credit card debt. Tax season is one of the only times all year when most people actually look at their full

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slash money-free. In communities across Canada, hourly Amazon employees, earn an average of over $24.50 an hour. Employees also have the opportunity to grow their skills and their paycheck by enrolling in free skills training programs for in-demand fields like software development and information technology. Learn more at aboutamazon.ca. Welcome back to the show. Let's move on to the third factor here, which is your credit length. Can you explain what this is and how that impacts your score? The credit length is the age of the time that we've had our credit accounts. So if we have two accounts,

one that's 10 years old and one that we opened yesterday, the average of those times would be five years. So if you have multiple accounts, it's just going to average out. And you don't want to open too many new accounts at one time because it will hurt that credit age. Awesome. So we should be wary of the travel hacking tips that we gave in a recent interview here. And if we open too many credit cards and don't have enough older accounts that can impact our credit score. How impactful is this and any tricks when I'm thinking about the next line of credit? The credit age is 15% of our credit score and you can make the credit age longer if you become an authorized user on someone else's account. So if you have a parent, a friend, anyone that has good credit and they are responsible

with their credit, maybe they have a card that they've had for 15 or 20 years, you can be added as an authorized user on their account and it will make your credit age look longer. Now, this doesn't always work because some accounts, I believe American Express is like this. If you get added as an authorized user on an American Express card, it won't transfer over the amount of time that that person had that card. It'll start out as a new card to you. I had that happen once. Oh, that's a good tip. So it sounds like I shouldn't be closing out my credit cards. I should just keep them forever. And I do actually have one that I opened like 35 years ago that I have kept open because I've had it for so long and every once in a blue moon, I'll charge something on it. Is there any case that it

makes sense to close out a card? Suggest people don't just because of the credit age factor. I mean, if you really dislike a card, you can. But a lot of reasons that people want to close a card is because maybe it has an annual fee or something like that and they feel like they're not getting the full benefits out of what the fee is. So if they call their credit card, company and say, can I downgrade this card to a lower tier card that doesn't have an annual fee? That's kind of a way to get around it. If they did want to close that card just because of the fee, they could just downgrade to a lower tier card that doesn't have a fee.

That is a great tip. I've never heard that tip before. I love that. Well, let's move on to the next category here, which is new credit. What is that and how does that factor into your score? And why is it different than credit length history? So new credit is the amount of new accounts that we've opened within a certain period of time. six to 12 months or so. It makes up 10% of our credit score. And you don't, again, don't want to open

too many new accounts at one time because the credit, creditors don't like to see you open a lot of new credit accounts at once because they see that you could possibly be a risk. Like, why were you opening all those accounts a couple months ago? So if you just open one or two, if you need to wait six months or so, do more, then it's better to do it like that than opening five at once. How do I, like, what is a tactical approach to opening up new credit if I'm a beginner here? And how do I go about this in a way that doesn't spook the credit companies and hurt my score too much? Because I do have to open some new stuff in order to begin building credit history. So if you're new to credit, I would open one or two accounts to start with,

start using those cards or accounts responsibly. And then after a couple months, when you see your credit score start to increase, you have a little bit of credit history there, then go in and apply for another one after that. but don't do 10 in a day or 10 in a month, you know, do one or two, wait three to six months, do a couple more and then just continue adding from there. Okay, let's talk about secured cards. If somebody has really bad credit and just cannot get a traditional credit card, they can only get a secured card.

How long should they wait before trying, once they have the secured card, before trying to get a more traditional credit card? It's kind of the same as a new credit user where if they have bad credit, they get the secured card. And those, they don't always get approved for those either. But once they get that card, if they get it, then they would be responsible with that credit. And then their credit score will start to increase.

So same thing. I would probably wait a couple months before applying for another card. And one card that is, it's not really a good card. But Credit One Bank has a card that is helpful for rebuilding. And all credit cards can be helpful for rebuilding. but this one specifically because it does approve lower credit scores. So if people starting with those lower credit scores, some people have not been approved for a secured card, but they were able to get that credit one card. Like I said, it's not the best card, but it does the drop, the job of, you know,

helping to at least get you access to credit that you can be responsible with. Can you be turned down for a secured card? Yeah, I think so. It depends on, I guess, income and other things too, but I've heard of people not being able to get secured cards. The last factor is credit mix. What does this mean? Credit mix is the different type of credit accounts that we have. So like I said earlier, credit cards are different than a car loan or a mortgage. So you want to have multiple different types of credit accounts.

The banks like to see that because they want to see that you're responsible with more than one kind of credit card. it's a lot easier to be responsible with a mortgage than it is to be responsible with a credit card because the mortgage, you just make the payment and you can't spend back on it. So they want to see you being responsible with an available credit limit on maybe a credit card or a line of credit. So what is the difference between revolving credit and a line of credit? Revolving credit, well, there's revolving credit and then there's installment loans. So the revolving credit is the line of credit, like a home equity line of credit, and then our credit cards. and then installment loans are things like car loans, personal loans, mortgages.

And with the revolving accounts, you can continuously borrow back from them, whereas the mortgages and the car loans, you get the loan one time and you pay off the loan, you're not able to borrow back from that loan. So that's the difference between the two. Should we have both with regards to our credit score? Yeah, it shows that good credit mix, which is what banks want to see. The more credit accounts you have, I think with the ratings for the credit mix, they want you to have many accounts. I think even up to 10 is still in the needs work or not great category.

So they want you to have a lot of different types of credit accounts or just a lot of accounts, period. If you look in credit karma, this category says total accounts. So the more accounts you have, the better it looks on your credit score. That was a great breakdown of the areas here that impact credit and a lot of great tips. How does someone keep track of all of their stuff related to their credit score? How do I check my credit score and how do I keep track of it? So I really like to use credit karma and I know some people will say don't use credit karma because credit karma report or shows us a vantage score whereas most lenders are pulling the FICO scores. But credit karma shows our credit factors amazing. Anything you want to know, if you go into credit karma and click on one of

those credit factors, you can see exactly what's going on pretty much all the time with your credit. So for me, that's the best place to look as far as monitoring utilization and things like that. I've seen some of the other FICO scoring, you know, places that you can check. And they don't show quite as much information as credit karma. But then there's also my FICO that you can, it's like $40 a month to get all three bureaus. I think that's a good place too, but I still prefer personally credit karma for me. And it doesn't seem like any of the scores are 100% accurate because I've had the vantage score. score not be accurate, but I've also had FICO scores not be accurate and including the different

FICO scores from like my FICO. So I'm not sure that there's one that's going to be 100% accurate anyway, but as far as factors go, credit karma is the place to go for that. All right. One more question here. You know, for a Dave Ramsey follower, for example, Dave Ramsey has been, has said, I believe I'm quoting him accurately, that that credit scores are BS. You don't need them. And you should. live, strive to be completely debt-free. And, you know, after a certain point, if you live debt-free, you won't even have a credit score for that. What would you say to somebody with the kind of that mentality and aversion to debt and thinking of through the credit system here?

You know, I just, I hear it all the time. And Dave Ramsey does say credit score is an I love debt score. So, and his followers, they definitely are in the comments. But I mean, if that works for them, that's fine. And like I said, everybody has their own way. If you don't feel like you need a credit score and you can do it without one, I'm sure there's a way to do it. I've never tried it. I don't think I would suggest it just because it seems a lot easier to just have the credit score and be responsible with credit. And, you know, if you want to get a mortgage, you go to the bank and you get a mortgage, how we typically are used to going to the bank to getting a mortgage. I will say that as a real estate agent, I have never worked with somebody trying to get a mortgage with a zero

credit score. Having a zero credit score is much better than having a like 400 credit score. But it is so much easier to get a mortgage. And I hate this phrase, but when you're playing the game with the same pieces that everybody else is playing. So I respectfully disagree with Dave and his philosophy of having a zero credit score. It's not to say you can't do it. you're just adding a lot of pressure on top of yourself. And strictly from a mortgage perspective, if I am listing a house and somebody has a mortgage pre-approval from a regular mortgage company that I've heard of and somebody else has this, like I have a zero credit score, crazy mortgage, I know that the zero credit score is going

to be harder to get a mortgage. And I'm going to encourage my seller to go with the more traditional route. And it's it's not an I love debt score. I have an awesome credit score and I don't like debt at all. It's just I'm playing the game under the rules that have already been established. One last question that I have for you, Ashley. You are entitled to one copy of your credit report from each of the three credit reporting bureaus every year.

Do you recommend pulling all three at once or one every four months to more money? It depends on what's going on with your credit. If you see that there's an error somewhere on one of those credit reporting apps, then in that case, I would pull all three just to make sure that all three of them don't have the same error. But actually on annual credit report.com, when you check your credit reports now, ever since COVID, they started doing it where you can actually pull them weekly. So that's really nice. You don't have to wait the whole year anymore. And the last time, I haven't checked it recently, but the last time it was probably a month or so ago when I checked, you could actually pull it every single week if you needed to. So that was, that's really helpful, especially if you're going

to, you know, get a mortgage or something like that and you want to double check and make sure that everything on your credit report, not just your score, is accurate. I did not know that. That's awesome. That's awesome. Okay. Ashley, this has been so much fun and so eye-opening. Thank you so much for your time today. Where can be? people find you online. Ash All About Money on TikTok and on Instagram. Awesome. And we will of course include links to both of those in our show notes. Ashley, thank you, thank you. This was super fun. Thank you so much for having me. All right, Scott. That was Ash All About Money. And that was very eye-opening. I learned several things today, including downgrading to a lower card with no fee,

will keep your credit length of history without changing, with no longer charging you the annual fee, which I think is quite fascinating because I have had several cards that I have canceled due to the high fee instead of just asking for a downgrade. So thank you, Ash, for that great tip. I learned, Mindy, that a lot of folks, I think, are probably an Ashley's situation and penduluming back and forth between accumulating debt and paying it off. accumulating debt and paying it off. And that's a totally normal experience. And I thought it was a wonderful, wonderful that she shared that with us because I think that can be hard for a lot of people to talk about, that they continue to get into and out of debt, even after going through

what is surely a months or years of grind to pay off the first batch of debt. So just know that you're not alone if that's going on. And that, you know, yes, you need to buckle up and get this next pile of debt paid off to move on to a financial independence. But there's nothing to be. ashamed of, only a system to build that can propel you indefinitely towards your financial goals. Yes. And one mistake is not going to derail your entire financial future. So you hit a snag in the road, pick yourself up, dust off your knees, and keep moving forward. I really like that she shared her experiences with our listeners because sometimes it can be really difficult to relate to somebody when they don't have any problems. All right, Scott, should we get out of here?

Let's do it. That wraps up this episode of the Bigger Pockets of Money. podcast. He, of course, is the Scott Trench, and I am Mindy Jensen saying, goodbye, Firefly. If you enjoyed today's episode, please give us a five-star review on Spotify or Apple. And if you're looking for even more money content, feel free to visit our YouTube channel at YouTube.com slash Bigger Pockets Money. Bigger Pockets Money was created by Mindy Jensen and Scott Trench, produced by Kaelin Bennett, editing by Exodus Media, copywriting by Nate Weintraub. Lastly, a big thank you to the Bigger Pockets team for making the show possible.