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4 Financial Hacks You Need to Be Using NOW

4 Financial Hacks You Need to Be Using NOW

There are a lot of financial hacks out there that you probably don’t know.

No, I don’t mean robbing a bank, or stealing money. Although these are technically hacks, I don’t recommend committing crimes to make money. Unless…. no, totally kidding. It is never acceptable. (Please don’t do it.)

The sad thing is, it probably isn’t your fault that you don’t know them. School fails to teach us pretty much everything we SHOULD know about money.

But, that’s okay, because as your number one favorite personal finance writer (if I’m not, just lie to me, my ego really needs this) it is my job to teach you these things.

Check out these four finance hacks that are SO important to know, implement and start getting a better handle on your financial future today.

 

finance hacks for better money

 

 

1) Pay Off Your High-Interest Debt

 

One of the biggest mistakes you can make is letting yourself get overrun by high-interest debt. It can steal so much of your income that you might quickly find your budget is much tighter than you’re comfortable with.

It may very well be the case that you’re wondering how to stick to a solid budget in the first place when the math simply doesn’t work out!

 

Credit Card Debt

If you’re a chronic spender, I’m looking at you.

Sometimes high-interest debt (i.e. spending more than you earn and racking up credit card debt) can cost you so much, that you’re not able to even make payments on the things you NEED every month like water and electricity. I don’t know about you, but I definitely do not want to be in the position of deciding to keep the water on vs. keeping my credit accounts out of collections. Although, I’m choosing no water 9/10 times. Showering is overrated.

 

By eliminating your high-interest debt, you not only save money every month by getting rid of that interest sooner, but you are also freeing up cash that you can use on other things like investing.

 

You can begin investing or saving BEFORE you pay off your debt, but I highly recommend you get rid of high-interest debt first. You’ll be able to stretch the success of your savings or investments better, with more cash-in-hand to work with.

 

Auto Loans

These loans should be tackled after you get rid of your credit card debt.

Why? Tackling any high-interest debts that you owe should always be the first line of attack if you’re looking for cost-cutting hacks. Car loans tend to have much lower interest rates than credit cards (3-6% or so versus 20%+ for credit cards), which means that you’ll make a lot more headway by lowering the balances that accrue far more interest with each statement.

Once you’ve got those pesky credit card payments out of the way, if you’re smart, you’ll use those newfound money skills to put extra cash towards your auto loan each month. The money you’re no longer spending on credit card payoff is now money you can put towards getting out from under your car debt.

Student Loans & Mortgages

These kinds of debts may almost be considered “good debts” for two reasons:

1) They are expected to take 10-30 years to pay off, typically, so you’re not getting as much knock on your credit score if it takes you 8 years to pay off a 10-year student loan or 25 years to pay off a 30-year mortgage. Additionally, the age of the loan over time will definitely help boost your credit score.

2) They have lower interest rates than credit cards (if you chose good student loans, at least), so they won’t cost you as much money out of pocket, proportionately.

If it’s in the cards to get these types of debts knocked out quickly then, by all means, do so. Otherwise, don’t hesitate to work at these slowly, with minimum payments, and take advantage of the extra cash to boost your investments and savings before you shift focus to these.

 

 

2) Set Your Bills to Recurring

This is one of those money hacks that no one thinks much of, but it is still very useful to do.

Nowadays most companies allow you to set up recurring payments every month. By setting this up, you’re allowing yourself to make sure that you never miss a payment. No more worrying about late fees, missing payments or getting your account sent to collections. In doing this, you’ll have the comfort of knowing you’re good to go each month.

I also like to set up recurring payments because it helps you to be aware of when the money will come out and how much will come out at that time. Most credit card companies that offer recurring payments only require you to pay the minimum. I highly suggest editing the settings to ensure that you’re paying as much as possible toward your highest interest rate every month (see money hack #1)!

Want to know why else this is smart? You won’t have to pay for stamps anymore. As of January 2019, a Forever stamp costs $0.55. First grade math says that if you’re still mailing out 8 bills per month, you’re spending over $4 more per month than you need to!

 

3) Begin Investing

It probably sounds a bit like common sense, and maybe even a little silly to say, but one of the biggest financial skills you should have is to know how to invest and begin investing. If you do not owe any high-interest debt and have some disposable income, then there’s no reason why you can’t start investing today.

You don’t need $1,000 or even $100,000 to start investing. You can begin investing with as little as five dollars with apps like Acorns. I started using Acorns when I first graduated high school and wanted to start investing, but had a small income.

If you have a little more income or want to get started making bigger moves, investing with just $20 will get you up and running!

The reason it’s so important to begin investing is so that you can benefit from things like compound interest and dividend payouts. Check out this compound interest calculator from the U.S. Securities and Exchange Commission, to see how you can make your money work to reach your own investment goals. This allows you to grow the money that you have and build a more stable and secure financial future.

 

 

4) Reap the Rewards

My personal favorite finance hack, and in my opinion one of the most underrated, is getting cash back or rewards.

Credit Card Rewards

If you are someone who is able to use credit cards responsibly, then there is no reason why you should not be earning money every month just by paying for the things you need to pay for. For example, I use my Discover card to rack up cash back on all my qualifying purchases throughout the month. Since I make a point to pay off the balance when the statement comes each month, I pay no interest.

Credit card companies will often offer “bonus” rewards, such as 5% cashback bonuses on gas and other items or 3% back on dining out. You’re buying food and gassing up your car anyway…so if they’re willing to pay you to do it, then definitely take advantage of it!

This is also one of my favorite money saving budget hacks – when they issue the cash back, I make sure to take that money and put it straight into my Acorns account every month. This is such a simple money hack that doesn’t seem like a big deal, but it has grown my investing account by almost $300 per year for the last three years. How’s that for a no-brainer financial skill?

As life changes — you get married, have a family, etc — this simple finance hack will become one of your favorite hacks. Your expenses will increase with more mouths to feed, your cash back increases accordingly, and you’ve got even more to put into your investment account. Turns out kids aren’t just money sinkholes! When you’re ready for retirement I guarantee that extra investment amount will not be something you regret having done.

Think about this: $300 a year for 30 years is almost $9,000. If you could increase that to $600 per year, or $1200 per year, well…think of the possibilities! With compound interest, the resulting amount can grow exponentially. Don’t underestimate the power of reaping your rewards and investing them.

 

saving and investing money using cash back credit card rewards

Alternative Cash Back Methods

All that said, if you are someone who cannot use credit responsibly or does not trust yourself to have a credit card, there are definitely other, safer options out there for you.

For example, I have a cash back checking account with Discover that also allows me to earn cash back on all qualifying purchases every month. So don’t feel like it’s necessary to use credit for earning rewards like this! Some other options to consider are simply using cash back services for your everyday purchases, such as Ebates or Ibotta.

 

Bonus: Diversify Your Income

This is DEFINITELY not taught to us in school, ever.

Think about it – you go through grade school, get to high school and are told to start deciding what your career will be…then you’re shipped off to college to get the degree and encouraged to put ALL your focus into that ONE great job you’re trying to land once you graduate.

Simply put, having only one income is a recipe for disaster. Diversifying income (having more than one source of income), is absolutely one of the best financial life hacks you could ever implement.

The more sources of income you have, the better off your overall financial picture looks. If you could make even an extra $200 per month, outside of your regular full-time job, you could:

  • Pay down debts
  • Have extra cash for saving or investing
  • Save for a bigger future purchase or a vacation
  • Possibly meet ALL your financial obligations for the month, if your day-job income is less than your current expenses.

 

 

Final Thoughts on Financial Skills You NEED to Know

After reading through the finance hacks above, you’re probably thinking they’re fairly common sense.

Yet I’d bet that a lot of you reading this don’t even have those 4 hacks squared away yet, do you?

Take each finance hack that’s explained here and treat it as a to-do project of sorts — work on it, get it buttoned up and then add the next one into your finance game.

You’ll be sitting pretty and living your best life before you know it.

 

Not worried about money, but taking it easy and enjoying life.

 

Which of these finance hacks are you going to get started with today?

 

 

 

9 Financial Milestones to Complete Before 30

9 Financial Milestones to Complete Before 30

We all reach a point in our lives were we say “what the heck have I been doing with my life?”

 

The truth is, everyone goes through these crisis. It’s in our nature to wonder, could I have handled some things better? Could I have achieved more of my financial goals? Or more of my personal goals?

 

These thoughts are why I have comprised this list of things you can accomplish, no matter what age you are. Milestone that when completed you can see immediate results from that will impact your life.

 

Whether they cut down on stress, make you more financially stable, or just give you a little peace of mind. Completing these things should be on every person’s goal list.

 

 

 

1) Start saving up an emergency fund

 

I cannot tell you enough how important it is to begin saving for an emergency fund. When I initially moved out at 18 I spent every dollar I earned on silly things. I figured, I will make more money someday, and THEN I’ll start saving.

 

This is the worst mindset to have. Because the truth of the matter is, if you overspend on a low income, you most likely will continue to overspend on a high income.

 

That is why it’s best to begin to reverse this mindset wherever you are in your life RIGHT NOW.

 

The best way to do this is increase the amount you are saving. I like to use the popular phrase “pay yourself first.” This idea means that every time you receive a chunk of money, you first put a portion of the money away, to save, or invest.

 

This is a great way to jumpstart your savings. To accompany this method I also use my trusty Digit app.

 

I love the digit app because once you connect your bank account, the Digit app analyzes how you spend money and then automatically transfers money you don’t need to your savings. And the best part is you never even know it’s gone!

 

Digit is my personal favorite way of saving money, because it allows you to set specific goals, and timeframes you want to save for. It also has a guarantee that it WILL NEVER overdraft your account. The savings automatically pause when your balance becomes low, and you can change this minimum balance setting whenever you would like.

 

I have grown my savings by almost 200% just this year using Digit. They also offer a 1% cashback bonus every so often as well! You can’t beat that.

 

You can also receive a free $5 from Digit whenever you sign up by clicking here.

 

 

 

 

2) Establish your credit

 

It is so important if you’re young or still in college that you begin establishing your credit. This doesn’t mean go open 20 credit cards and max them out. I mean establish your credit the RIGHT way, and get an awesome credit score.

 

Good Credit is something everyone wants, but not everyone thinks they can get. The truth is, that if you handle your credit the right way, you can easily obtain a 750+ credit score within a year or two!

 

And if you have ruined your credit, then getting your finances together, making sure you are paying your debts down, and saving money will ensure your credit improves over time.

 

You need to check your credit score and be sure that there aren’t any errors or major issues that need to be taken care of. There are many websites out there that allow you to do this for free without any effect on your credit like NerdWallet, Credit Sesame, and Credit Karma.

 

It is also important to monitor your credit score to make sure you don’t fall victim to identity theft or any unauthorized credit usage.

 

Knowing your credit score gives you a better idea on where you need to start when it comes to repairing your credit and how you can raise your score.

 

And if you haven’t started establishing your credit then you can check out my article on getting started today with no credit history or experience.

And if you Do have credit but it could use some tender love and care, check out Mike’s awesome credit repair guide over at Credit Takeoff.

 

 

3) Start investing

 

No matter how broke you think you are or how clueless you are as an investor. With today’s resources there is absolutely NO reason why you should not be investing.

 

You should first begin saving for retirement and attempting to max out your retirement accounts every year to maximize the amount of tax benefit you’re getting. My personal favorite app for retirement investing is M1 Finance.

 

M1 Finance offers retirement accounts, and normal taxable accounts that you can easily fund through your standard bank account. I have mine set so that I automatically transfer $100 bucks every Monday to my account. The user interface and investing options are excellent and they provide an awesome investing experience.

 

They’re also offering anyone who signs up by clicking here their first $10 invested free.

 

If you work at a place that offers 401k contributions then you should also be sure that you are taking advantage of all employer incentives offered to you. These incentives can help to add enormous amounts of value to your investment account, so be sure you aren’t missing out on free money.

 

Another way that you can start investing even with a low income, is my favorite investing app for beginners. Acorns.

 

Acorns is an excellent investment app to get you started and allows you to submerge yourself into the crazy world of investing with only a small amount of capital.

 

You can invest in a well-diversified actively managed portfolio for as little as $5 at a time. Acorns is also free for college students for four years after sign up date. And only one dollar a month after that.

Acorns allows you to easily maximize the amount you’re investing by offering their round up and found money features.

 

Round-ups —

By far my favorite Acorns Investing feature, once your credit or debit card is linked to Acorns, the app will pull your daily transactions and every time you make a transaction it will automatically round the transaction up to the nearest dollar and invest it into your account.

For example, if you were to spend $1.82 on coffee, your round ups would kick in and bring that up to $2.00 and invest that $0.18 into your account. Once the total of roundups reaches $5 it will be allocated according to your investment portfolio preferences.  You can also specify which transactions you would like Acorns to pull from and even apply a multiplier of 2,3, or 10x if you want to grow your account faster. I keep mine on 2x.

The best part is you never even notice the money coming out.

 

Found Money —

 

Another awesome feature that Acorns offers that allows you to grow your investment account. Found Money is a portal on Acorns Investing App that you can click on to do your shopping. They have partnered with over 200+ companies and include big names like Apple, Nike, and Hulu to offer your cash back whenever you shop with these brands.

 

Using these features with acorns you can effectively grow your investment account even with a low income. And you can even get your first $5 dollars for free if you sign up using my unique link.

 

Sign up for Acorns by clicking here and receive $5 dollars.

You can also check out my full Acorns review by clicking here if you wanna learn more. 

 

 

 

4) Stop getting in debt and start paying off debt.

 

If you are struggling to obtain your financial freedom then it may have to do with your spending habits.

 

If you are having trouble with spending money and getting deeper in debt then you may need to consider cutting yourself off from credit. This means locking your credit cards in a home safe until you become more responsible with them, or even shredding them so you can’t use them any longer.

 

Getting in debt can be addicting and if you are constantly in need of the newest things credit can buy, then you may need to reevaluate your spending habits and consider trying to fix this by practicing contentment for what you DO have.

 

Trust me, I know better than most how difficult this can be, I grew up extremely poor. So whenever I got credit for the first time I wanted to buy all the fancy things I never had as a kid.

 

This was all fine and dandy until I had over $10,000 dollars In debt on a $20,000 dollar income. My life was a nightmare of financial stress for the year I spent trying to pay this off.

 

If it wasn’t for my handy digit app I talked about earlier, I probably never would have paid it off in time. They even recently launched a new feature on the app that allows you to use the app to automatically put the extra money you save to your credit cards.

 

Yes! Digit will automatically save AND pay off your credit cards FOR YOU. If that’s not badass, I don’t know what is. I wish they would have had this feature when I used it to pay off my debt years ago.

 

The truth is, you will feel so free whenever you resist the urge to get into more debt and start paying off the debt you have. It is one of the best feelings I have ever experienced. Being debt free is a dream come true.

 

If you need help with your budget and paying off debt, check out this article where I help walk you through budgeting and saving money to pay off your debt.

 

 

5) Get your health in check and make sure you’re covered

 

If you have no medical insurance coverage and no life insurance then you are truly living life on the edge my friend. While I respect those that live life adventurously and wild.

 

I don’t believe in leaving your family financially responsible for you and your expenses if you were to tragically pass away or have a medical emergency.

 

I was one of those “I don’t need health insurance, I never get hurt, I never get sick” kind of people for the longest time. Until I got majorly sick and ended up in the hospital for an entire week two years ago.

 

This changed my perspective, and I ensured that I was covered by health insurance from then on. It may seem like something you don’t need but the truth is, you will wish you had it when you do need it.

 

Another thing to consider is getting life insurance, or accidental death coverage AT LEAST. There are so many options out there and you can find plans for as low as $20 dollars a month that will cover your funeral expenses in case of accidental death.

 

YOU DO NOT want to leave your family to handle these burdens if something were to happen to you, and you DO NOT want to have medical emergency that you cannot afford.

 

So get coverage, you will have so much more peace of mind knowing that you have it. Your family will too.

 

This also means that you are taking care of your mind and body as best as you possibly can. I began really caring about my health two years ago when I met my girlfriend. (dating a woman way out of your league can really do this to you).

 

I decided I was tired of being overweight and tired of being so unhealthy. Using HealthyWage I was able to lose 55+ lbs AND make over 1,800 dollars while doing it. I used this money to fund my upcoming vacation that I am so excited for.

 

HealthyWage is an app that allows you to make a wager for how much weight you can lose in a given amount of time. The app will calculate your weight loss amount and your monthly bet and come up with a final amount they are willing to bet you to lose the weight.

 

It’s extremely simple, you lose the weight, you win the money. You don’t, you lose your money. Just like any other bet you’d take. There is a risk, if you don’t commit and lose the weight, you won’t make any money.

 

But, in the case you do make the commitment, it can be extremely rewarding. I was able to make 1,800 dollars in just 6 months using HealthyWage. And the best part is that I was doing something  I already wanted to do! Get healthier.

 

I am still so glad I used HealthyWage and winning that money was exactly the motivation I needed to lose over 55 lbs.

 

If you are interested in seeing how much money you can make by losing weight click here.

 

 

6) (Optional) Create your own business

 

Nowadays creating your own business is easier than it has ever been before. There are thousands of people creating their own websites and own businesses today.

 

The best advice I can give is find what you’re good at, then find out how to make money doing that. Whether you make money by teaching it to others, or completing the service for others. There is always someone willing to pay for something someone else is better at then them. TRUST ME.

 

You can easily create and launch your own bog just like this one and start your own business within a month just like I did. You can write about any topic you enjoy that interests you, and there are tons of ways to make money as a blogger or with your own website.

 

You can sign up for Bluehost and start your own WordPress website with your own hosting, a domain name, and a free SSL certificate, (google wants your website to be secure with an SSL certificate), for as little as $3.95 using my link to sign up.

 

Starting my blog has been one of the best decisions I have ever made, and I love knowing I created something and it’s become a full-fledged business.

 

You can sign up for Bluehost by clicking here.

 

You can also learn more about starting your own blog from the same people I did, Alex and Lauren over at Create and Go. 

 

 

7) Make the most out of your money

 

No matter how rich you are, it always feels good to save a little extra money. (Well, Jeff Bezos might not care, but I know I sure do, and you probably do too.)

 

There are tons of ways to get the most out of your dollars, and it’s easier to do now than it has ever been. (That means not having to carry a huge binder full of coupons now).

 

The digital age has made it so much easier to make a little extra cash with no effort. My favorites are using my Discover it Card to get up to 5% cashback, and using Ebates to get extra cashback when I shop.

 

The best part of shopping with Ebates is shoppers without cashback credit cards have an opportunity to make cashback as well! And that cashback can add up to real extra cash. (I have made up to an extra 100 bucks just by using the app when I shop for things I was already gonna buy.)

 

Ebates is a great app that EVERYONE can use to make a little extra money back when shopping. If you aren’t using an app like this you are leaving money on the table. And like I always say, “No money left behind.”

 

If you wanna sign up for Ebates to start earning cash back today, you can use my link to sign up and receive a free $10 sign up bonus.

 

You can also use apps like Ibotta to save money on everyday purchases in store instead of just online like with Ebates. While ebates is an online shopping portal, Ibotta allows you to save on typical grocery store purchases like eggs, milk, bananas and etc.

 

 

 

8) Keep track of your finances.

 

Once you have your financial health back on the right track it is important you STAY THERE.

 

This means keeping track of your finances and watching your finances improve and grow. My favorite way of doing this is by using personal capital. This app allows you to get a full picture of how you are doing financially.

 

The app keeps track of all of your debts, assets, liablities, and calculates your net worth over time. And my personal favorite feature is that it tracks your investment performance over time vs. other investment index’s like the S&P 500.

 

By keeping track of your finances and watching your net worth grow over time it encourages you to keep up the good work and continue to grow financially.

 

I love using Personal Capital and love the peace of mind it gives me in helping me understand my full financial health and keep track of everything in one single place.

 

 

 

Final thoughts:

 

At the end of the day, it’s okay if you haven’t completed all the things on this list. And you don’t necessarily have to, to have a happy healthy life.

 

But completing these things can surely lead to more peace of mind and better financial comfort. I know that over time completing these steps has helped me to grow confident, and made my life feel more secure.

 

I genuinely hope that every single one of you reading this finds the path to financial comfort and knows the feeling of not having to stress day in and day out about money. My goal in creating this blog is to make even the smallest difference in the life of my readers and I hope whoever you are reading this, one of these steps have helped you to feel that comfort.

 

Oh, and I can’t believe I almost forgot,

 

 

9) Sign up for the Busy Living Better email list.

 

At the bottom of every blog post, this one included, you can find an email opt in that allows you to subscribe to the busy living better newsletter.

 

I send out weekly emails that help you to find financial freedom, learn to save money, make extra money, improve your credit score, and invest in all types of markets.

 

If you want to make sure to never miss a post and learn more about Finance every week, then go ahead and sign up. I’d love for you to join and you can even email me back every week and send me messages to just chit chat.

 

Now, get your butt into gear and start living better.

 

 

Until the next one,

 

Noah Riggs

 

Establishing Awesome Credit With Zero Experience

Establishing Awesome Credit With Zero Experience

Establishing Credit is one of the most ass-backward processes I have ever seen.

 

To be eligible for credit, you need to have a history of good credit, but to get good credit you have to have credit to begin with…. I mean… like what…?

 

It’s like some portal of ridiculousness that you would find in a complicated video game.

 

establishing-credit-portal

Visual of the Portal of “Ridiculousness” for Establishing Credit. Don’t let it suck you in.

 

A little backstory:

 

When I was fresh out of high school I applied for my first credit card. Actually, my first three credit cards, and I was declined for every single one of them.

 

The reason? “I didn’t have enough credit history”

 

I was sitting there staring blankly at my computer thinking, “Well… duh… that’s why I’m trying to get credit you fools.”

 

After three rejections, I felt like I was in middle school asking all my little crushes out again.

 

But, just like in middle school, I did some research and figured out the best way to approach the situation, and I succeeded. Surprisingly, it’s not as hard as you’d think. (Establishing credit I mean, asking girls out WAS as hard as you’d think.)

 

So, today, my goal is to teach you exactly how I established my credit with no credit history, what I did right and what I did wrong, and the things I wish I would have done differently.

 

I have now walked many people through establishing their own credit and taught them how to best approach the process.I am now just a few points from the 800+ credit score club and am so grateful to know that I will have no issues getting approved for anything I may need to get in the future.

 

(Oh, and encase you were interested, I also got better at asking girls out, and my girlfriend is like super good looking, light years out of my league.)

 

So, let’s jump right into how you can get these same results when trying to establish your own credit.

 

establishing-credit-jump

 

What is a credit score?

 

To get credit, you must first understand what credit is. (Well, this isn’t necessarily true… but it will definitely help)

 

Your credit score is like a progress report that gives lenders an idea of how responsible you are with your money and how able you are to pay back money that is borrowed.

 

Credit scores range between 300 and 850. 300, in this case, is this worst possible score, and 850 is the best possible.

 

According to Experian, a good basis for scores is as follows:

 

Very poor: 300-579

 

Fair: 580-669

 

Good: 670-739

 

Very Good: 740-799

 

Exceptional: 800-850

 

 

Many factors go into the calculation of a credit score.

 

According to creditcards.com, The Five Factors (in order of importance) are:

 

  • Payment History – 35% of your score is based on payment history.

 

Your payment history is a track record of all the payments you have missed, or made on time. (Hopefully, you will have more of the latter).

 

If you miss a payment then it will be recorded in your credit history and it will have a major negative impact on your score. This is the most important part of calculating your credit score.

 

It is important you always pay your credit dues on time, EVERY MONTH. Even if you can only pay the minimum payment, it’s always best to make some payment rather than none.

 

If you are unable to make your payment it is best practice to reach out to the lender you borrowed from and let them know you will not be able to pay for the time being. Many times they will be lenient or give you thirty days before reporting you to collections.

 

 

  • Credit Utilization – 30% of your score is based on credit utilization.

 

Your credit utilization refers to the amount of credit you use vs. how much credit you have available.

 

For example, if you only have one credit card that’s limit is $100 and you spend $95 on the card without paying it off before the end of your billing cycle, your credit utilization will be 95%. This is VERY BAD.

 

Your credit utilization should stay around 1-5% and ideally it should never surpass 30-35% as this is considered very high.

 

The reason for this is that lenders see people who consistently max out their credit cards and are always close to their credit limits as high risk.

 

This is why you should aim to carry low balances and never max out your credit cards.

 

 

  • Length of Credit History – 15% of your score is based on the length of your credit history.

 

When trying to establish your credit from scratch, the most likely problem you will run into is that your “credit age” is too low. You don’t have enough credit history.

 

This is why when you first begin establishing credit it takes some time for your score to increase. Even when using your credit responsibly. The longer your credit history is, the more clear it is to lenders whether you are an ideal borrower or not.

 

Your credit history is usually comprised of an average and is the average of all open accounts divided by the number of accounts you have.The goal is to continue to increase this number so that lenders can have a clear image of how you handle credit over time and that you are a responsible spender.

 

 

  • New Credit – 10% of your score is based on New Credit accounts.

 

This means that being approved for new credit will increase your score.

 

This happens for many reasons, it can increase available credit which can lower your credit utilization, and it can add to the types of credit you have (loans, revolving, etc.).

 

 But, it is important to keep in mind that applying for new credit can impact your score in a negative way. Every time your credit score is run for an application, you receive what is called a hard inquiry on your credit report.

 

This shows lender’s how much credit you have applied for in the past and if you are “credit hungry” as I like to call it. (These inquiries come off your report after two years, and as time passes, the impact of these inquires lowers)

 

It is also important to note that you receive a hard inquiry whether you are approved or not, so it is vital that you only apply for credit whenever it is actually needed.

 

Another way it negatively impacts your score is that the average age of your score will be lower as you get approved for new credit.

 

So keep in mind that while having a good credit mix is important, do not become credit hungry and apply for too many loans or credit cards.

 

 

  • Credit Mix – 10% of your score is based on your Credit Mix.

 

 

Your credit mix can be a little confusing and somewhat vague.

 

Basically, all this means is that you have the ability to pay back multiple types of credit.

 

So for example, you have a student loan, a credit card, and a car loan. Paying each of these back responsibly will show you can efficiently handle many types of credit.

 

This is a good sign to a potential lender and will make it more likely you get approved in the future.

 

It is necessary that you understand each of these so you know what you need to do to improve your score over time.

 

 

 

So how do you get credit when you have none?

 

So now let’s get to the reason you are here! You need some dang credit am I right?

 

There are actually many options for establishing credit now, and I have seen many advertisements for different apps and services that allow you to establish credit over time.

 

I, unfortunately, cannot recommend these with a good conscious as I have never tried them (at this time). What I will do is tell you how I established mine and what I have seen work really well for others.

 

There are two main options I use when teaching someone to establish credit from scratch.

 

Those are:

 

  • Secured Loan – A secured loan is a loan that is backed by some sort of asset you possess.

 

 

The asset is usually your car or cash, you must provide collateral that can be paid to the lender in the case you don’t pay back the money you borrowed.  

 

I personally went up to my local bank at Regions and asked to take out a secured loan. Some do have minimum amounts so keep this in mind.

 

To be approved for the loan I had to put $500 dollars in my savings account, allow the bank to put a lock on this money, then they gave me $500 dollars as a loan. In this case, the $500 dollars serves as collateral for the loan, I know it sounds ridiculous.

 

But, keep in mind while you are establishing your credit the bank has no reason to believe you are a responsible lender. This is how they cover their rear end.

 

Once you pay back the $500 dollars they loaned you, the bank will then unlock the $500 dollar collateral and you will now have access to your money once again.

 

It’s simple, easy, and it works.

 

The only problem with this method is that once the loan is paid back in full, it will appear as a closed account on your credit report. You need some revolving credit.

 

 

This is where the next option comes in,

  • A Secured Credit Card – A secured credit card is similar to a secured loan as an asset is required to be used for collateral in the case that you do not pay your balance. The difference is, that your credit limit is a revolving balance you can continue to use every month for as long as you have the card.

 

 

For the most part, this is the best option. Depending on which card you choose.

 

Most secured cards require a deposit of $49-$500 dollars and your monthly credit limit will be equal to your deposit in most cases.

 

Nerd Wallet has an awesome article ranking the best-secured cards

 

It just so happens the first two cards on the list where the two secured cards I had when I first started out.

 

Between the Capital One Secured card and the Discover it Secured Card I would pick the Discover it secured Card every single time.

 

The reason being is that the Discover it Secured Card provides many benefits that an unsecured card would offer.

 

In fact, the Discover It secured card offers all the same benefits of the unsecured Discover It card. They even give you the double your cashback bonus at the end of the first year offer as well.

 

The other reason I always recommend this card to newbies is that they not only have rewards and bonuses, but they also will graduate your card to unsecured after you prove you are a responsible credit user.

 

What this means is that they will send you your deposit back, make your card unsecured, and in some cases give you a credit limit increase.

 

Unfortunately, with the Capital One Secured card, you will not get your deposit back until you cancel your card, and there is no graduation to unsecured.

 

Your card will remain secured for the entire time you use it, no matter how responsibly you use it.

 

The one benefit of the capital one secured card is that it does have a lower initial deposit in some cases. I only had to pay $49 dollars for a $200 dollar credit limit.

 

I think that between the two secured card options, discover is by far the superior choice. You should always lean more towards the cards that offer good rewards that you can maximize and offer excellent customer service and user experience.

 

This is why I chose, and still choose Discover’s secured card over all other available options when beginning to establish your credit.

 

establishing-credit-discover

 

Final thoughts:

 

Establishing credit from scratch can be a daunting task at first.

 

But just like all things in life, with a little money and enough research, it is by no means an impossible task. Just be sure you are getting credit for the right reasons and understand that any mistakes you make can leave a permanent scar on your credit for the future.

 

Having good credit is important for getting the best rates on your future homes, cars, and any other loans or cards you may apply for.

 

So keep this in mind when you’re just starting out. Be sure you are budgeting and managing your money properly and you will have no problems.

 

Now go forth and prove yourself a worthy borrower.

 

 

Until the next one,

 

Noah Riggs