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So, then the next section is like my favorite section because it's about credit cards.
Right.
So this section, which is thirty percent of your credit profile, is called the amounts old section. Right. Some people refer to it, and I refer to it sometimes as credit utilization. But I wanted to make sure that you guys knew it was amounts old because there is more that goes
into this category than just your utilization on your credit cards. Right, So your credit the factors that go into this section and will determine how many points you're getting, is your credit utilization ratio, so basically how much credit you're using versus the amount of credit that you have available to you, right on all of your credit cards. Another thing that goes into it is the number of accounts with balances.
This is a big one.
The next three that I'm going to refer to. These are going to be the small things that keeps most people out of ever gaining access to the top level of offers from a company.
Right.
So, in other words, if American Express has their tip, if they have a credit card and the ceiling for that credit card is a thousand dollars, right, you have to have certain qualifications in order to ever gain access to that eighty K line because most of their customers are only getting access to maybe twenty thousand, thirty thousand, forty thousand, Right, So, if you are wanting to actually increase your baring power and increase your capital, you know,
amongst your entire credit profile, these are going to be the small things that makes the biggest difference, right, the number of accounts with balances, Right, So, the number of accounts with outstanding balances. This means any charge offs that you have, any charge it doesn't matter how old, if it's within If it's still in your credit report, it means it's under seven years old. Any charge offs that
has an outstanding balance automatically affects your credit utilization. Right, most people only think that their credit cards affect your disc section.
But it's not right. It does, it does.
It does make up about eighty percent of it, like the utilization percentage that you are reporting on a month to mon basis to the credit buias, it makes up eighty percent of this section.
However, the last twenty percent.
Will will go to how many out how many outstanding charge offs do you have?
You should always look to.
Settle charge offs if you can, or get a paid delete we'll we'll discuss that next week.
But those are affecting your credit utilization, so it.
Doesn't matter how responsible you're being with your credit card, you will still have to weigh it against this outstanding balance until that is satisfied.
Right, and then another thing is the proportion of loan balances to the original loan amounts.
Now, all this means is if you have accounts on your credit report, installment accounts or aka loans, if you have ever gotten a defernment that messes up that specific point. Right, So if you have a car and you agree to have to take out a loan for let's say forty eight months, right, whatever, something happens along the lines and you get maybe two three deferments which extends the loan
to fifty one months, fifty one, fifty two months. Yeah, so it extends your original loan term which was supposed to be forty eight to fifty two.
Right.
That immediately will impact your amounts old section because now you're overdue. Right.
The only exception to defer payments.
Are student loans, so they are the only accounts on our credit reports that you pretty much can get as many deferments as you You can get as many deferments as you want, it will not impact this section, which goes to my next point. Make sure that all of your student loan bound or I'm sorry, I need everyone to look at all their student loan accounts, right.
Make sure that they say educational loans or student loans.
Right.
They will say installment credit because that's the account type that they are. But if they do not specifically notate that it is a student loan or an education loan, then your credit utilization is being impacted heavily, and you may not even realize it. Right, A great way to tell if your student loans are not reporting accurately or you know, reporting as I just stated, if you have ever been denied.
For credit you apply for a credit card or whatever.
And one of the denial reasons was the proportion of your loan balances are too high, or if it says and each company will word it a little differently, but what it what it'll what the basis will say is the balances on your installment accounts are too high, or it'll say, uh, it'll say along the lines of what I just said. Right, that's one of the clear cut signs that your student loans are reporting as regular installment loans.
As opposed to educational loans.
Because it absolutely matters because of this, because of what I just showed you, because that impacts your utilization.
It's looking like you.
Have a large larger utilization then you're saying, because this, the difference doesn't show on the credit in your credit score, right, but it does show on your barring power when you are doing credit applications or if lenders are looking at your credit report. All right, okay, so what is credit utilization? Credit utilization is calculated as the percentage of credit that you are currently using compared to the total available revolving
credit that you have. So, if you have three credit cards with one hundred dollars on each of them, if you have a limit of one hundred dollars, that means you have a three hundred dollars limit total. Right. If you use one hundred and fifty of those amongst the three cards however you want, that means that you would
be your utilization would be fifty percent. Okay, So a quick way to calculate your utilization, you take all of your balances, add them up on all of your active credit cards, and then you divide it by your total limits, right, and that'll get you what's called your aggregate utilization, right, which is it's that standard ratio that makes up your utilization. Okay, Now,
what is an ideal utilization? An ideal utilization is always, always, always, always, always always going to be between one and three percent. One in three percent, And I know that may seem low, extremely low to a lot.
Of people, right, especially if you're used.
To abiding by the industry standard, which is thirty percent. As you can see on the chart that I'm showing you guys, thirty percent is extremely high. Right, So if you actually are wanting to improve your credit score, or if your credit score has just been stagnant, and you you like, what's going on? Why why is my credit
not improving? I've been paying my accounts on time, my car on time, my credit card on time, and I'm just my credits card is just stuck, right, I can I can never increase it, right in a steadily paced Usually it's because it's because of utilization.
It's because you've probably.
Been reporting twenty percent, thirty percent or you know even higher. Right, thirty percent is our industry standard, So it's what's usually recommended, is what's usually taught, and that's because it's like that safe number.
It's essentially like getting a C in school. So a C is not going to fail.
A C is not going to cause you to fail a class, but it also will not cause you to be, you know.
At the top of the class. Right.
So if you if we're if we're looking at this in the lens of our credit reports, if we are trying to increase our credit score, a C or AKAA, thirty percent is not going to allow that to happen, right, you would absolutely have to report a one to three percent utili utilization, which is a sure sure way to increase your score, or at the very highest, between one
and nine percent. Right, So, to to make it super specific, the only time that I am concerned about reporting a one to three percent utilization is if I'm actively shopping for something a car, a home, applying for a credit card, or something like that. Right, That's when I'll always lure my balances to between one and three the month prior to doing an application. That way, I'm able to maximize my score, get all of those points that I can out of credit utilization, get a small little booster or
a boost in my credit score before I do my application. Right, you should always before you apply for somebod you should always know at least the billing cycle before, right, So a month in advance, you should be planning for any applications that you're going to do next month, simply because it takes a full billing cycle for your utilization to update, and if you don't wait for them to update, they'll just pull your your your old utilization or your old credit report.
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