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15 Little Life Hacks

60-second video: Myths of credit

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While personal-finance journalists love to point out that we could save $3/day by not buying lattes, they usually don’t point out that having good credit can save you over $100,000 on major purchases, like buying a house or car. Credit isn’t as sexy as lattes, but since we focus on the big wins, today I’m showing you a 60-second video that dispels myths of credit.

Check it out — a guest post from Andy Jolls of

I Will Teach You to Be….Credit Savvy…in 60 seconds by Andy Jolls, ex-FICO Exec and CEO,

We are bombarded by credit ads on Facebook, mySpace, random blogs and even Nascar races. Many of these ads are for free trial services where the costs kick in before you get a chance to understand what you are buying. So here’s the skinny on what you need to know about credit in 60 seconds

  1. More than one You have three credit scores from 3 different credit bureaus
  2. Lots of models Most used scores are FICO scores. 90% of all mortgage lenders.
  3. Myth: No car, no house no worry: your credit standing can impact employment, insurance and lending decisions – don’t fight it, accept it. – 20% of all employers look at it now.
  4. Swingers: Your credit score can vary from bureau to bureau – 29% of consumers have 50 point swings
  5. Free? You can your report for free at or get a free 30-day trial with your FICO score.
  6. Myth: Closing cards helps you. Sadly, this hurts your score as it lowers the credit available to you.
  7. Myth: You have to keep a balance to build your score. Ugh. No. Not true.
  8. Myth: Checking credit scores hurts. Nope, as long as you are getting it from a non-lender your score is unaffected.
  9. Myth: Online loan shopping hurts. Truth is all inquiries in a 30 day window for home loans are treated as 1 inquiry.
  10. Credit Repair Master#^$@*!… You don’t need a partner to master credit, in fact the FTC says you should “do it yourself”.

As Ramit and I agree on not sweating the small stuff, I want you to focus on not obsessing on your FICO score. Instead, I want you to learn the important elements – such as pay on time, and eliminate balances – and develop habits that will keep your credit score high for years to come.

* * *

My new book, a New York Times bestseller with a 6-week plan that works:


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  1. While this was interesting, it would have been more informative if he didn’t just blurt the info out and explained WHY each of his statements was valid.

  2. I’d add that it’s also a myth that if you pay off your credit card bill every month on time, you’re home free. If you run up huge balances (relative to your limit), you may hurt your score *even if you pay it off at the end of the month.* A good rule of thumb is to try not to charge more than 20-30 percent of your limit, especially if you’re in the market for a loan. I got this great advice from financial journalist Liz Weston.

  3. Although I have received my free credit report in past years I recently tried to get it from all three agencies and was either told I needed to enter my credit card (which I’m sure would require me to cancel something later on) or that I was ineligible because my state (Illinois) does not require them to provide a free report.

  4. @Megan: It’s a federal law (see, so you’re eligible anywhere in the states.

  5. Thanks for this! I have no credit and know I need to start building it, and everyone seems to tell me different things. This cleared up a few questions I had.

  6. I have also heard that having more than 50% of your available credit charged can hurt your score, but how much does it hurt? Of course I only heard this after I recently took advantage of some 0% balance transfer offers and now have only 2 credit cards with balances remaining, both using much more than 50% of their available credit. The overall ratio of debt/credit is only 18% but that is across all cards.

    Anyone “in the know” want to take a stab at ranking which of the things that DO impact your credit score are more important?

    For example (off the top of my head and totally guessing):

    Having a bill go to collections
    Being more than 30 days late on any bill.
    Closing cards (particularly ones establishing a long credit history)
    Having a card with more than 50% of the available credit used…

  7. Loved it! Straight talk re. credit scores is hard to come by. I’d love to see citations for the points he makes. Seems like Andy knows his stuff, but with so much contradictory info floating around, I want to be able to really make sure I understand everything.

  8. Thanks for those! It has been useful for me as I used to think that every time you check your score it hurts, good to see that I was wrong!

  9. I have been thinking that people’s priorities are jacked up. I read The Millionaire Next Door two months after it came out, which was a comprehensive study on the behaviors of self-made millionaires.

    The biggest thing I remember was to move into a neighborhood where you were comfortable with the payments and were richer than most other people, then you didn’t have to spend money to keep up with the jonses, you were the jonses.

  10. Beef, good point. Future videos will go more in depth.
    Erin, I tell people to shoot for 10% of their limits. More on this soon.
    Megan, not true. Go to Safe, govt mandated site.
    Danielle, check my video called “Credit Score Factors Pie” for a better sense of weighting. Worst impact : bankruptcy least impact: inquiries
    Chris, Justin: Thanks!
    Byron: Love that book. On credit, the point is to be educated. Many of the best score folks are people with simple needs, paid off mortgages, installment loans and low credit card usage ratios.