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In this episode, MissBeHelpful's Yanely Espinal tells us how to solve three common, but no less scary, major money problems. Click here to get tickets to Yanely's workshop on November 10th: https://www.eventbrite.com/e/how-to-build-repair-or-totally-rehab-your-credit-score-tickets-122168845305?aff=YT112

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Yanely Espinal on Instagram: https://www.instagram.com/missbehelpful/

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What's up, everybody?

This is Yanely from MissBeHelpful. And I'm working with TFD to offer a live digital workshop about credit.

We'll be covering how to start from scratch, rebuild your score or boost it. We're going to have 45 minutes just for live Q&A. So make sure to bring all your credit questions.

I'm Yanely, also known as MissBeHelpful, coming at you via The Financial Diet. I'm going to share the three super scary money problems and how you can solve them. So first I'm going to jump into one that is very, very common, which is having a bad credit score or having low credit and not knowing exactly how to fix it.

So what I first had to figure out was why. Why was my credit score that bad? I didn't really understand how my credit score works, what the different categories are, and all that stuff.

So that was the first thing that I figured out. The two biggest parts of my credit that were the easiest to hack in order to fix my credit score quickly was utilization and age of credit. Utilization is how much of your total credit limit you're using right now.

A lot of personal finance experts will say you want to keep your spending under 30%. But the reality is that that's only going to get you to maybe a good credit score. If you want to get to an excellent credit score, you've got to make sure you're spending less than 10% of what's available to you.

That's the big thing that a lot of people tend to not realize, which leads to having a really bad credit score, because once you go over 10%, now you're starting to see a decrease in each category of your credit score. So you go from excellent to good, from good to fair, from fair to bad, and then from bad to very bad. So you don't want to move down the chain in terms of how many points you can get for utilization.

And the easiest way to make sure you always stay in the excellent category is to only spend 10% or less of what's available to you. You can also call up your credit card and say, I really want to make sure that my utilization is a little bit lower. So is there any way that you can consider increasing my credit available, my credit limit, so that it's higher, because either way, whether you pay down your balance or increase the available credit limit, the percentage of utilization that you're currently using right now is going to decrease.

If you only have had credit for six months or maybe for a few months or a year, then that doesn't show them a lot of data. There's not enough information there for them to really see if they can trust you. So the easiest hack when you don't have a lot of years to show for having credit is to try to get somebody who has a really long age of credit, like 10 years or more on a credit card they've had, try to get them to add you as an authorized user, parents or grandparents, uncles, aunts, older cousins, people in your family that you trust that have a good financial reputation, that they're responsible with their credit cards and they've had credit cards for a very long time.

This doesn't hurt your credit in any way. It doesn't require a hard inquiry or a credit check or anything like that. And a credit card will come to you in your name that directly allows you to spend from that person's credit card account.

So this is why it's a very important thing for you to make sure that you and the person who's going to add you as an authorized user both understand what this means. It means that they are fully responsible for any of the bills that are unpaid that are not paid by you. But you are equally allowed to spend on that account just like them.

So one thing that I recently did with my own little brother, he wanted to get a car loan. And his credit score wasn't so hot. And he asked me to add him as an authorized user on my oldest credit card.

So I told him, I'm OK to do it, but only on one condition, because I wasn't comfortable with him having a credit card out there that he can just use whenever he wants and then I'm responsible for his spending. So what I told him was, I will go ahead and add you. But when the credit card arrives in the mail, I need you to give it to me.

So I actually have the credit card in my wallet. And he doesn't have access to it. But he texted me literally six or seven days after I added him as an authorized user.

And he sent me a screenshot of his credit score that went up over 65 points just because I added him as an authorized user. So this is a really easy, quick hack that can help anybody that has low credit or no credit to have access to credit very quickly. If this isn't something that's available to you because either you don't really have older people in your family that have credit or the people that do have credit in your family that are older than you are not really responsible with their money, or for whatever reason, that is totally understandable.

Another quick thing that you can do is just establish the credit that you have-- so whether that's with your first credit card or with your first student loan-- and then just wait. And I know this sounds really annoying, because it's not real actionable. But you just have to be patient, because the worst thing that you can do when you're trying to build up your credit score is to go open new accounts, trying to show them that you can be credit-worthy, because what that does is two things.

First, it hurts your credit score, because it creates a bunch of hard inquiries every time you apply for new credit. And then the second way that that hurts your credit score is because it actually lowers your age of credit. So every time you open up a new account, they look at it and say, well, this account hasn't even been open for a year.

It's been open for zero years. So then they take that zero years and incorporate it into your average age of credit. And if you know anything about averages, as soon as you throw a zero in the mix, it really brings down the average.

So the number of years of available credit that you've had actually decreases. Super scary money problem number two is to have really high interest rate debt-- 24%, 25%, 27%. These are super scary interest rates, because it's the rate of growth is so high that it's really hard for you to keep up with.

And that's why for me I saw my credit card debt really spiral out of control so quickly. Within just a couple of years, I had almost $10,000 more debt, even though I was not really spending on those credit cards anymore. But the interest rate was just accruing so fast.

You can look for a personal loan that's actually available, and then just take out that personal loan, use the cash that you get from that loan to pay off all the credit card debt or high interest rate that you might have. And then you just have one monthly payment that you have to make to the personal loan until you pay it off. Now, obviously this is going to depend on your credit score, because if you have a really good credit score, you're going to have a much lower interest rate on that personal loan.

But if you have a bad credit score, then you're going to have a high interest rate on that loan. But either way, you're probably going to have a much lower rate compared to the double-digit interest rate on credit cards. And if that's what you're dealing with, then you're going to want to try to make sure you get the lowest possible interest rate available to you.

A helpful thing to do would be to actually work on increasing your credit score first before you go apply for that personal loan. And that's what I did. I did every hack that I could.

When my credit score went up a little bit, then I went and applied for the personal loan and actually got approved for an 8% loan, which sounds like a lot for a lot of people. But compared to my 27% credit card interest rate, 8% was a bargain. If you're not trying to open up a personal loan right now, that's totally fine.

Another way that you can take advantage of lowering your interest rate is actually through a balance transfer. So this is when you open up a new credit card and they give you a promotional period, sometimes 15 months, or 18 months, or 21 months, where you don't have to pay any interest on any balance transfers. So it means if you have a really high interest rate credit card that has a really high balance, you can just move all the money that's due on that credit card to the other credit card, to the new credit card.

And the interest rate will drop to zero. Now, you'll have to pay a balance transfer fee, which is usually like 2% or 3%-- depends on the credit card. So you obviously want to run the numbers and make sure that it's worth it for you.

But generally speaking, it would be if you have really high amounts of high interest rate debt. I recently got a letter in the mail from my Capital One Venture Rewards card saying that they're going to open up an 18-month promotional period with 0% interest on balance transfers. So for me, even though I've had that card for years and years and years, it's not a new card.

But I'm still eligible for that promotion, because I've been a loyal customer. So even if you've had a card for a long time and you're not trying to open up a new credit card, that's OK. Call up the existing card that you have and see if they're willing to give you any promotions right now.

The third and final super scary money problem is living paycheck to paycheck. I was a teacher in New York City making $40,000 a year. And I had $20,000 of credit card debt.

And for some reason, I still felt like I had so much money. And it's because it was this false sense of abundance that I had, because I grew up very low income, strapped for cash. And then all of a sudden, I was getting $1,200 from my job.

And it felt like a lot of money. The best thing that I did for myself to help myself get out of that cycle of paycheck-to-paycheck life was to sit down and actually create a very strict budget. I know that a lot of people don't like budgeting.

But for me, it was something that I actually really enjoyed, because it told me where every single dollar was going to go before my paycheck even hit my direct deposit. Where's your money going? What are the things that you actually value?

What are the things that you can't afford anymore in your budget and you have to kick to the curb? Sometimes you have to be real with yourself. We want so many things.

But we can't have everything. We can only have some things. The way that I budgeted was I used a Google spreadsheet.

And it was a zero-based budget, which means as soon as I got my paycheck, I delegated every single dollar to a certain bucket or to a certain category. The problem is that at some point, you really start to feel like you're depriving yourself, and you can't really cut any more. Once that you hit that point, that's where you're going to have to start thinking that it's time to generate more income, because you can only cut so much.

And there's certain things that you need to keep in place, like your bills, and your needs, your rent, your food. So for me, I realized that, OK, I'm only going to be able to do so much with my teacher salary. I'm going to have to start generating more income.

And so I started tutoring and babysitting on the weekends. And I also started to think about other ways I could make money online. I started selling clothes online, purses, clutches.

I started to make YouTube videos. And YouTubing actually led to me making an extra $1,000 a month. So all of these things helped me not only to just maintain the bills that I had to maintain, but also allowed me to more aggressively get out of debt and create a small cushion for myself through an emergency savings fund so that I wasn't living paycheck to paycheck any more.

I don't know about you, but whenever I learn new skills from somebody, I feel really inspired and motivated to take action right away. So I hope that this video inspired you or motivated you. Thank you so much for checking out this video here on The Financial Diet's YouTube channel.

And if you are not already subscribed, make sure you hit that Subscribe button, because there's more awesome content on this channel. And you want to make sure you come on back to the channel and check out other videos that are just as helpful, if not more helpful, than this one. That's all I have for you all.

And again, my name is Yanely. I'm also known as MissBeHelpful. Till next time, peace.