Save some extra money: Change

In this 3-5 minute article:

  • Where do you keep your change?
  • Do you keep you change?
  • Saving change
  • It adds up!

Everyone hates change… It’s bulky, most wallets aren’t meant to carry it, and the monetary denominations are so small, that many of us don’t think much of it. However, it can really add up by the end of the year.

One of the easiest ways to save a little bit of extra money is to save your change when you pay in cash.

Let’s look at an example:

This morning, you decide to start your day out by buying a latte. The total comes to $5.32 and you give the barista $6.00. They return your change to you and you put it in your pocket. Later that day, you go to lunch and spend $9.45. You hand the person at the register $10.00 and they return your change to you. Your final purchase of the day is a new phone case for $20.13 and you hand over $21.00 and get your change back.

At the end of the day you have a pocket full of change, and a couple of options:

Option A would be to forget about the change and get rid of it. Obviously this would be a poor choice!

You go with option B and decide to place it into a container where you store all of your spare change. Today you’ve been able to add $2.10 to your change jar! You’re your first purchase you added $0.68, $0.55 from your second, and $0.87 from your third.

Let’s say you have similar spending habits for the year:

If you take $2.10 and multiply it by 365 days in a year, you end up with an extra $766.5 in your pocket. Not bad for carrying around some small coins in your pocket each day!

However, although you’re keeping all this money, it’s important to realize that in this example, you spent $34.90 in a day. Over the course of the year that’s going to come out to be $12,738.50. It’s obvious most of us would not be purchasing lattes, lunch, and phone, cases every day. If you’re a habitual spender, this method of saving can help you begin to get more comfortable with stashing away extra money!

More savings tips to come!

-Zach

Best clothes to buy to save money

Many of us love to go out on a shopping spree and buy new clothing! The thrill of going out, trying clothes on, purchasing them, and going out in style with that new shirt or jacket is something that never fails to satisfy. Often, this ends up hurting our wallets. Buying clothes can put our bank accounts in an unhealthy position. The best clothes to buy are the ones that look good, make us feel good, and that keep our finances in good shape.

In this 1-2 minute article:

  • Maintaining style with finances in mind.
  • Good ways to save while buying clothing
  • “Couponing”

So, what are the best clothes to buy, while still getting what we want?

One of the best ways to save money on clothing is by purchasing clothes that match with multiple other things we own. If you value fashion, but don’t have money to keep up with buying new clothes each week, you can buy one or two items every here and there that match with what you already have.

An example:

Let’s say you’ve got a few shirts that you really like, but you want some pants to go with them. Instead of buying pants to match each individual shirt, you’ll be much better off purchasing one pair of pants with a neutral color to match all the shirts you own. However, this doesn’t mean that instead of buying 3 pairs of pants that cost $100 each, you go out to buy just one pair of True Religion jeans that cost you $300. Then you’re right back to where you started, and maybe in a worse position.

Even bigger savings!

In fact, if you’re really looking to save money, it’s best to use a coupon for the pair of pants you do buy! If you use a combination of methods to save money, you’re going to end up with more bang for your buck. I like to buy clothes at discount stores, that are on sale, while applying coupons and paying with gift cards — the DSU way!

Buying clothes that match multiple other clothes can give your wallet the real boost it needs to use that money for more important things such as setting aside money to invest in your Roth IRA! There’s never any shame in being thrifty!

What is a Cash Diet?

Each day may of us spend tens, hundreds, even thousands of dollars of expenses on our credit or debit cards, and our balances climb higher and higher. We rarely realize what’s going on until we take a look at our statements. In this article, I’m going to explain cash diets and how they can be useful to you if you have a tough time budgeting!

In this 2-3 minute article:

  • What is a cash diet?
  • How do you use a cash diet to your advantage?
  • The good and the bad of cash diets.

What is a cash diet?

Cash diets are an extremely useful tool to save money. However, much like a real diet a cash diet can take some very strong self-control. The basic concept for a cash diet involves the following

  1. Find out what your expenses are for a month
  2. Withdraw only enough cash for the month
  3. Do not spend any more cash that month than your cash diet allows for

It’s that simple!

One tip to make a cash diet easier is divide all of your expenses into categories, then create a specific envelope, plastic bag, etc., devoted to each category. By doing this, it makes it easier to keep track of how much money you have to spend on certain things such as food, entertainment, gas, or other expenses!

Why is a cash diet so useful?

If you put yourself on a cash diet, you’re more than likely to only spend the amount that you budgeted to spend in a month. There is very little risk that you exceed your monthly expenses, making it easier to save!

Pros of a cash diet

  • Little chance of overspending
  • Easy way to keep track of expenses
  • Easier to detect credit fraud

Cons of a cash diet

  • You have to make sacrifices in your budget
  • Carrying around cash can be dangerous
  • A lot of discipline is required

How Much Does Coffee Cost?

Paying $5.00 for a coffee every here and there isn’t all that bad; however, paying for coffee is really a scam when it comes down to how much it costs to make it yourself. Sometimes coffee shops have those drinks that we really like that we can’t make on our own, but there are a number of people who purchase specialty coffee from shops like Starbucks nearly every day of the year who don’t understand the cost of coffee!

In this 2-3 minute article:

  • How much does coffee cost yearly?
  • Compounding the cost.
  • Special cases.

Let’s take a look at the real cost of purchasing a coffee drink every day of the year:

This math seems really simple, but we’ll dive into something a bit more advanced later. First we have to decide how much the average coffee drink is. A drink from a coffee shop will generally cost $5.00 and some change, so for this example we’ll use an even $5.00 as the cost of the average drink. Next we have to take 365 days in a year and multiply it by $5.00 per coffee. That comes out to about $1,825.00. You can decide whether $1,825.00 is a lot to you or not…

Here’s where things get dicey:

Let’s assume that because you’re spending $1,825.00 on coffee each year, you’re unable to utilize that money in different ways such as investing. This is the opportunity cost of your purchase. If you were going to put that money into an investment account for your retirement (maybe a Roth IRA) for 40 years that averaged a 7% return instead of purchasing coffee each year, by the end of those 40 years you would have on average just over $364,000 dollars! Keep in mind, this doesn’t take into account a lot of factors such as the price of coffee increasing each year, and many more variables. You can see the big impact of purchasing a coffee a day!

Justifying the price:

Sometimes, it might make sense to pay for coffee. There have been countless times I have used coffee as a networking tool. Grabbing coffee for a new connection is an excellent (and relatively inexpensive) way to compensate someone for their time.

Another reason buying coffee makes sense is to essentially rent a seating area or workstation. What I mean by this is making a purchase so you may sit down in a public area and do some work. As I write this article now, I am sitting at an amazing coffee shop in Lahaina, Maui, by the name of Cafe Cafe Maui. The coffee, the environment, and the staff are amazing here, and I love to do work here on Sunday’s when given the chance.

A final reason, and one highly relevant to the pandemic, is to support local businesses. If you love a small brand in your home town, it’s never a bad idea to support a local coffee shop with your dollar, by purchasing from them.

So how much does coffee cost?

Well, it depends on your situation, but it could cost you hundreds of thousands of dollars if you’re a Starbucks addict!

Building a Budget

In this 3-5 minute Guest Post!

  • Why do I need a budget?
  • What do I need to manage a budget?
  • What does a budget look like?
  • Building a budget

Do I need a budget?

Let’s talk about everyone’s favorite subject: budgeting. It doesn’t have to be intimidating or constricting. Building a budget can actually pave the way for helping you grasp bigger goals that seem out of reach of your current income. They help you prioritize your financial goals and figure out a timeline to get there.

Budgets are not one size fits all, and half the battle is finding one that works for you. It’s important to realize where your money is going to ensure you are making the most of each paycheck. 

Where do I start?

There are a number of apps (such as My Budget Book or Money Mgr.) that are helpful with giving you visuals of where your money is going. You can also use a spreadsheet or do it the good old analog way.

While putting together your budget, look at past credit/debit card statements and think about the financial goals you have. Keep in mind that you’ll have both short term and long term financial goals to consider when finding the budget that works for you. That is why you have to re-evaluate at least every month to ensure you’re staying on top of your goals. Look at examples online and consult with friends you trust about what works for them. When you make a budget for the first time or restructure the one you have made, give yourself some time to settle into it. 

What does a budget look like?

Look at Liz for example, she earns a monthly adjusted income of $2,000 which ends up being roughly $1,000 per paycheck since she gets paid biweekly. Her rent is $600 which includes utilities. She allocates $300 each paycheck for rent, puts $200 away for savings, plans to use $100 for groceries and invests another $150. This leaves $250 each paycheck of discretionary funds that can be used for whatever she wants. She plans on saving for a new phone and begins putting away $100 dollars every paycheck for it. She routinely spends another $50 on new clothes, and allocates the last $100 to social events and going out. Zach has talked about the awesome tool of compound interest on this blog so keeping yourself in your budget allows you to take full advantage of that option. 

Example Budget Breakdown

Happy Budgeting!

Finding a Job you Love in a Competitive Marketplace!

Today, getting a job you enjoy seems like something that can be harder than ever. Unfortunately, many positions are already taken, require too much experience, or are just plain boring, which leads to an availability of just a few jobs!

First you’re going to have to discover who you are:

One of the things you can do is discover your strengths. If you want to know narrow down the options you have, you’ll want to know what you’re good at. Many employers will be hesitant to hire you if you’re not qualified for the position.

For example, no one would hire a salesperson for their business if they lack people and communication skills. Why would they want someone timid representing them as the first point of contact between their business and the consumer? This is the exact thought process that goes on in the mind of the employer. But there are exceptions and we’ll get to those later.

If you’re looking at discovering your strengths, I recommend simply asking a friend or two to list off your strengths and weaknesses. The friend should be extremely honest, otherwise you can consider the response worthless. DO NOT LET THEM LIE ABOUT YOUR STRENGTHS — brutal honesty will be your greatest asset in this exercise!

Once you’ve discovered what you’re good at, you need to decide what you enjoy. You wouldn’t want to work in a school if you hate children! Think about some things that you really enjoy doing, write them down, narrow the list down to about three things that you really love, and discover careers that involve those desires.

Next you want to decide the things you require from your future employer. Is it a high salary? A relaxed environment? A quiet work space? Work from home options? It’s important to discover these values so you can target a workspace you enjoy.

Finally, once you have synthesized your lists of the above, you need to combine them to describe your perfect job. Don’t be unrealistic, but make sure to define something you really enjoy.

For example, maybe you’re a socially extroverted individual, who loves to work in a fast-paced environment, who enjoys meeting new people. Perhaps you could consider working in a sales role! There are plenty of jobs that fit each person’s description, you just need to look hard enough.

Next, you’re going to need to apply:

For this step, you’ll need to build a resume. A resume shows a summary of your professional life, and is often the first thing your future employer sees! Most of us have one or two of these buried in a folder on our computers, but it’s always a great idea to keep this updated as your career progresses.

Your resume should be well thought out and should include the things you think are most important. You can find plenty of resume templates online, but its generally best to only use resume templates as a reference, then design your own so that you have full editing capabilities of the document. Sometimes templates make re-formatting a painful process…

With your resume, you’re now ready to apply for jobs. You can apply in a few ways. One of those methods is applying online through indeed or by using another site of the like. These sites are great because they put a high volume of jobs in one spot and you can select your preferences. You can even put in many of your job specifications from the list you made with the above exercise!

However, sometimes these job boards are not the best way to apply. Another way is by going to the website of the company of your choice, and clicking on the button that says “careers.” Usually companies will list open positions on their site for people to apply.

My personal favorite way to apply for a job, is going to the physical establishment, talking to the hiring manager and introducing yourself, then applying for the position after asking for an application. When someone meets you in person, they are more inclined to follow up with you since you have made a connection with them. Your primary goal is to get yourself in the door and get an interview!

For more formal corporate positions, some of the above methods may prove to be difficult. Generally, referrals from individuals you know are the most powerful tools to get an interview with the business of your choice. If your peer, friend, or family member is an exceptional employee at the business to which you are applying, the employer is likely to give you a shot at an interview.

After applying, your future employer is going to look at your resume and qualifications:

I mentioned earlier that there are exceptions made based on your skillset in the event you do not meet the qualifications. Sometimes employers will be more interested in who you are as a person rather than your skill qualifications. You can teach skill, but you cannot teach personality. In other words, as long as you have a good personality, you can learn to do anything. If the employer decides not to hire you, you can go learn whatever skill you need to qualify for the job, come back later, and apply for the same position if it’s still available!

After your employer has taken a look at your resume, you’re off to the interview process:

This part is my favorite! I’ve been interviewed and have conducted interviews many times, and can confirm this plays a huge part to being hired. The easiest way to ace an interview is to be prepared, be you, and be excited. You must come to the interview, knowing the core concepts of what you want to say about yourself when asked, you have to be genuine, and you need to be in a good mood. In many of the interviews I have conducted, people have shown up in a bad mood, and nothing will ruin your chances of being hired more than a bad attitude. You may have to do more than one interview depending on the company. Often, more established companies will require more than one interview, while smaller companies may not require such an intense process — of course there are always exceptions.

Once you’ve finished your interview it’s time for you to wait:

Wrong! Now it’s time for you to prepare a follow up email or letter to express your appreciation for an opportunity to interview with the company. This is often overlooked and can bring your interview from good to great with one simple step!

Later on you’ll receive a call on whether or not you received the job. Then it’s time for your decision.

Do you take the position or not?

-Zach

Selling Goods on Craigslist

I’ve already discussed tips on buying things on Craigslist and getting a good deal. Today I want to talk about selling things so that you can make a little extra cash on the side! Selling on Craigslist and other public marketplaces can be much easier than you think. It’s certainly a great way to make money, without having to work!

In this 5 minute article:

  • Selling on Craigslist and other public marketplaces.
  • Doing your research
  • Listing your items
  • Selling
  • Bonus tips!

Research

You’re first going to need to have something that you want to sell. This could be anything of value. Take a computer for example. Maybe you just upgraded to a new computer and you have an older model you want to sell.

The next step is to do a little bit of research to see what comparable goods are selling for. This is going to allow you to list your computer for the price that many consumers are going to be willing to pay. If you’re in a hurry to sell, maybe list the computer at a lower price to catch more attention. If you’re in no rush to sell, and maybe your computer is in outstanding condition, you could decide to list it for a higher price. Otherwise, it’s generally best to keep your items for sale at a similar price to other other items that are being sold.

Listing

After you’ve done your research, it’s important to take some good photos of whatever you’re selling. If it’s a computer, it’s good to take photos of all sides of the device, including any damage, etc. The more photos the potential buyer has to see, the less you’re going to have to deal with people coming to see your computer, only to find out it’s not what they thought it was because you didn’t have any pictures. It will waste both their time, and more importantly yours!

Once you have your pictures taken care of, you’re then going to want to write up a description of the product. Much like the photo process, the more detailed you are, the better the results you’ll have. If it’s the computer that we’ve been talking about, it may be best to list the memory specs, year, model, and any other crucial information. This can even help in listing your result first on public marketplace websites and applications.

To list your item, you’ll need to create an account with Craigslist (but keep in mind Craigslist is not the only way to sell things. I just find it to be the easiest for my needs). Creating an account is simple and involves the same things that any other account creation process would, including an email, a password etc.

Once you’ve made your account, you’re able to list an item for sale.

All you need to do is input the information you researched, your photos, your price, and any other things you want to include, and you post your item! People will be able to contact you through the site, or you can list your contact information in the listing. Then you wait for the calls or emails from people who want to purchase your product, set up a meeting time, and work out a deal!

Bonus Tips

It’s not uncommon to receive emails or text messages that are scams, make sure to be mindful of this.

Always meet in a public place when selling an item to ensure your safety. Safety is never guaranteed so consider bringing a friend or meeting at a police station!

Use the tips from my other Craigslist article to understand how buyers think, that way you can make sure you’re achieving the best deal on your end!

Talk to your friends and family about the item you’re trying to sell, or list the item on multiple selling services. You’ll gain more exposure to your item, which may allow you to sell it quicker!

-Zach

Save Money On Craigslist

In my opinion, one of the greatest disappointments in the modern economy is that when purchasing goods and services you are required to pay the listed price with no exceptions. In a number of other countries, bartering is often an expected practice among those who go shopping. This practice protects the customer by allowing them to pay what they believe is a suitable price for a good or service. In the U.S., applications and websites like Craigslist allow people to participate in bartering in a similar manner. This can be a great way to save money!

In this 5-7 minute article:

  • Negotiation on Craigslist and other public marketplaces
  • Doing your research
  • Bring what you want to spend
  • Walking away

Negotiation and Craigslist

From a young age, my parents taught me negotiation skills to aid my success in the future. I remember going to craigslist deals with my dad when he needed to purchase something, processing what was going on, and absorbing all the information I could. I was fascinated watching him go home with what he needed, after spending only a fraction of the item’s list price. All it took was a little bit of conversation and some back and forth price negotiation, and before I knew it, he and the vendor shook hands and we were on our way home.

If used correctly, craigslist can be an excellent tool to never pay full price for anything you need! However, it’s a little more complicated that just finding an item, meeting up with someone, and buying the item. There’s a little bit of work that you need to do to make sure that you don’t go home unhappy. Here are my top three craigslist tips for your success:

Tip #1: Do your research.

Just like you would always do your research before investing in the stock market, it’s important to do your research when purchasing something. To start, doing your research allows you to be a more educated buyer. The more educated you are on a product or service, the more confident you’ll be when purchasing. Confidence allows you to show the seller that you’re serious, and that you know what you’re talking about. In other words, it keeps you from getting taken advantage of or scammed. If you were purchasing a car and it had bald tires, but you didn’t know what bald tires looked like, or you didn’t know to look to see if the tires were bald in the first place, you may be stuck with an extra expense after purchasing the vehicle. The same concept applies to nearly every other purchase.

Doing your research may also allow you to determine whether there are better deals available. In a similar car example, if you were purchasing a car that was listed for $15,000, but you didn’t know the car was only worth $10,000, you’re clearly not putting yourself in a situation to succeed in a deal. Research is crucial to a deal in your favor.

Tip #2: Only bring the amount of money you want to spend with you.

One of the things my dad used to do when I went with him to buy things from craigslist, is bring only the maximum amount of money he wished to spend on the item with him. For example, if an item was listed for $400, but to him it wasn’t worth spending a penny over $250, he would only bring $250 with him. By only bringing $250 there was no way he could possibly spend any more money than he wanted to! This is also a great tool for people who are trying to budget, since it forces you to walk away from a deal if it exceeds your spending threshold.

Tip #3: Don’t be afraid to walk away from a deal.

One of the final things to take note of is that there are rarely times where you MUST buy something. Never will you need a TV for your house. If you need to live without it for a while, that’s alright! You will be best off by walking away from a deal if you don’t believe you can afford it. Nothing is worse than going home with an item for which you feel you paid too much. You can always come back to the vendor to purchase the same thing if it’s still for sale. Chances are, if the item was too expensive, the vendor will have to lower the price at some point in order to sell it. If you watch the price, you may be able to contact the seller at a later point in time to make another offer!

In all honesty, there are plenty more things that you can do for a purchase from craigslist, but these three are some of the best strategies to be successful. Craigslist is a fantastic way to save money on your purchases.

Bonus Tip:

Always be careful on Craigslist or other public marketplaces and meet in a public place. Never meet somewhere where you feel uncomfortable. Usually you can ask to meet in the parking lot of a busy supermarket or even the parking lot of a police station if there’s an area available. If you’re still uncomfortable with that, ask a friend to come along for company!

-Zach

Different Ways to Invest

Investing is a term that often comes across as scary to many individuals. Often we associate investing with putting money into the market and praying that when you take it out you’re left with more than you put in. However, that’s not investing… That’s gambling!

In this 5-7 minute article:

  • What is investing?
  • Trading
  • Real Estate
  • Personal Investment

Fears of Investment

What words do you think of when you think of investing?

  • Risky?
  • Frightening?
  • Complicated?
  • Difficult?
  • Wall Street?
  • Stocks?

I can almost guarantee that you think of one of the above words, and by the end of reading this short article I would hope you have a different understanding of investing, and a more diverse perspective on various ways to invest.

There Are Many Ways to Invest!

Investing doesn’t necessarily mean getting a suit on and trading stocks in a big room with symbols flashing all over the place with different monetary values. Investing can encompass a number of things!

Of course, the most common thing people think of when the word investing is mentioned is trading stocks on the market.

Since many people are familiar with this type of investing I won’t go too deep into it, but I’ll likely write an article in the future on how begin investing for anyone interested. For now, you could check out an article on how to retire rich (the “easy” way) through investing (if you read that article, soak in the information like a sponge, and use that strategy in addition to other investment strategies, there’s a very good chance you retire a millionaire – maybe a multimillionaire if you play your cards right)!

Another Way to Invest is Through Real Estate.

Many of the world’s most successful people have accumulated their wealth through real estate! Investing in real estate can be a bit more complicated. In most cases, you’re often required to come up with a down payment on the real estate. Generally, this turns out to be 20% of the purchase price (with some exceptions). Let’s say the property you want to purchase is being sold at $200,000. You’re likely going to have to put a minimum of $40,000 down to purchase the house, plus a bunch of other costs! These things all make buying real estate difficult, not to mention the need to qualify for a mortgage if you’re like the majority of the population which is not likely to be carrying around an extra couple hundred thousand dollars to buy a house or office building!

However, despite its complicated processes, real estate investment can be very lucrative. There are also many ways to use real estate as an investment vehicle such as renting a residential property out to tenants who live there, renting office space to a business looking to have a physical location, allowing the property value to appreciate over time, and many more options.

A Third Great Way To Invest is Through Investing in Yourself!

This is one of my favorite ways to invest, since it’s often very inexpensive. There are plenty of ways to invest in yourself, but an easy and budget friendly way is through reading or listening to podcasts. By learning more about topics you’re interested in, you’ll likely be able to improve the skills that you already have, and learn new skills to become more knowledgeable on the subjects you love! I have read dozens of books on business and finance, and listened to hundreds of podcasts regarding these topics as well. Why so many? They cost little to no money! These methods of investing by far have the greatest ROI (return on investment) — More than your outrageous 15%+ gains on your market investment portfolio. Even more than your outrageous thousands of percentages you earned on cryptocurrencies!

Let’s say you listen to a free podcast that gives you the business idea that changes your life and makes you millions. Maybe you pay $10.00 a month for your Spotify or Apple Music account, a few hundred bucks for your phone, fifty bucks a month for your service, a hundred bucks for your headphones, etc. But those are things you already own! In theory, you didn’t have to spend any extra money to make money by utilizing those possessions. Depending on how you look at it, you could consider it a practically infinite return on your investment.

A side note about the above: you do not have to spend money to make money. I don’t know who came up with that idea, but this is completely wrong in my opinion. Use tools you already have, be resourceful, stop complaining, and do something!

Another Way to Invest in Yourself is Through Going to College.

A college education can be expensive, but it can be well worth it if you have an idea on what you want to do! I won’t explain this one too much since many of us are familiar with the concept, and many of us have our own opinions on college education. The cost/benefit analysis of a college education is up to your own interpretation and circumstances — especially given the current pandemic.

If You Want to Invest in Yourself, Another Method is Through Taking Courses or Going To Seminars.

I like to think of this method as a less expensive college, often with no extra credentials. There are plenty of seminars offered for individuals wanting to learn more about a subject. You can pay a few hundred dollars (or less) to go hear an expert speak about a subject. But hearing others speak isn’t the only way to go this route, you can also purchase courses to become certified in various fields. For example, if you want to get your real estate license, you can purchase one of many courses online to prepare you for a test for the certification. Courses and seminars can cost anywhere from nothing to thousands of dollars depending on what you’re trying to explore, but they’re one of many excellent ways to invest!

Concluding Thoughts

These are just a few ways to invest, and there are certainly many more methods that are available. Investing doesn’t always have to mean that you’re putting money into a stock and waiting for it to go up. There’s plenty of other ways to go about multiplying your money.

-Zach

Ways to build excellent credit

The other day I released an article on how to initially build a credit history. However, as a DSU subscriber, you want the best credit history possible. In order to qualify for the best opportunities that excellent credit can bring you, below we touch on some ways to build excellent credit!

In this 3-5 minute article:

  • Using your credit
  • Length of your credit history
  • Making payments on time
  • Different Types of Credit
  • Credit Inquiries
  • How each of these affect your credit score
  • Ways to build excellent credit

Using Your Credit (30%):

If you don’t use your credit, the credit bureaus aren’t going to know you exist! If all you do is keep a credit card and never put any money on it, it really wont do much good for building your credit history. Optimally, the best amount of your credit to use is below 10%. Some people even say to keep around 3-5% of your limit in use at any given time (this is what I prefer to do, often making sure my balance never exceeds 3%). For example, if your credit limit is $1,000 it would be best to use under $100 for the good results, below $30 for optimal results. At $10,000, $1,000 and $300 respectively.

Length of Credit History (15%):

Another thing that makes up a sizable percentage of your credit history is the length of your open credit accounts. It has been shown that as the time that your accounts have been open increases, so does your credit score. Typically, after 5 years of an open credit account, one can expect to have a pretty firm grounding for their score. Although you have the least amount of control over this determining factor, you can maximize your control by doing things such as getting a credit card as early as possible. If you were to get a credit card at 18, then by 23 years old you would have a pretty solid credit history length, good enough to boost your score. With that score, you might get a preferred interest rate on a home loan!

Making Payments on Time (35%):

This is one of the most obvious ways to build excellent credit. Making sure to pay each of your bills on time plays an enormous role in how your credit score is determined. Credit card companies see you as high risk if you miss payments, because they don’t want to lose the money they lent you! A history of missing payments can do a lot of damage on a credit score – often, even one missed payment can do a lot. DO NOT MISS PAYMENTS!

Different Types of Credit (10%):

Although it may seem odd, having a couple types of credit may help you. Types of credit can include (but are not limited to) a home loan, a loan on a car, or of course a credit card. It’s good to have a couple of different varieties, but not so good to have an enormous amount of them. It’s also best to apply for different credit types over a span of time.

Credit Inquiries (10%):

This one can be overlooked, but it’s best to apply for different credit types over a span of time. When you apply for a bunch of different accounts in a short period, it looks as though you are in desperate need of money, which can look really negative to a credit company. Whenever you apply for a loan or a credit card, it is noted on your credit report, so keeping your inquiries to a minimum is optimal – the less the better.

Concluding Thoughts

The above are the main factors that go into your credit history, and each of the estimated/rough percentages listed depict how much of a role they play in determining your credit score. Using credit responsibly is the easiest way to build excellent credit.

-Zach