Page 24 - Winning The Credit Game Bundle (CK Patrick)

12 THE CREDIT GAME

and other financial rewards to get you on their team. Payment history
accounts for about 35% of your credit score.
One important thing to note here is that you can’t win any games if
you don’t play. Some people assume they must have perfect credit
because they have never borrowed money. If you never spend more
money than you need, that’s a really good sign for your financial
responsibility, right?
But in the eyes of banks and creditors, the opposite is true. If no one
has ever seen you pick up a ball, they’re not just going to assume that
you can make breathtaking plays. So you’ve got to borrow money and
pay it back—you’ve got to play the game—in order to build credit. The
key is to borrow money, not because you need to, but because you are
doing it strategically to optimize your credit score.
We’ll discuss the details of how to do this later.
2. Amounts owed. If someone owes a lot of money, that’s not a
great sign for you as a lender. Why do they owe so much money? Why
haven’t they paid more of it back yet? If I lend them money, are they
going to be able to pay me back and pay back all these other people?
Think of this like a sports team hiring someone who they know
already has a full-time commitment to another team. How much time
and energy is that player really going to be able to give your team? You
want someone who isn’t overcommitted, and who you know has a lot
of free time and energy to give your team a stellar performance.
As a borrower, you want to keep your credit utilization rate below
30%. That means that of the total amount of money you are allowed to
charge on your credit card, for example, you’re only using 30% or less.
In general, lower is better. The more credit you have that you’re not
using, the more time and energy you have available to devote to any
other team you apply for, so to speak. Having that availability makes
you a better candidate.
This metaphor will break down a little bit in a minute, but for now
that’s a useful way to think of it.
Amounts owed—the less, the better—makes up about 30% of your
credit score.
3. Credit history length. The more games you’ve played and won,