Black Entrepreneur Blueprint 625 - Jay Jones - How Credit Really Works And Why Most People Never Learn It

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[00:02:00] Welcome to Black Entrepreneur Blueprint, the number one podcast and resource for Black entrepreneurs. I'm your host Jay Jones and Black Entrepreneur Blueprint was created specifically to educate and inspire Black entrepreneurs to launch, build, and grow successful, sustainable businesses. Join us as we help build an economic power base in the worldwide Black community by building and supporting Black-owned businesses.

[00:02:29] If you're currently an entrepreneur or want to be an entrepreneur, you're invited to join us each and every week here at Black Entrepreneur Blueprint. Welcome to the BEB family and get ready to elevate your entrepreneur IQ. Welcome to the Black Entrepreneur Blueprint episode number 625.

[00:02:55] I'm your host Jay Jones and today we have another outstanding and informative show in store for you. Today is part one of a two-part series that we're going to focus on access to capital. Access to capital and that is so important as an entrepreneur to help you leverage, grow, and scale your business. And today's topic is on episode 625, how credit really works and why most people never learn it.

[00:03:25] How credit really works and why most people never learn it. Now, most people spend decades using credit without ever learning how the system actually works. And in order for you to master something, you need to understand how the system works. So today we're going to be talking about multiple things including why most people never learn how credit works, what your credit score is really measuring, the five factors that impact your credit score, and more.

[00:03:54] Now, before we get to today's show content, I just want to share a few things with the Black Entrepreneur Blueprint family. First and foremost, I want to welcome all first-time listeners to Black Entrepreneur Blueprint. Welcome to the BEB family. Please stick around until the end of today's broadcast, and I'm going to share all my social media contact information and resource links, such as the link to 1234 My New Credit Score.

[00:04:21] That's the numbers, 1234 My New Credit Score.com. Don't spend all types of money with lawyers and all types of credit repair agencies, guys. This new AI program can help you restore and repair your credit for only $29 a month, and it's cancelable at any time. Go to 1234 My New Credit Score. And trust me, I've used this.

[00:04:48] I'm in the mortgage business, and I've used this for some of my clients, and they love it. And I've been able to get several people refinanced, and I also did several purchases using 1234 My New Credit Score.com. That's the numbers, 1234 My New Credit Score.com. Make sure you check it out. And also, even if you don't need it personally, they have a great affiliate program where you can earn affiliate commissions also.

[00:05:16] Now, let's get ready for today's show content. Now, let's break down the five factors that lenders used to create that credit risk or your credit profile. And let me just say this, guys. Your credit report is a snapshot of where you are today. All right? You may be jacked up today. Trust me. Been there, done that. But there's a way to restore your credit and position it where now you look attractive to lenders.

[00:05:45] So let's break down the five factors that lenders look at. Number one, payment history. All right? How often or how do you pay your bills? How do you pay your credit cards? How do you pay your card note, your mortgage? Payment history. Okay? You want to pay everything on time. So on time is before it's due, but you do not want to go past 30 days.

[00:06:09] So in the mortgage business, if you pay your mortgage, if it's due on January 1st and you don't pay it until February 2nd, that means you went 30 days past due. So that's what we call a 1 times 30. All right? So say you keep paying it like that. You're always behind. And you do that for three months in a row. Right? That's what we call a rolling 30. So you've been 30 days behind three months in a row. All right? So that's what we call a 1 times 30.

[00:06:38] So that's going to affect your credit score. Remember, your credit score is just a snapshot of where you are today in terms of what your credit and payment history looks like. So payment history. All right? So remember, it's from the position or the perspective of the lender. And the lender looks at risk. So you want to position yourself as a good risk.

[00:07:03] So if you're paying everything on time, make sure, guys, that, you know, you do that so you look at like a good risk. Let me give you a tip also. I've been in a mortgage game over 20-something plus years. Right? So if you are down on your, you know, your credit card payments are too much and you say, you know what, let me go get a talk to a consolidation company. Somebody that can help lower my bills and do all of that good stuff.

[00:07:31] Never, ever, ever, ever do that. And I'm going to explain to you from a lender's perspective what that looks like. So if you have too many bills and you see these debt collection companies that are calling you and you try to consolidate all your credit card payments, what happens is this. Anytime that is on your credit report, that's like a death knell, meaning that's a super negative to a prospective lender.

[00:07:59] That means to them that you can't manage your credit card payments. They already see that because you're behind. But let me tell you how that industry actually works. So say you have four credit cards and they'll say, we're going to reduce your monthly payments from $1,000 down to $700. You just pay us the $700 a month and we're going to pay each of the credit cards, whatever they negotiate.

[00:08:24] Now, what happens is out of that $700 a month that you pay, that company actually takes money off of the top. So that all of that $700 doesn't go to pay off your credit card balances. So they may take $200 off the top and that's how they make their money and then distribute the other $500 to the credit cards. Now, what does that do? Number one, it's taking your good earning power and it's not allowing you to pay down your debt fast.

[00:08:54] You can actually make and negotiate with your credit card companies yourself. So please do not ever use one of those consolidation companies, debt relief companies or whatever, because you literally can do the same thing. Call your credit card company. Hey, I'm in a financial bond. I need to reduce my interest rate. Well, I need to reduce the payment for a period of time. What can we do to do that? And then you pay them directly. Don't go through an intermediary. All right.

[00:09:23] And what we're talking about, guys, in today's show is how credit really works and why most people never learn it. You know, we've talked a couple of things. We've talked about, number one, understanding what lenders are actually measuring. Right now, we're talking about breaking down the five factors of credit. So we talked about payment history just now. Credit utilization. This is where a lot of us struggle many times because we're leveraging our credit cards up to the hilt. Okay.

[00:09:53] A lot of times we use these cards to fund inventory, cover cash flow gaps. You're paying business expenses and all of that good stuff. But the rule of thumb is you don't want to have over 30% utilization on your credit cards. 30% of whatever your available balance is. So if your credit card limit is 10 grand, you don't want to keep more than $3,000 on that card. Now, you can put more than $3,000 during the monthly cycle.

[00:10:19] But when that payment is due, pay it down under $3,000 or 30%. That keeps your score high. And what it shows the lender in terms of a risk factor is that you're a low risk because your credit cards aren't up to the max. Okay. So that's number two, credit utilization. And these are the five factors that risk factors that these lenders look at in terms of you actually keeping and building good credit. Credit age.

[00:10:49] Okay. How long have you had credit? So in the mortgage business, I tell people your credit score is like a fingerprint. Everybody has a different profile. So you can have a college student that gets out of college. They have a $5,000 credit card. That's their only line of credit. And they can have a 750 credit score. Okay. Great. 750 is great. But it's more than just the numbers. So also they could have that credit card for what?

[00:11:18] Maybe a year or two years. Okay. So you want to look at that. And so if you have somebody else that's been established, they have three credit cards, a mortgage, they have student loans or whatever, and they have a 750 credit score. And they've had credit for over 10, 15 years to the lender. That is more amenable to them.

[00:11:43] That is less of a risk because they've had that credit for longer periods of time and they've kept their credit up. Okay. So everybody's credit is different. I used to hear clients all the time. Well, yeah, man, my neighbor, he got, he said he got a 680 credit score and, and he got this type of rate. But everybody's profile is different. That, that person may have had $200,000 in the bank, right? Reserves. Reserves make risk, it less risky for a lender to lend you money.

[00:12:12] So if you have $200,000 in the bank and somebody else has $20,000 in the bank and you lose your job and you got 200,000 in the bank, guess what? That's less of a risk because you have money to draw from. So everybody's profile is different. It's not just your credit score. That's credit age. Let's talk about new credit. All right. So when people keep applying for new credit all the time, that's a red flag.

[00:12:39] That means that you're having credit problems or you have issues in terms of being able to be cash, don't have enough cash. So what you have to understand is it's always from the lender's perspective. So if you go out and try to get five new credit cards at one time, guess what? The lender's like, well, damn, why do they need, why are they applying for all these lines of credit? What's going on? So you got a lot of inquiries, right? Multiple inquiries.

[00:13:08] So these inquiries, every time you go and you inquire about a line of credit, they actually reduce your credit score. So that's why when people are searching for cars, a lot of times they may go to two or three different dealerships. You get hard pulls, hard inquiries. That's going to lower your credit score, mortgages, all kinds of stuff. So new credit, understand that all new credit isn't good credit. Be selective when you're going and looking at new credit.

[00:13:37] So don't pull and try to get five credit cards at one time. Now, I know there's a lot of these hustlers out here who's talking about, yeah, you apply to, you know, five banks exactly at the same time. And that way you can get approved for five credit cards. Don't listen to that BS because the inquiries will come up eventually and it may hurt you in the long run. Number five, your credit mix, right? Different types of accounts help create a complete profile.

[00:14:04] I gave you the example of a person that just got out of college. Only thing they have is one $5,000 credit card. Pay that on time. That's great. Versus somebody that has an auto loan, a mortgage, a line of credit and several credit cards. Once again, it's a different mix. So now they have more credit history. They have different types of credit, open-ended credit and closed-end credit. Closed-end credit is something that is a finite amount.

[00:14:32] So you could have a 48-month card note that you pay $600 a month for 48 months and after you pay those 48 months, guess what? That line of credit is closed. Or you can have an open-end line of credit, which could be a home equity line of credit. It could be a credit card or something where the balance revolves. It's a revolving balance, okay?

[00:14:54] So these are the different things you have to understand when it comes to what lenders look for and how to position yourself as a good risk versus a bad risk, okay? So now let's talk about some of the biggest credit myths that entrepreneurs believe, all right? So myth number one, I make good money. Guess what? Income doesn't automatically create good credit. Just because you have the income doesn't mean you have good credit.

[00:15:25] Now, yes, lenders look at your income and the more income you have, the better. But what are you doing with that income? Are you paying your bills with it or are you tricking it off, right? So just because you have great income doesn't mean you automatically have good credit. Then another myth is I'll fix it later. So normally later means next year, five years, 10 years.

[00:15:49] Most people don't really focus on their credit guys until they need to do something. And then when they get denied or they get unfavorable terms, then they start worrying about, well, damn, I need to fix my credit. Be proactive, guys. You need to pull your credit report right now. Look at your credit and make sure you're positioned for success. Remember, this is part one of part two where we're talking about access to capital.

[00:16:17] And as an entrepreneur, you need to have access to capital to grow and leverage or to leverage and grow your business. All right. How many businesses do you see that have that access to capital that gives them a runway? Now, here's what I will say about capital. You don't want to get capital and not have anything to do with it.

[00:16:38] You want to be able to take that capital and make money or put it in a position that's going to allow you to make money like inventory or marketing or things like that. You just don't take the line of credit and use it for some BS. All right. So if you keep watching social media, you're going to see all of these these cats out here, you know, stunting and all of that dumb stuff when you can be leveraging your money and building and growing and scaling your business.

[00:17:06] So the best time to fix your credit, guys, is right now to position yourself for better things. Don't forget one, two, three, four. My new credit score dot com. Only twenty nine dollars a month. Cancel aboard any time. It's an A.I. system that literally is four steps. Helps you do it yourself. Don't pay all of that crazy money to law firms and these credit repay agencies when this literally walks you through it.

[00:17:33] And once again, I've used it for some of my clients in the mortgage business. I've told them about it and they love it and they position themselves to get approved for mortgages. All right. So we're talking about some of the myths. Another myth checking my score hurts. No, it doesn't have to. You can do what's called a soft pull. Also, you can go to each bureau, Equifax, Experian and TransUnion, and you can get a free annual credit report.

[00:18:00] All right. So you don't want to go and you don't have to spend money for it. I know places like Credit Karma and all that stuff. Credit Karma's job is to sell you products. OK, they're going to tell you, oh, yeah, we can do this with credit monitoring. They may do that. But the way they make money, guys, is selling you products. OK, and so do a lot of other companies. Another myth. I need somebody else to fix my credit. I just touched on this.

[00:18:28] This is where you this is where you take control of yourself, guys. And you go to one, two, three, four. My new credit score dot com. The numbers one, two, three, four. My new credit score dot com. It's about education, guys. And you need to understand it. Educate yourself about credit repair and about your credit and how to position yourself to get access to capital. That is the key, guys. That is the key.

[00:18:56] So don't just sit there. And I get it. Sometimes you don't know what you're doing and you need help. So if you have to have help, go ahead and spend money with somebody else. But understand everything that they're doing. You can do it yourself. If you don't have the time, I get it. But if you have the time, you need to learn and understand how to manipulate your credit score. And I'm going to say that word again, manipulate. There's ways to manipulate your score.

[00:19:25] So if you're trying to buy something within the next six months, you're trying to buy a car in the next six months. There are ways to manipulate your score that will help you improve it so you can have a better rate on your score. Okay. Of course not. You can't run your business not knowing how much money is in your bank account.

[00:19:54] So why would you ignore your credit profile? Okay. So you need to understand this, guys. Your credit profile has to be strong. There's errors on there. There's fraud. Sometimes there's reporting changes that are incorrect. So you need to monitor your credit periodically. Okay. You need to monitor that. That's big, man. I found something on one of my bureaus. They actually merged my credit report with somebody else.

[00:20:22] And I had stuff on there that wasn't even mine. Now, one of the worst case scenarios I saw was with my oldest daughter. However, she, when we were applying for her to go to college and you get these, you know, loans and grants or whatever, you know, like Pell or whatever it is.

[00:20:42] One of the things is I, she got approved and we pulled her credit report and they had all types of stuff from on her credit report that she had a car note that was based in California. She had a credit card and literally it wasn't her. So she was 18 years old and what had happened was some girl, we got in touch with her in California said that she had the same social security number as my daughter.

[00:21:11] Now, my daughter's name is Taylor Jones, Taylor Jones. And this girl's name was Taylor Jones. They were literally born like two days apart. But I said, this doesn't even make sense because my daughter was born in Philadelphia and she was born in California. And if you know anything about the social security system, the first three digits of your social security number denote the state that you're getting your social security card in.

[00:21:40] So California is totally different than Pennsylvania. So we're like, yo, this doesn't even sound kosher, but literally same date. I mean, two days apart, same age, birthdays, two days apart in the same middle first and last name, same middle initial. And they had some of her stuff on my daughter's credit report.

[00:22:02] But she was saying that her social security number was the same as my daughter's, which we went to the social security office and they were like, no, your daughter's is good. And she had to end up getting a new social security number. I don't know if they were trying to be tricky, trying to be slick or whatever.

[00:22:21] But that was something that was super important because when somebody or your credit is jammed up or somebody's impersonating you or their file gets merged with yours, it can be the difference of winning and losing in business and in life. So if that credit report, luckily the stuff on there before we got it off was good. It was paid on time. But just imagine if it was collections, charge-offs, bankruptcies, stuff like that. So you have to audit your credit.

[00:22:50] All right. Now, before we get to the last segment, guys, let me just share all my social media contact information and resource links. I talked about it, you know, a couple of times. Go to the numbers. One, two, three, four, my new credit score. If you need help in terms of repairing and restoring your credit. Also, if you want to become an affiliate, the company has an affiliate program that's free where you can send out a link to people or companies or whatever, however you want to market it.

[00:23:19] And you can get a percentage of their monthly subscription fee. One, two, three, four, my new credit score.com. Now, anything long you want to connect with me with, hit me on my email. jjones at blackentrepreneurblueprint.com. J-A-Y-J-O-N-E-S at blackentrepreneurblueprint.com. Facebook, blackentrepreneurblueprint. Instagram, I have two IG accounts. The first one is jjonesforreal. J-A-Y-J-O-N-E-S, the number four, R-E-A-L.

[00:23:48] Second one is blackentrepreneurblueprint. LinkedIn, connect with me there. Just go to LinkedIn, type in jjonesblackentrepreneurblueprint. Also, Twitter or X now, jjones001, J-A-Y-J-O-N-E-S-001. And also, YouTube. Make sure you go to YouTube. Hit the subscribe button. Look for Black Entrepreneur Blueprint. We have additional content on YouTube that is not on the show.

[00:24:15] So, for all you first-time listeners, let me just let you know that we drop every Monday morning, 5 a.m. Eastern Standard Time on all your major podcast platforms and YouTube. So, wherever you're watching this or listening to this, make sure you hit that subscribe button. Now, let's go to the last segment of the show. So, I want you guys to understand how important it is, especially for our folk, to have access to capital.

[00:24:42] So, if you look at all of these wealthy families, generational wealth, most of them have access to capital. Now, some of them were born with a silver spoon in their mouth. But there's others that built that generational wealth from the ground up. And to be able to do that, guys, you have to have access to capital. Now, we all know that we get left out of all the rooms. We're not educated from being young about building wealth, owning businesses, leverage, credit,

[00:25:11] and all that good stuff. So, we're behind the eight ball. So, we have a lot of catching up to do. So, it's our duty right now to share this information with your colleagues, your network, your friends, and obviously your family to help build generational wealth. And that's why I'm doing this two-part series. And it's focusing on access to capital. Now, today we talked about pretty much how the game works, how to position yourself,

[00:25:38] how to use or know the different facets from a lender's perspective of what they look for to be able to give you access to capital. Now, next week, we're going to talk about how successful entrepreneurs use that game to build wealth. And so, it's a two-part series about access to capital and building wealth. And these are the things that we need, guys, to be able to change our situation.

[00:26:05] So, we're on the socioeconomic ladder. We're on the bottom, right? We're on the bottom. And there's a reason for that. It's systemic. And it's also, we have to take ownership of that too because we're not necessarily focusing on the things that we need to focus on to move us from point A to point B. I get it. It's hard when you're trying to worry about how you're going to keep your electricity on, how you're going to pay your car note if you're not going to get foreclosed on.

[00:26:35] You have to have your necessities covered first. Been there, done there. I get it. But the conversation has to be deeper. It can't be just surface level. It can't be like, look what I just bought. Look where I just came from. Let me look good on Instagram when I'm really hurting inside. Don't worry about what it looks like on the outside. You need to fix the inside. I almost lost it all twice. Everything. Home, cars, bank accounts were depleted.

[00:27:04] I was blessed to be able to come back two times. And I told my wife, it's one thing to look good on the outside but be broken on the inside. So let's refocus and focus on what we need to do internally. I don't care how it works. We, you know, there was a point in time we couldn't drive. And I'm not a big car guy, but we couldn't drive the cars we wanted to drive, right? It was just like that we were used to driving. All right, we got to pull back. You know, it don't look the same on the outside. You know why?

[00:27:32] Because it ain't the same on the inside. We're trying to make a comeback. And sometimes you got to take a step back to take two steps forward. So once again, understanding and positioning yourself for success is the key. And access to capital is going to help leverage or give you leverage so you can grow and scale your business even faster. So I hope you guys understand this. Please share this with your network and let them understand guys. Credit is important.

[00:28:02] It is not just business credit. It's personal credit. Because when you start a business, you don't have business credit. You have to develop that. And most times they're going to talk about or they're going to look at your personal credit. So as an entrepreneur business owner, make it easier for yourself to have access to this capital to help you grow, scale and leverage your business. Now, I say this each and every week guys, because it is true. We get more and more downloads because of you, the BEB family.

[00:28:31] I appreciate you guys so much. Please continue to share the word about the podcast, the website with the free resources, the whole ecosystem, online courses, everything there to help you elevate your entrepreneur IQ. Remember, it's not about me. It's not about you. It's about us. It's about building an economic power base in the worldwide black community by building and supporting black owned businesses. Love you guys. See you same time next week. Peace. Peace.