Lesson #9 : Credit Building not Debt Building

This post is for people who are NOT looking for a quick fix to their credit. In reality there is not a quick fix. My whole issue is people saying I wanna have a house by march of next year and its Dec. Seriously..Credit Building is NOT a fast easy process.

There is not 1 single step that takes less than 30-45 days to see results that will stay and are not short term fluctuations. people who come here saying I need help FAST !… Your in the wrong place. Nothing is fast in Credit. 30-45 Days.. I post that 100 times a day..

I see so many people posting things they have done, and what they are about to do, and all I see is them being right back in the exact same issue they are in now within 6 months. They are shocked when they get that first or second card and max it out and wonder why the score dropped 100 points.. you did not listen.

With that said if your looking for a quick fix of your credit and do not plan to take care of it after its fixed, do NOT even bother reading this post. You will get nothing out of it.. This post is for the ones that are tired of being denied credit and are looking at a long term solutions and willing to put in the work. With that said…

These are my personal rules to credit rebuilding. What works for you may differ, but these have worked excellently for me.

Rule #1: Credit rebuilding is not debt building.

If you have low FICO scores and want them higher, part of raising them means rebuilding credit. This does not mean rebuilding debt. If you have low FICO scores and want them higher, you should have no excuse for piling on new debt with the new credit you are building. I’ve seen it too often that someone gets a store card from an online predatory merchant and in a year they owe $5000 at 33% interest. Don’t do that.

Rule #2: Three open credit cards to start.

FICO8 scores gives you “free” points as you go from zero open credit cards to 3. The new age penalty for new accounts is lower than the boost you get from going from 0->1->2->3 credit cards that are open. Good starter cards for rebuilding are Capital One (Platinum or Secured) and Discover (Chrome or Secured). One thing I like to see people do is get the Capital One and Discover secured cards right off the bat, and then in 6 months you should qualify for an unsecured Capital One card (QS1 typically). I prefer seeing people avoid getting predatory cards like Credit One, Milestone, Total, Indigo, etc. I also prefer to see people avoid getting store cards because they can hamper your rebuild years later.

Rule #3: The AZEO Method.

This one is a heroic find by whoever discovered it. AZEO means All Zero, Except One. This means you first go and find out when your credit card reports a balance to the credit bureaus. Most cards report on statement cut date. Some report on the first of the month. You can find when your credit card updates by using Credit Karma and look when it last reported. Then, in the future, you can use your cards however much you want, but when they actually report the balances used, all cards should report $0 balance except for one card. The one card that reports a balance should report less than 8.9% but more than $2. So if you have a $300 limit card you will use as your AZEO “one” card, that $300 limit card should report somewhere between $2 and $25. The other cards must report $0 usage, so if you used them in that month, paid them to zero.

There is absolutely no excuse for not doing this during rebuilding. If emergencies come up during rebuilding, see rule 4.

Rule #4: Savings is more important than anything for rebuilding.

You and I both got into FICO hell because we did not plan well in the past. It doesn’t matter if you lost your job, had a medical emergency, or were just irresponsible: we didn’t plan for those events with savings to cover us. Many people who go through a bad life event are able to recover from it in just 6 months, but during those 6 months they stop paying creditors, and that hurts for 7-10 years. So my rule #4 (which is actually my first rule!) is start building an emergency savings account. If you’re rebuilding your financial life, stop buying useless things. Think about turning off cable TV or Netflix or downgrading your phone service. Cut out dinners and bar nights and video games and movies. Just do it for a year, so you can save money towards the next life event — it’ll happen to all of us, this time you can be prepared.

Rule #5: Attack your derogatories, patiently, and expect it to take a lot of time and energy. this can takes YEARS not days or weeks.

Negative tradelines reporting on your credit reports last 7-10 years typically. Attack the lowest hanging fruit first (such as chargeoffs showing balances, or collections outside of your jurisidction’s SOL date). This can take time, it took me 7 months, it might take you a year. I do all of my work in writing, via postal mail, using CMRRR (Certified Mail, Return Receipt Requested). This shows the other party that I am very very serious about both of us following the law, and it increases the chance that someone reads it.

I do not do disputes via the phone or online. This is lazy and you may suffer from it even if it works for others. Once you’ve attacked the low hanging fruit, you can start working out deals with collection agencies to PTD because you’ll have saved money up to pay if they negotiate it. Get it all in writing. Don’t deal with the phone or email, USPS only, CMRRR, and force them to reply in writing. If they want to commit mail fraud, let them.

Also start considering goodwill letters to any chargeoffs or lates you’ve paid for — I say wait 6-12 months of showing great credit usage because the original creditor MIGHT do a soft inquiry to review things, and if they see you’re truly responsible, you may get help. I got goodwill corrections on ALL my lates, but it took almost 6 months of writing 100s of goodwill requests to dozens of people every month.

Rule #6: The Alliant SSL Technique.

FICO8 scores give you a bump if the following are true:
You have an open and active installment loan reporting (student, auto, personal)
That installment loan has less than 8.9% of the original balance left to pay

It’s hard to do this with student loans or car loans. The SSL Technique only works if you don’t have any student or auto or mortgage loans open and reporting. If that’s the case, go to this link and read the first 2 pages over and over until you get it. Then do it. If you ask me a question that is answered in the first two pages there, I will push the edge of the rules here and be extremely sarcastic. Ofcourse I am never sarcastic we we know.…/

Rule #7: The SCT (Shopping Cart Trick)

Please don’t do this right away. On one hand, getting ONE store card using the SCT Method is probably fine — I did it myself with a store I shop at and have for 16 years. I regret it. The worst thing people do is use the SCT to get 10 store cards and then charge them all up with items they can buy cheaper elsewhere, and then they’re paying 30% interest on stuff they overpaid for by 30% already. FingerHut and Overstock are two common websites that on very very rare occasions have good prices, but are usually priced with predatory pricing because they give out credit lines like Halloween candy corn. You don’t need the SCT to rebuild. It has its purpouse but if you are wanting to build long term credit the SCT is not the answer. And I know me saying this is going to fall on deaf ears but I gave it a shot. Lots of us made the mistake of using the SCT and I swear it holds my credit limits down with other lenders when I apply. So avoid it like the plague, none of the SCT cards are useful for emergencies or most common lifestyle needs. Also remember that buying a TV on an SCT card doesn’t get you Visa/MC extended warranty coverage.

Rule #8: Make a real budget.

If you don’t have a budget, you need one. If you aren’t abiding by your budget, you need to remake it and abide by it. The average re-builder that I have helped in the past 2 years or so still spends over $4300 a year on useless items. It amazes me that people will swear they can’t afford $200 for a secured card but in the last 3 months they spent $300 on Panera Bread runs at lunchtime for $16 each. $10 Starbucks coffee 2X a day, and getting their nails done one a week. Everyone can make a budget, and everyone should live by it until their scores are in the 700s — and once they reach 700s, they should still live by their budgets!

Rule #9: Befriend a local mechanic.

Every town has at least 2. My town has 7 within a 2 mile walk. Go meet them all. Meet the owners. Talk to them and ask them if they ever sell driveable cars at a good price. Three of my local mechanics ALWAYS have cars for $1500 that will get another 50,000 miles out of them. One of these mechanics speaks broken English but he’s got magic hands when it comes to fixing up beaters that will drive another year or two without issue.

Now that you’ve befriended them, consider them when it’s time to get a car. Buying a car for an interest rate over 6% or with less than 20% down is going to get a lot of folks back in credit hell. You can probably buy a nice beater for $2000 or less, for cash, and drive it for years while saving up 20% down payment and fixing your FICO scores to qualify for less than 6% interest. Think long term.

Rule #10: Never max out any card.

FICO looks at any card as “maxed out” if you let it report more than 88.9% utilization one month. This can absolutely CRUSH your scores during rebuilding. Do not do this. If you have no choice and must carry a balance, try to carry it on 2 cards or 3 cards. You want any one credit card to report less than 38.9% otherwise FICO will ding you for that cycle til it’s paid down. If for some reason you have to let a balance revolve, see rule #4 again and go back to your recent spending and highlight every single luxury item you bought that you should have avoided so you would have more savings. There are reasons to carry a balance at 0% interest for a year (new air conditioner, or whatever), but when you’re rebuilding, you’re focusing on better credit, not more debt.

Rule #11: Autopay, autopay, autopay. Also, autopay.

The last thing I believe are people who say “I forgot to make a payment and found out 3 months later than I am reported as 60 days late”. No, you forgot to set up autopay. In fact, stop right here and log in to ALL your credit cards (store cards too) and set up autopay. Just go do it. Now. Set it up for the minimum payment due and tie it to a checking account where you know you will always keep a few hundred dollars available. I personally have a separate checking account JUST to make payments from. This protects me from accidental overdrafts. There is no excuse for not making the minimum payment when you have the money and “just forgot”. Seriously, go do it now, across the board.


In my opinion, I would NOT apply for another card if you’re reporting 76% utilization on one card and 38.3% utilization on another with balances on 50% or more of your cards.

The cleanest profile you can manage involves the following “tree”:

Utilization on less than 1/3 of open cards — if you have 4-6 cards total, you want to show usage on only 1 of them. If you have 7 or more cards, 2 cards showing activity is fine. This hurts your FICO score for too many cards showing usage.

Utilization of less than 28.9% as your highest on any card — 48.9% is probably acceptable but I’ve seen denials and/or low starting limits because of higher usage. Getting your usage down is important before applying so you can maximize approvals and maximize starting limits. Aggregate utilization of less than 8.9% total limits If you can get those 3 things “corrected” over time, your scores should go up pretty nicely.

One final note.. If you read all of this.. and agree with the concept. And are still using Credit Karma to monitor your credit scores.. STOP IT.. PLEASE by what ever means you need get a FICO score tracker, You need to look at all 3 CBs and watch your FICO 8 scores.

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