“I’ve Been a Ghost in the Credit System…”

April: So, let’s say I followed some not-so-great advice and never acquired any credit. But now there’s a big purchase I want to make that really requires credit — and it’s not a bad purchase. It’s a necessary one.

What do I do now that I’m starting out? As Zach said, I’ve basically been a ghost in the credit system. How do I become… a real girl?

Robert: Well, before we get into that, April — if you don’t have any credit, you’re not going to get what you want to buy. You have to have credit established.

April: Oh, wow.

Robert: If not, you’ll have to depend on somebody else. And at 41 years old, you need to remember what I told you about 20 years ago. It’s only four little syllables:

“Yo-yo, you’re on your own.”

Y’all remember that now. And yes — you can tell your kid that when they get out of college. Excuse me… you should tell your kid that when they get out of college.

Yo-yo, you’re on your own.

Zach: I wanted to have a house without my wife’s credit score.

Robert: That’s a bad position there, Zach.

Zach: Grateful for her. I had no credit.

Robert: You fell in love that day, didn’t you?

Don’t Fall Into the “Monthly Payment” Trap

Robert: Before we get into starting credit, I want to say something. In another episode, I talked about the $37 minimum payment — and the trap of thinking only in monthly payments.

So, let’s talk about cars for a second.

You go into a dealership with no credit or bad credit, and they tell you, “We can put you in this car for $300 a month.” And everybody lights up: “Yes! I want a car for $300 a month!”

Now, there are two situations here.

If you don’t have a car and you need one to get to work, and you have no credit or bad credit, and they’re offering you something you can afford — unlike some financial advisors, I’m not going to tell you never do that.

Phase one: If you truly need the car to work and that’s what you can afford, go get the $300/month car.

But here’s the warning: don’t buy based on emotion or the monthly payment alone.

“I can buy this because it’s only so much a month…”
“I can buy that because it’s only so much a month…”

Every time you do that, it’s ching-ching-ching — and you don’t even know where you are financially because all you’re looking at is the monthly payment.

The real cost is the price of the item plus the interest they’re charging you to finance it.

And here’s something that drives me crazy: car loans used to be 36 months, maybe 48 months. Now I’m seeing car loans for 72 months.

April: Does the car even last that long?

Robert: Sometimes it doesn’t. That’s why you have to be careful.

If you’re buying a car based on monthly payment, you might be making a mistake — unless it’s something you absolutely need, and you’re planning to work your way out of it later.

But if it’s something you want and you’re going to pay on it for six years… you may want to reconsider.

Why Credit Matters (Especially for a House)

Robert: With all that being said — there are things you can’t buy with no credit or bad credit, and one of the biggest is a house.

You can’t buy one with no credit unless you have enough cash to write a check and pay for it.

Zach said earlier he had no credit, so he had to lean on his wife. But they were a good partnership, because he had the cash to help pay for it. Her credit got the house, and his cash helped pay for it.

So Zach’s not just a bum.

Zach: I’m more than a bum.

Step 1: A Credit Card (Yes, I Said It)

Robert: If you don’t have any credit at all… and I know some people might throw darts at me… but this is a practical podcast.

One thing you may need to do is get that “bad word” thing:

A credit card.

That is one of the ways to establish credit.

Now, some people can’t automatically get an unsecured credit card.

• Unsecured means you don’t put up collateral. You get a limit, and it’s not tied to a specific asset.

• Secured means you put money down — like $200 or $300 — and that becomes your credit limit.

If you can get unsecured, great. If not, a secured credit card is often the starting point.

And make sure your card reports to all three credit bureaus:

• Experian

• Equifax

• TransUnion

That’s who tracks your payment history and helps determine your credit score.

A Big Warning: If You Can’t Control It, Don’t Use It

Robert: Now, I want to interject something. Zach reminded me of it earlier.

If you’re an alcoholic and you’re recovering, you don’t need to be around alcohol.

Well, some people have the same problem with credit cards.

If you have no control and you keep spending because it’s convenient, you’ll put yourself right back into spiraling debt. If that’s you, you may need a different strategy.

Zach: You’re going to have to find a spouse with good credit.

Robert: Absolutely.

Keep Utilization Low: 30% Is the Upper Limit

Robert: Another thing I’ve learned from banker friends: when you get a credit card, you don’t want to use up all of it.

Let’s talk about credit utilization.

If you have a $500 limit, 30% is $150. But don’t charge $150.

Charge $148… or better yet, aim for 20%.

If you max out a $500 card, you will not help your credit — you will hurt it.

April: They don’t like it when you spend all of it.

Robert: No. And you have to pay attention to that.

One banker friend told me 10% utilization is ideal, but when you’re starting out, just remember: stay well under 30%.

Pay On Time — Every Time (And Watch for Dumb Mistakes)

Robert: And you have to make sure you pay the bill on time — within the grace period.

But the main thing is: pay on time.

Set up auto-pay. Draft it from your bank account. Do whatever you have to do — but never be late.

April, I’m about to tell you a story I don’t think I’ve ever told you.

April: Oh no…

Robert: When you make payments, be careful you don’t key something in wrong — even by a penny.

If you mean to pay $3,422, make sure you don’t accidentally pay $3,421.99 or something off.

April: Did you do that?!

Robert: I didn’t. But here’s what happened.

A business partner and I were trying to buy property quickly. I went to the bank to get a line of credit to secure it before converting it into a loan. In the old days, we could do that in four business days — can y’all believe that?

The banker says, “Robert, there’s a problem.”
I said, “What?”
He said, “Your credit score is 600 and something.”

I said, “You’ve got to be kidding me.”

He pulled it up and showed me: I had financed a car through a credit union. I made payments faithfully — but the teller missed my payment by one penny.

So on paper, I had been “late” every month for three years.

April: No.

Robert: Yeah. That’s what I said too.

Thankfully he understood and helped me clean it up.

So the lesson is this: when you make a payment, verify it’s correct. And yes — you also have to watch out for other people’s mistakes.

April: I have a similar story. I had a car loan. They mailed me my bills, I paid on time, sometimes I paid extra — trying to build my credit.

Then I stopped getting my bills. Turns out they had a typo in my address — not super obvious, but wrong. I missed a payment, had to call, and they charged me $10 for having the “wrong address” on file… that they entered wrong.

So yes, you have to look out for other people’s mistakes too.

Robert: Exactly. You don’t think to check those things — until they cost you.

Another Option: Become an Authorized User

Robert: If you can’t come up with a couple hundred dollars for a secured card, and you can’t get an unsecured card…

Then you may have to go to mama, daddy, brother, sister — or your spouse — and beg them not to let you use their card…

…but to add you as an authorized user.

If they do, make sure:

• They always pay on time

• They keep utilization low

• They’re never late

Because their habits will affect your credit.

A “Credit Builder Loan” That’s Really Borrowing Your Own Money

Robert: Here’s another method I’ve used a lot — both for establishing and rebuilding credit.

Go to a real financial institution. Don’t go to loan companies.

April: If it says “title loan” or “cash advance”… all the above.

Robert: Exactly. Because it shows the bureau you can’t borrow from a bank.

So here’s what you do:

You go to the bank and say, “I want to borrow $1,200.”

They’ll say, “You don’t have credit. We can’t lend to you.”

And you say:

“No, you can lend to me. I want you to take the $1,200 I’m borrowing and put it into a savings account or a CD — and I want to borrow against that money.”

Now the bank has nothing to lose. The loan is secured by the same money.

And then you negotiate. If they’re paying you 2% on the savings/CD, they shouldn’t be charging you 12% on the loan. Try to get something like 5%.

If you borrow $1,200 at 5%, it might cost you roughly $60 over time — and you’ve established credit.

Here’s the cool part:
When you finish paying it off, you still have that $1,200 sitting there — you’ve built savings while building credit.

Just don’t keep borrowing and borrowing. Use it as a tool to establish credibility.

The Two Biggest Drivers of Your Credit Score

Robert: Here’s something important:

• Payment history is about 35% of your credit score.

• Credit utilization is about 30% of your credit score.

That’s about 65% of your score right there.

So if you do nothing else:

1. Pay on time

2. Keep utilization low

That alone puts you way ahead.

How Long Does It Take?

April: And for people starting out, here’s what can happen if you do it right:

• In 1–2 months, you may see your first score

• In 4–6 months, you may qualify for an unsecured card (if you started secured)

• In 6–12 months, you can qualify for better cards and better rates

• Around 12 months, you could be near a 700 score if you’re consistent

And if you’re rebuilding, it’s similar — but you’ll also want to check your credit reports.

Rebuilding Credit: Check and Dispute

Robert: If you’re rebuilding, check all three reports:

• Experian

• Equifax

• TransUnion

Look for:

• Late payments

• Charge-offs

• Collections

• Incorrect balances

• Accounts that aren’t even yours

Believe it or not, sometimes accounts show up on your credit that aren’t yours because someone typed something wrong. In today’s world, you can’t depend on anybody but you to make sure everything is correct.

If you find errors: dispute them.
If you owe something: negotiate it down and pay it off.
If something needs correction: ask for a goodwill adjustment.

Also: look for credit cards with no annual fee.

Keep It Simple: Don’t Try to Fix Five Things at Once

Robert: Don’t get over two things you can handle at first.

You’re also trying to:

• get out of debt

• stay on a budget

• get ahead in life

So break it down into small bites.

In construction, I once talked to a bonding company about a $10 million job. They said, “Is it from scratch?”
I said, “No — it’s renovation across four buildings. It’s not one $10 million job. It’s four $2.5 million jobs.”

That’s how you have to think.

Don’t Close All Your Old Accounts

Robert: If you have old accounts with no balances, don’t close them all. Don’t have too many — but keeping older accounts open can help your credit because it shows history and available credit you aren’t using.

And remember: avoid too many applications and hard pulls. Too many hits can slow down your rebuild.

Give it 12–24 months and you can be back where you need to be — if you follow the process.

Focus on the Process, Not the Trophy

Robert: One thing I told my son when he was playing football:

If your coach comes in saying, “We’re going to win the state championship,” that’s your target.

But once you understand the target, don’t stare at it every day.

Concentrate on the process that makes you the best player you can be. If you focus on the process and work hard, eventually you can look back and see how far you’ve come.

Goals are important. You need to know where they are.

But if you keep looking at the goal and don’t work the process, you’ll never get there.

So stay true to your process. Take a deep breath. It will come together.

But if you don’t start, you’ll never get there.