The Sugar Daddy Podcast
Ready to normalize talking about money? Then welcome to The Sugar Daddy Podcast. Every episode will get you one step closer to your financial goals. Whether that is learning how to invest, budget, save, retire early or simply make better money choices, Jess & Brandon have got you covered in a way that's easy to understand, and easy to implement. Tune in as they demystify the realm of dollars, so it all makes cents, while giving you a glimpse into their relationship with money and each other.
Brandon is an award winning licensed financial planner, and owner of Oak City Financial, with over a decade of experience and millions of dollars managed for his clients all over the United States.
New episodes published the first three Wednesdays of every month.
The Sugar Daddy Podcast
95: How to Build and Defend Your Credit Like a Pro
Think your credit score is just a number? Think again. In this episode, Jess and Brandon break down the five key components of your FICO score—and why they matter more than you think.
Learn how to:
- Boost your score with smart, strategic moves (not guesswork)
- Avoid the myths that hurt more than help
- Protect yourself from identity theft with simple, overlooked security steps
Your credit score doesn’t define you—but it does impact your financial options. Tune in to take control of your credit and open doors to better rates, approvals, and opportunities.
Visit prenups.com/sugardaddy to learn more about fair prenups that help couples plan for a healthy financial relationship.
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Notes from the show:
This episode is sponsored by Prenupscom. The truth is, every married couple has a prenup a set of rules that defines your legal and financial relationship with your spouse. You either choose your own rules or use what your state gives you. At Prenupscom, they write prenups that actually help couples stay married. Their specialty is fair prenups that help couples plan for a healthy financial relationship. Don't let the state decide your marriage rules. Make your own. Visit prenupscom. Slash sugardaddy to learn more. That's prenupscom. Backslash sugardaddy and get the prenup that helps you stay married. Already married, no worries, they do post-nuptial agreements too. That's what Brandon and I did after eight years of marriage. In today's episode, we are going to talk about credit, the five factors that impact your FICO credit score, checking your annual credit report and locking your credit bureaus for safety. This is a quick one, but it's going to be meaningful.
Speaker 2:Sugar Teddy Podcast yo Learn how to make them pockets grow.
Speaker 1:Financial freedom's where we go Smart investments, money flow meaningful. Hey babe, what are we talking about today? Today we're talking about credit and what goes into our credit score, because people need to know that there are a variety of factors that go into their credit score and what you can do to boost your credit.
Speaker 2:Yes, yes, unfortunately, credit is kind of a game you have to play sadly In the United States.
Speaker 1:Yes, in the.
Speaker 2:United States, but there is a correct way to play it and there's a wrong way to play it, so we want to make sure that you guys understand what are the things that you should be doing in order to help and fit your credit?
Speaker 1:Yes, and we all know, or should know, that your credit score can have a positive impact on things like the kinds of loans that you are able to get. If you need to purchase a vehicle, you want to open, sometimes, your utilities getting a new cell phone, putting a deposit down on an apartment, getting a new cell phone, putting a deposit down on an apartment, the higher your credit score, the more favorable your terms and conditions, as well as your interest rate, which we know is what's going to ultimately determine what you're paying and how miserable that interest rate is. So the better your credit, the better the interest rate typically is.
Speaker 2:Also, the big thing is we want to stress is that your credit score doesn't define you. So if you've had some issues in the past, you've had some hard times where it leads to you not having a good credit score. This is not to shame you or anything of that nature. This is to provide you with information to help you improve your credit score so that you have better options available to you. Like I said, it doesn't define you, but having a good credit score is very beneficial in a lot of ways.
Speaker 1:Yes, you are not your credit score. Having a low score from whatever has happened in your past is not who you are as a person. It doesn't make you a bad person None of that. We don't believe any of that here, so that is not what this is about.
Speaker 2:You know also, the thing is too is like okay, if you have an 800 credit score, congratulations, Good for you, but it doesn't change you. I mean, it doesn't make you any better than anybody else.
Speaker 1:Yeah, exactly, but there are things you can do to boost your credit score. But the first thing you need to know is that your credit score, your FICO credit score, is made up of five components and they are broken down by percentages, meaning that all of these five components are not weighted equally. So that's an important thing. So 35% of your credit score is made up of payment history. So this is why, if you've ever heard, don't close your oldest credit card, this is one of those reasons Because you want to have that long-term established credit.
Speaker 1:Because you want to have that long-term established credit. So one thing that my mom and I think your mom did for you is they put us on to their credit cards as authorized users when we were teenagers. So, technically, I've had an American Express card since I was 17 years old, right, so that is one of my oldest standing accounts, and what you want to make sure that you're doing is that you're paying any kind of bills on time. So your payment history on those longstanding accounts, on all of your accounts. But those longstanding accounts really are important. So if you want to help boost, for example, your child's credit score, you can make them an authorized user If you're using credit cards responsibly, maybe they get to put their gas on it. Maybe they, you know, when they go to the movies they put their charges on there. Then it gets paid off and so you have that good standing of paying your bills on time. That's what you're trying to look for here.
Speaker 2:That is the biggest part of your credit score is making sure that you do not miss payments on any type of loan that you have, so that you're not missing credit card payments, you're not missing student loan payments, you're not missing mortgage payments, those that is the heaviest weight on your credit score and it's also the hardest thing to come back from when you've missed a ton of payments.
Speaker 2:Because basically, what it is is that they take a timeframe I'm not sure exactly what the timeframe is from a year standpoint, but within, within, like just say, for hypothetical sake here say five years for the payments, and if you miss a payment it's going to take five years for that to roll off. That's terrible. So it's like you know, once you make a payment and you miss one, it's going to take a long time for it to roll off. So you could have kind of like a speeding ticket. Like a speeding ticket, you could have missed a couple of payments, like four years ago, yeah, and now you've made every single payment on every single one of your debts, but those four or few payments that you missed four years ago are still going to be there for a certain period of time until they roll off.
Speaker 2:Yeah so the biggest thing that you want to make it on time. Early is even better. Yes, because, like I said, this is the biggest weighted part of your credit score.
Speaker 1:Yes.
Speaker 2:All right, real quick. I want to speak to the person listening who feels like they can't work with a financial planner yet because they're carrying a lot of debt. First of all, I see you and I need you to know. You're not broken, you're not behind. You're not behind, you're just in a tough season. I created something just for you because I've had people reach out who are serious about changing their money story. But the full financial planning package just wasn't the right fit yet. So I built a new service through Oak City Financial that's focused completely on debt reduction.
Speaker 2:No fluff, no shame. You'll get a one-time planning session completely on debt reduction. No fluff, no shame. You'll get a one-time planning session, a personalized payoff strategy, your own financial dashboard and monthly coaching. If you want extra support while you climb out, it's $300 to get started and $100 a month. If you want that ongoing guidance, that's it. This is about helping you get unstuck, not making you feel like you failed. If this sounds like what you've been needing, go ahead and schedule a call with me. The link is in the show notes. Let's take the first step together.
Speaker 1:The next is 30%, which is your credit utilization, and this is how much of your allotted credit are you using. You want to keep this number as low as possible. So if you have a credit card with a $10,000 limit on it, you don't want to be sitting at $9,900 on that credit card because your utilization rate is going to be extremely high. If you can keep your utilization to under 30%, that's where you want to be. I mean the lower the better. Right. You want to have a lot of access to funds to this credit without actually using it.
Speaker 2:And ideally, in this scenario, when you're saying, like you know, a 30% credit eulage with the credit cards, we always stress Did you say eutelage I mean Is that a word Usage?
Speaker 1:We're going to have to look that one up.
Speaker 2:Usage.
Speaker 1:People love your words and then they'll send me messages like this really is a word, look, and I'm like okay, it just sounded really weird.
Speaker 2:I don't know. It came out of nowhere, if you know if utilage is a word, let me know. But for this scenario, you know, with the 30% usage you on your credit cards, we're still stressing Pay those off, yes, Monthly. Pay off the entire balance each month because you don't want to have to pay those high interest rates.
Speaker 1:Yeah, exactly.
Speaker 1:So this is also one of those things where if you're going to be calling which we always encourage on an annual, maybe even once a year, twice a year type basis calling your credit card companies asking them to raise your spend limit, because that helps inversely positively affect your credit utilization.
Speaker 1:If you have a higher allotted amount of money that you can spend and you're not spending it, then you have a lower utilization, which is again going to factor into this. So let's say you have a $5,000 credit limit on one of your credit cards, you've been paying on time, maybe you have a zero balance, you've had it for a couple of years. Call them A, ask them to lower your interest rate because you should be doing that and a lot of times they will, even if it's for a certain amount of time and then ask them for a credit increase because if you have a higher amount of money that you could spend and have access to but you're not using it, that will positively impact this credit utilization score, this percentage that you want to keep as low as possible. So typically you can do that once, maybe twice a year, especially if you're in good standing and the more credit you have accessible to you with the least amount of usage, the better.
Speaker 2:Yeah, and for those individuals who are trying to improve their current credit score, let's just say you are sitting right now at 40% credit card utilization. Asking for that credit increase could help drop you to that 30%, or maybe a little bit lower than that, and that will increase your credit score.
Speaker 1:Exactly. That's where that gaming part comes in. Maybe you haven't paid off that debt, but if your available credit goes up, then this is like fractions, right, you're inversely, percentages, percentages. Yeah, you're helping your percentage. Your credit history is 15% of your score and this is how long you've had those accounts.
Speaker 1:So, again, maybe you have a lot of money in the bank, maybe you have a ton of savings, but maybe you've been scared of credit cards and now it's time to purchase a car, get an apartment, and they're like, oh, you don't have any credit history. And you're like, yeah, I pay everything in cash, I have a ton of savings. Like this is what we want, isn't it? No, it's not. And this is why it's a game, because we need to.
Speaker 1:Especially if we're going to have teenagers, young adults, we need to be setting them up to have a credit history. And so, again, adding an authorized user, this is something that you can do to help boost that credit history for your children. Because, not having any credit history, even if you have a ton of money in the bank, you're responsible, you're paying everything in cash. Now, banks don't know that you're a responsible lender because you have not borrowed any money right, or a responsible, not lender, a responsible borrower, excuse me. So they want to actually see what your history is with borrowing money and they want to see that that's a positive one. So having some sort of credit history is going to be important, and it's 15% of your score.
Speaker 2:And I also want to stress here is that there are other people within the financial social media realm that are like oh, you don't need credit cards, you don't need credit for this and this and that. That can be true, but it's a much more strenuous process to do anything when you don't have a credit history. Can it be done? Yes, Would it be easier if you just opened up a small credit card Significantly.
Speaker 1:Brandon is talking about Dave Ramsey, who loves to say that you don't need to have a credit card or credit history to get a mortgage, which is true, but, again, the process of proving that you are a responsible borrower without a credit history is much more difficult and requires a lot more paperwork.
Speaker 2:And a lot more money up front.
Speaker 1:And a lot more money up front. So like, why go through that? Credit cards are not bad we talk about that all the time If you use them responsibly you understand these components, like Dave Ramsey looked me in the face and told me you don't use credit cards.
Speaker 2:Yeah, credit cards aren't bad. It's when you have bad habits and use credit cards incorrectly. Yeah, that's what it is.
Speaker 1:Right, but I'm glad that we have the credit history that we have, because anytime we've needed a mortgage, a refinance, a new car, whatever it is, it's been easy breezy because we have such a longstanding credit history. 10% of your FICO score is new credit, so how often are you opening up new lines of credit? So, whether that's a personal loan, mortgages, car loans, credit cards, there's like this fine balance of like.
Speaker 2:This is the gaming part, because they don't want to see you opening up too many new credits.
Speaker 1:Right.
Speaker 2:Because then that's just saying to them that's a red flag that like you don't have enough money, why are you opening? So many new lines of credit, but then you don't want to have too little, because then that just affects your credit score from a negative standpoint.
Speaker 1:Right, this is also when, let's say, you are in, maybe, an underwriting process for a mortgage, your lender has probably said don't go and buy anything big, don't open a new credit card, don't buy a car, don't go buy furniture. You need to keep whatever's in this bank account and these balances as steady as possible. Right now we are not opening and pulling credit from other places, so you have to be strategic. You have to make sure that you're, you know, kind of playing the game. So we recently posted I opened two credit cards within a day of each other, which I haven't done in years, but one of them was offering 70,000 American Airlines miles and then the other one was offering 18 months of zero interest for balance transfers. And so, because we knew we were going to be moving some money around and some debts around, those two credit cards made a lot of sense and so I opened them back to back and I haven't done anything else since.
Speaker 1:Right, my credit score went down two points like a month after and then went up, I think, 12 points a month after that. Again, I knew that we didn't have anything else coming up. We weren't going to be opening up any big lines of credit, nothing like that and because of those two credit cards I ended up adding another almost $50,000 to my available credit, so my utilization score again went way down. So it's a game. You have to be strategic. But those store credit cards especially if you're a younger person and you're listening to this, and stay away. You're at Old Navy and Victoria's Secret and Kohl's and all these places. Those are the credit cards where I'm like, really stay away. Like those APRs are so high. The benefits do not outweigh the payments.
Speaker 2:Also. The thing is too like. This is when you also hear about the difference between, like, a soft pull and a hard pull for checking your credit score, and you don't want to have too many hard pulls because then that can affect your credit score negatively.
Speaker 1:Yeah, a hard pull is, you know, those car loans, personal loans, mortgages, soft pulls, depending on the type of credit card, is typically like a store credit card, um. So sometimes you'll see offers where it's like this is not a hard pull, you know, no dings to your credit score. This is why they're saying that, because if you have too many of those, it will negatively affect your score. So just be mindful. Yes, and then the last thing is your credit mix, which comes in at another 10%. So, 10% credit mix. This is what kind of available money do you have to you? Is it on credit cards? Is it personal loans? Do you have a mortgage? Do you have a car loan? All of those loans are set up differently. A personal loan is set up differently than a credit card. A credit card is different from a mortgage. A mortgage is different from a car loan. They want to show that you have like a mixed bag of loans. Again, not too many.
Speaker 2:Yeah, and once again, this is the game portion of it that you kind of have to play the game to make things easier for yourself in the long run Because, like I said, you could be someone that just has. You're doing well, you have a great income and you're like why don't I just pay everything for cash? This is where it can negatively affect you.
Speaker 1:Right. One thing that I really like to do and this is just me kind of being neurotic, but I really love paying off our credit cards throughout the month, so I don't wait until the payment due date. Some of our credit cards are set up on automatic payments, especially the ones where we don't typically spend, so maybe there's like a random subscription that's still on there for 30 bucks or something. I'd rather that automatically pay and may not have to think about it. But for the cards that we use for our daily spending, which end up being several thousand dollars a month, I like to just pay that as I think of it, I'll open my app, I'm looking at our points, our miles, et cetera, and I just make a payment. Because, again, all of that is going to factor into that utilization, right? If I pay off my card two weeks before its due date, well, guess what? My utilization of what I have available versus what I'm using has now been processed, and so those are ways where you can make smaller payments throughout the month, to kind of gamify this score.
Speaker 1:And a lot of times, if you're maybe going through a credit repair program, something like that, they'll tell you make multiple payments throughout the month instead of waiting for you know the actual due date. There's also a difference between the due date and the statement date. So those are things that you need to look at, because that is a rolling calendar when something is due and the statement close date is not necessarily the date that your actual bill is due. So looking at those and getting ahead of the payments from the statement close date versus the due date can be a very positive thing for your credit score. Yeah, all right. So, as a quick recap, 35% payment history, that's are you making your payments on time? Don't be in default, don't be delinquent, don't be late. Pay on time Absolute bare minimum. Pay the bare minimum instead of being late.
Speaker 2:One extra call out there is also there is a difference on your credit score if you are 30 days late compared to 60 days late, compared to 90 days late.
Speaker 1:And you'll see that on your statement.
Speaker 2:So like 30 days late is not as bad as 60 or 90. But just don't be late. Yes, that's the idea Don't be late, but just letting you know. If it happens, if you hit that 31st day, go ahead and pay it. So it's only 30 days late and not 60 days late.
Speaker 1:Yeah, that's true. 30% is credit utilization. So again, how much of the money that you have available to borrow are you actually using? Try to keep that as low as possible, preferably under 30%, but the lower the better. 15% is your credit history. So how long have you had available credit to you? 10% is new credit. How often are you opening up new lines of credit for yourself? And then, 10% is that credit mix. Is it a mix of mortgage, personal loan, credit cards, car loans? We want to see that there are a variety of loans or assets available to you, money available to you. So keep that in mind the next time you you know open a credit card, get a loan, start paying off your things. That there are these five factors that go into your credit score.
Speaker 1:Now, these next two things we've talked about often. We cannot stress them enough, especially with all of the online shopping. Most of us have our cards saved to various portals or Amazons or you know whatever. It is Shopify. You need to make sure that your social security number on Experian, transunion and Equifax is stored as a freeze, so you can go into TransUnion, equifax and Experian and basically freeze your credit, and what that means is that somebody else cannot open a new line of credit in your name.
Speaker 1:So this is where we're talking about having your identity stolen, right? We don't want that. We don't want to see that people are opening accounts in our name, and so the easiest and fastest and freest way that you can do that is to freeze your credit bureaus. You can thaw them or unfreeze them at any time. So when I just talked about opening those two credit cards, I actually had to go in. Yes, it's a little bit of a pain in the butt, but guess what? I'm never tempted to open a random store credit card or, you know, get got at the counter to save 10%, because I have to go through a whole process to thaw my credit in order to open up my bureaus so that my credit can be pulled. So this is one of the best ways that you can safeguard yourself from fraudulent activity, as well as people opening credit in your name.
Speaker 2:Yeah, this is the easiest way, because when your identity is stolen, one of the first things they're going to do is try to open up a new credit card. Yep, because that's the easiest, because none of it has to be done in person. Nothing of that nature could do it all online, and so freezing your credit bureaus completely prevents that from occurring. So, you know, it's like I said, like just as you have to set up an online profile for each of the separate bureau bureaus, and then you can go ahead and easily take a button. You just click, go ahead and freeze it all. It is so simple, simple and so many people don't do it. It is crazy, like honestly, to do all three.
Speaker 1:take the maybe 20, 30 minutes to set them all up to set them all up and have them frozen I've had mine frozen for so long that, like I still have the paper copies of it because they didn't always have an online portal. Now on Experian, TransUnion and Equifax, you have an online portal.
Speaker 2:You can literally do it on the app.
Speaker 1:I mean, there's no excuse. So if you are still getting accounts open in your name, your identity is stolen. That's on you, Honestly.
Speaker 2:Also one additional thing that we do outside of that is, with our credit cards. We have alerts set up to let us know when purchases are made.
Speaker 1:Yes.
Speaker 2:And the reason for that is, like I'm going to say, like a year or so ago I got an alert that I had made like two, three purchases back to back at Walmart, while I was just sitting on the couch watching.
Speaker 1:TV. Not even that was yeah, yeah.
Speaker 2:And I was like you know, I had the alert set up and thankfully went ahead and saw that.
Speaker 2:So once I saw the alerts, what I immediately did is I froze the card itself so that no more spending could be done on it, went ahead and called into my credit card company and let them know. Hey, you know these last three purchases. They were not me, that's not, and they were all taken care of. But all that happened was all that was. That was able for me to catch it so quickly because I had the alert set up.
Speaker 1:Yeah, and I'll take it even a step further, because I have so many credit cards and most of them I don't use. I either lock those or I have very, very low spend limit set for notifications. So for most of them I have a notification that any purchase over $20, I get a text message. So I can tell you right now, if somebody were to try to use one of my cards that I don't actively keep in my wallet, I don't actively use it I would instantly get a text message saying you know, this amount of money was spent $21 was spent and I would know that somebody's trying to do something.
Speaker 1:Because typically what people will do, especially if they're trying to steal your identity or steal your credit, is they'll make small transactions first. They're not going to go out and buy thousands of dollars, they're going to test it, they're going to go to the gas station, they're going to buy a Coke, they're going to buy some snacks, whatever. And so setting up those alerts for the small limits helps you stay alert to what's going on. So in most cases you can actually lock those credit cards so that they can't be used at all, but then definitely set up the spending alerts. And then, for the cards that you're using frequently.
Speaker 1:You can do the same thing, right Any purchase over $100, any purchase over $500, whatever your spend patterns are, try to figure out what's outside of that pattern so that you're alerted very quickly. I can tell you, because I very rarely shop at Walmart, that if I, if there's a charge at Walmart, I always get a text message from that credit card saying was this you? Because it's outside of my normal spending pattern. So there are things that you can do that are completely free of charge. Only take you a few minutes to set up so that you can stay safe.
Speaker 2:And once again, this is also another layer of protection when it comes to using credit cards that is not available to you on a debit card. So in my scenario, somebody got my credit card number trying to make purchases. I was able to stop it, call it in. No money was taken out of my pocket. Now, if I had been the person who always used my debit card out and about going to a store and swiping it and someone got that number, that would have been actual cash out of my bank account, so it would have been gone and it would have been a much longer process for me to get it back if I actually did get it back.
Speaker 1:Yeah, because the bank is not as incentivized to get your money back versus their money.
Speaker 2:They're way more incentivized to get their money back.
Speaker 1:Yeah, and then really the last thing, aside from understanding what goes into your credit score and how to properly maintain your credit cards so that you're not a victim of identity theft, is to also check your annual credit report. So you can do that once or twice a year at least. I don't know if the rules have changed, but at least once now a year you can do it completely for free, I know, during COVID times they did it twice For a few years.
Speaker 2:it was like you got at least two times a year free yeah, bare minimum check your full credit report.
Speaker 1:This has nothing to do with your score. Typically, you have to pay an additional amount to actually get your score. Most of your credit cards, even your banking institution, will now give you a roundabout figure of what your score is. You know your FICO score, so I wouldn't worry about that. What you're looking for in your annual credit report is what are the accounts that are on there yours, yours? Are they opened in your name? Are you aware of them? Is there something that should have been closed that's now still showing open? Are you owing money somewhere that you completely were unaware of?
Speaker 2:Or if it's showing like you missed payments and you know you didn't miss any payments.
Speaker 1:Right. So there's a dispute process that you can go through, because all of those things again are going to impact your credit score. You want to make sure that what is on your credit report is yours and unfortunately, you know, in this day of social media, I constantly see people you know on threads and on Instagram saying, hey, I found out that my cousin opened a credit card in my name, my parent opened a credit card in my name. It's rampant. So unless you are actively protecting yourself, you are not protected. Don't assume that people aren't out here opening your mail, getting your credit card offers applying in your name. You don't know unless you look at your annual credit report. So don't be a victim. Be proactive. Lock your credit bureaus to make sure that nobody can open anything without your permission and then check your annual credit report so that you know what is on there. Is it correct? Do you need to make a dispute? Even Brandon found two things last time that he needed to dispute that now we're kind of tracking to resolve. So it can happen to all of us, especially, you know, us in this elder millennial age range. Most of us open credit cards in our 20s and so if you've just been living life and not checking on these things. It's been probably 20 plus years. It's time to check.
Speaker 1:So, all right, share this episode with a friend. Hopefully this has been helpful to you. Remember the five factors that go into your FICO credit score. Lock those credit bureaus on Experian, transunion and Equifax. It's completely free. It'll only take you a few minutes and make sure that you are checking your credit report at least once a year. We'll talk to you soon, don't forget. Benjamin Franklin said an investment in knowledge pays the best interest. You just got paid Until next time. Thanks for listening to today's episode. We are so glad to have you as part of our Sugar Daddy community. If you learned something today, please remember to subscribe, rate, review and share this episode with your friends, family and extended network. Don't forget to connect with us on social media. At the Sugar Daddy Podcast, you can also email us your questions you want us to answer for our past, the Sugar segments at thesugardaddypodcast at gmailcom, or leave us a voicemail through our Instagram.
Speaker 2:Our content is intended to be used, and must be used, for informational purposes only. It is very important to do your own analysis before making any investment, based upon your own personal circumstances. You should take independent financial advice from a licensed professional in connection with, or independently research and verify any information you find in our podcast and which you rely upon, whether for the purpose of making an investment decision or otherwise.
