In case you didn't know, your boy PJ was a banker before I was an entrepreneur, and it was in those days that I developed and fine-tuned the Exotic Car Hacks system based on things I saw my super-rich banking clients doing.
So here's the lowdown on credit, broken down into three sections to cover all situations: getting credit, building credit, and growing credit.
This is for people who have low or no credit at all.
The best place to start is with a credit card - and this is where it all goes wrong for most.
The average American consumer gets approved for a credit card, charges a bunch of sh*t they don't need to it, and makes the minimum payments every month.
This is a great way to get absolutely destroyed by interest charges and never be able to grow your wealth in any meaningful way.
Nearly HALF of all U.S. adults currently have credit card debt.
There is good debt and there is bad debt.
Credit card debt is bad.
Don't be like them.
Instead, as a new credit card holder, use it for your usual expenses (food, fuel, etc) and pay the bill IN FULL, EVERY MONTH, NO EXCEPTIONS.
Meaning... don't charge what you can't afford to pay off immediately.
Yes, in some cases credit cards can be used for emergencies, but ONLY as a last resort.
If you've never had a credit card before, I recommend starting with Chase, Discover, or AMEX as they tend to approve for modest amounts to people with no credit and are quick to allow more when you prove your creditworthiness.
BONUS - if you have a friend or loved one who has exceptional credit with a long history, have them add you as an approved user on their oldest credit card account.
You never need to take possession of the card or use it at all, just being on their account will raise your score considerably in 90 days.
Now that you have a credit card and are getting some history on your profile, it's time to get more of it.
If you haven't done this before, the first thing to do is to call your credit card providers and ask for a credit limit increase.
Most allow you to do this online by updating your income on your profile.
If you call on the phone, explain that you have a couple of big purchases coming up and you'd like to keep your business with <company name> if they can extend you a higher limit.
Pro tip: they don't verify, but they do want to see progressive growth. If you applied and said your income was $30k, don't try to say it's $100k 6 months later.
A big part of your credit score is your "utilization", meaning how much credit you have available vs your outstanding balances, so raising your credit limit and NOT using it will allow you to get that score up.
Next, you want to get more types of credit lines on your account.
Credit cards are just one type of credit.
The more variety you have in good standing, the better your score will be.
The next types of credit lines you want to go after are called secured or collateralized loans.
For example, car loans and home loans.
Obviously, I'm partial to car loans. I'll explain why in the next segment.
Home loans are great because it shows financial stability.
If you rent or constantly move around it can be a huge red flag to a lender.
As a final note, there are also unsecured / uncollateralized loans that are exactly what you think they are: cash loans not tied to specific assets.
I don't recommend these types of loans for beginners, just know that they exist and your ability to properly utilize them later on in your path to wealth will bode well for your ability to get more credit.
Growing Credit & The Exotic Car Ladder
Now that we understand the basics of getting credit and building up our history, let's talk about growing credit - specifically through what I call the "Auto Loan Ladder".
The key to growing credit is to utilize similar trade lines and show you're capable of making your payments.
You don't get an Amex Platinum with no pre-set spending limit without first proving you can be responsible with a card that has 5-figures of available credit. etc.
Similarly, the key to getting $0 down car loans at super high dollars is by proving you can pay for loans of smaller amounts and work your way up.
Let's illustrate the ladder for someone who's never had an auto loan before.
Once one hack at a given tier is complete (holding the loan for ~6 months, make every payment on time, and pay it off when your car is sold), you can be approved for 50-100% of that loan value on your next auto loan, assuming your income supports the monthly payments.
Tier 1: $30,000 - $40,000 range
Example Hacks: BMW M3/4/5/6, Maserati Quattroporte, Aston Martin Vantage
Tier 2: $60,000 - $80,000 range
Example Hacks: Nissan GTR, Porsche 911 Turbo, Mercedes G63
Tier 3: $90,000 - $120,000 range
Example Hacks: Lamborghini Gallardo, Audi R8 V10, Rolls Royce Ghost
Tier 4: $130,000 - $180,000 range
Example Hacks: Ferrari 458, Lamborghini Huracan, Rolls Royce Dawn
Not only does your credit score improve with every completed hack, but your available credit for secured loans goes up as well.
That's the beauty of Exotic Car Hacks and why I have always said this is a financial training, not an automotive one.