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Confessions of a Shopping Guru
So, recently I checked in on my credit score. You know, the score that enables lenders to give you money and basically decides if you are worthy (ok, so maybe a slight exaggeration!).
I have great credit, but the number could always go up, if you know what I mean. So, my lender advised me to open another credit card account. Yes, seems counter intuitive, but as it turns out, the more debt you can show you can responsibly carry, the better you look to possible lenders. In fact, 30 percent of your score is based on the amount of debt you hold.
I have basically one credit card. I know, unheard of these days, but it’s true. The reason? I love to travel and my credit card earns me miles, which I redeem each year, or hoard for years and years saving for a fabulous getaway that I am unlikely to ever take. But, that’s beside the point (sort of).
So, a few pointers on credit cards:
- Lenders like to see that you use credit cards. Use your cards, and don’t close accounts. Simply remember to use each card you hold on a regular basis to show that it’s an active account. Do not allow a company to close an account – just use the card every couple months and pay off the bill.
- Credit cards with an annual fee are fine, if the rewards outweigh what you are paying in that fee each year. (I was relieved to find this out since sometimes I hate the $75 fee but if it gets me a free ticket I’d pay $500 for, then it’s worth it!)
- Shop around. There are thousands of credit card options – cards with rewards, cards offered through your bank, through every merchant with whom you shop…you get the picture. There’s lots of competition so be sure to ask for a lower interest rate and a higher limit (even from your current card holders) and get the best deal for you.
- Speaking of merchant cards, avoid those. Do you know that you actually lose 5 points off your credit score each time you open one of those to save 20% on that fabulous top you might wear 10 times?
- Keep your balances low.
If you’re in serious credit card trouble and can’t hold an auction for designer goods to pay off your card like they seem to do in the movies, get help. Here is a good article to get you started, even giving tips and resources for avoiding bankruptcy.
So, what did I learn? Even though I have one great card and am paying off the balance each month, I’m not helping myself out, in fact, I could be hurting my credit score. So, I’m going to open a new credit card or two. Stay tuned on the score!
Happy Shopping!
- Kristen
p.s. I’m a shopping guru, not a financial professional, so be sure to consult someone who knows more than I do before you make any big moves!
Comments (3)
Great tips, all!
My husband and I just bought a house, and while we thought we had great credit, my husband’s score was penalized because he didn’t have enough lines of credit–they wanted at least three, and the older the better.
Also, something we learned the hard way: having a “joint” card with your husband or wife doesn’t always mean you’re an official cardholder! They could have you on as an “Authorized User,” which can actually hurt your score. It’s all very confusing, and I’d recommend calling and grilling your credit cards’ customer service reps for answers so you don’t get surprised.
Great tips thanks
This was really helpful – I had no idea that the merchant cards would detract from one’s score. I’d be curious to know why – fascinating. Thankfully I don’t have any of those, but am glad to know it’s best t avoid!