Posts Tagged ‘Credit Score’

Will applying for rewards cards hurt your credit score?

Ever see the reward cards that advertise thousands of travel miles for just opening an account?  I recently got the Capital One Venture Card and was wondering how my credit score would be affected if I applied for several of these cards.

The post below is by RJ Weis at Gen Y Wealth.  He applied for several cards and tested the impact on his credit score.  What do you think happened?  The results were surprising! Read below:

The Impact of Travel Hacking on Your Credit Score

by RJ on May 15, 2011

The last time I checked my credit score, it was at 717. That was on June 12, 2010.

Since then, I have applied for 4 different credit cards. The purpose for applying to each of these cards was to earn free miles.

The four cards I applied four earned me 200,000 miles. That’s good for 4 round trip tickets to many international destinations.

So how did this impact my credit score?

Let’s find out.

Last time I checked my credit score, I did so using MyFico. Now it costs $20 to get a credit score at MyFico, so instead I’m using Equifax. You can view your FICO® score through Equifax for $15.95.

I’m happy to report that my credit score as of 5/13/2011 is 752. An actual increase!

Why did it go up? I can think of a few reasons.

  1. I only had one credit card before, so more credit cards improved my utilization rate.
  2. I paid all of my bills on time.
  3. I didn’t apply for many credit cards all at once. Although, I’m not entirely sure if this helps or not.

One of the biggest assumptions about travel hacking is the negative impact on your credit score. Everyone’s credit situation is different and nobody knows exactly what goes into this calculation. However, my point is that you should always test assumptions. Many times, they’re incorrect.

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Know Your Credit Score

Top 5 Essentials for Being Financially Fab

The Financially Fab lifestyle involves being confident, making wise decisions, planning for the future, and enjoying what you have now.  Those skills are acquired overtime, and they start with a solid foundation. To set up that foundation, this week’s blog begins a 5-post series about the Top 5 Essentials for Being Financially Fab.  Each week, I’ll post another part of the series.  You can join the conversation by adding your personal stories, asking questions, or making comments.

The Top 5 Essentials Are . . .

  1. Know your credit score—the bank does, you should too!
  2. Track down your cash
  3. Knockout fees
  4. Save!
  5. KISS – Keep It Simple, Stupid

WEEK 1  – Know Your Credit Score—the banks does, you should too!

Your credit score is revealing!

  • Why is your credit score important?  It’s the financial equivalent of someone knowing your weight and dress size—no, not the weight listed on your driver’s license—your real weight.  If you don’t already know your credit score, you should. The banks do. Your credit card company does. You should too!
  • Banks use your credit score to rate how likely you are to repay credit.  The higher your score, the less risky you seem, and the lower your interest rate.  The information complied to develop the credit score is contained in your credit history, also called a credit report.

What’s credit history?

  • Your credit history lists information about your current credit accounts (loans, credit cards, etc.).  This includes whether you’ve missed payments or paid late, the number of accounts, the maximum limits, how much is owed, and other details. I told you it was revealing!  The difference between having a higher or lower credit score can hit your wallet hard–by affecting how much interest you pay.  If you have a higher credit score, you can pay less interest for the same amount of credit.  Just check out the example below.  Interest rates vary with the economy and individual circumstances, and the example below uses current rate information.

Imagine that you take a spring break trip and pay for travel, hotel, shopping, and entertainment with your credit card for a total of $700.  You pay only the minimum required, $20, until it’s paid off.

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Low Credit Score (from 581 to 660)

Annual Interest rate 20%
Time required to pay trip About 4 years and 5 months
Interest paid $360, over 50% of the $700 trip cost
Total cost with interest $1,060!

You’d be paying over $1,000 for a $700 trip. What?! $360 dollars extra!

Excellent Credit Score – (741 and above)

Annual Interest rate 10%
Time required to pay trip About 3 years and 6 months
Interest paid Only $132, paying 63% LESS with a better credit score
Total cost with interest $832

The 1st essential to being Financially Fabulous is figuring out your credit score.  Once you know what it is, you can start avoiding those high interest rates and stop throwing money at credit card companies and banks.

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Act Now – Get Your Score!

Everyone with credit has a score. Find out yours! There is only one official source for your FREE credit report, www.annualcreditreport.com. The only official source for your credit score is www.myfico.com.  You can also scroll over the links in the top right column of this page for more information about both websites.

The banks know your credit score.  If everybody else knows the number on the scale, the real number, you should too.

Share your experience.  How did you feel after looking at your credit score?  Were there any surprises in the credit report?

Financially Fab is here!

This blog is about making your money work for you and making smart decisions.  This is a space to learn from the ground up, share questions, and become financially savvy.