Your Credit: One of Your Most Important Assets
In the fall of 2009 credit card issuers made the drastic move of significantly increasing the sign up bonuses they pay for new credit card applications. In the past, you may have received 25,000 frequent flyer miles for applying for a credit card. Since late 2009 bonuses of 50,000, 75,000 and even 100,000 miles just for signing up for a credit card have become the norm. If a frequent flyer mile is worth roughly two cents (they are worth considerably more depending how you use them), you can easily see the bonanza of free travel available to you if you have good credit. Imagine getting $2000 of travel for a credit card approval … But it truly is only available to those with good credit. Let me explain.
Credit card issuers were beaten up with delinquencies in the last economic turndown. They now want only those with good to excellent credit histories for their premium travel cards, that offer such big bonuses and rewards for continued use.
The principle way card issuers determine eligibility is by obtaining your individual credit score. You see ads for these credit score services on the television every day. The three main credit reporting agencies are Experian, TransUnion, and Equifax. They each have their own separate model and method for determining your score but the end result is almost always the same. The determining factors in calculating your credit score are:
- Past credit payment history (always pay on time)
- Credit utilization (try to keep your balance at no more than 50% of your credit limit)
- Length of credit files (save your oldest credit cards always)
- Recent Credit Inquiries (too many inquiries suggests that the borrowers may need money in a panic situations)
- Types of credit (the best credit files have successful histories with installment, credit card, charge card and mortgage types of credit.
Credit card issuers are looking for credit scores above 700 on an FICO style scale or 800 on a VantageScore Scale. If your credit scores are below these numbers, get your scores up before applying for premium travel cards. Each time you apply for a credit card is lowers your score 2-5 points. Why apply if your chances of approval are low??? Get your scores up first before applying so that every application generates an approval.
Here is the best part of the story. If you have great credit (way above 700 on the FICO scale), you can judiciously apply for numerous premium travel cards and get bonuses from all of them. In my credit file you will find over 95 entries and I still have an excellent credit score. I pay my bills on time, never have a balance over 50% of available credit, and I know my credit inquiries fall off my credit report after two years. I time my applications based on when a batch of inquiries has just fallen off my report.
Here is another little thought about fact: If you have a credit score of say 750 and you apply for a car loan, all things being equal, you will be approved. If your credit score is 780, you’ll still be approved; however the terms and conditions of the car loan will still be the same. Once your score is good enough for approval, any score above and beyond that number is in essence “excess good credit”
My point: Why not use it for free travel? Judiciously of course.
In 2010 and 2011 we earned over 1,000,000 miles combined in each of those two years, primarily through credit card applications.
I spent about 12 years in the mortgage banking business as a company owner, loan underwriter, and servicer. I have seen literally thousands of credit reports; good and bad. My credit counseling experience was with the local Veterans Affairs office, helping our Vets get out of financial jams.
I can help you in this sometime scary world of credit maintain or even improve your credit score, while adding some exciting travel opportunities to your future. We’ll go slow, and you and only you, will be the ultimate decider of what actions you take regarding your credit and obtaining free travel.
Below are resources to help you obtain your credit scores and reports, along with some goverment and publicly available pages, and a few things I put together on how you can build or rebuild a solid credit file. Continue on with me and read about some facts and myths about your credit … Or, contact me now to get started.
Get your credit report for free: (all three bureaus, once a year)
AnnualCreditReport (Experian, Equifax, TransUnion)
Government and public references:
FTC Statement on Free Credit Reports
myFICO on Credit Reports
Components of your FICO Score
Components of your VantageScore (read about VantageScore & FICO comparison too)
Frugal Travel Guy links if you’re looking to build / rebuild a credit file:
Starting a Credit File – Retail Charge Cards
Starting a Credit File – Installment Loans
Credit Cards – Keys to the Travel Kingdom
Continue on with me and read about some facts and myths about your credit …