If you have hit the credit card applications hard, good for you! There is no reason not to leverage your good credit to earn free travel. But what happens when it comes time to make a big purchase like a new vehicle?
I have signed up for 6 new credits cards in 2016, about 20 in 2015. Needless to say I have signed up for a lot of credit cards as of late. In case you are wondering what 20 credit cards in one year earns you in free travel, check out this map of our ‘free’ flying in 2015. Well, close to free, we spent a total of $400 in fees for two people. (almost 45,000 miles per person)
As you can see, free travel is a real possibility. The fastest way to earn free travel is to sign up for multiple credit cards on the same day, known as an app-o-rama. If you have questions about earning free travel, don’t hesitate to reach out to us on Facebook.
I have researched new car lease deals for the last few weeks. I sold cars in my former years so naturally I spend a long time looking for the best car for the money. I landed on a Ford Fusion Energi which is a plug-in hybrid. (You can PM me on FB if you want the deal details)
It has been about 45 days since my last credit card account was opened (that is a long time for me). When the dealer ran my credit it came back in the high 700’s, not bad for having over 20 open credit cards! The dealer did not even say a word about the inquiries or credit card accounts, they just let me know that I was approved for the tier 1 rate and that I could put no money down if I’d like. I even tried to get them to bite by saying, “clearly I like to sign up for credit cards…” They responded with, “What ever you are doing, it’s working”.
How should I manage my credit cards to make sure I keep a high score?
The key to having a high credit score, which is important if you want a good lease deal or get a low-interest rate, is keeping your account balances low. If you carry a balance on a credit card that tells the credit bureaus that you are “needing” to borrow money. Another term would be that you are “leveraged”. The only way banks can evaluate how you are managing your existing credit card accounts is to see if you are paying on time and what balances you carry each month.
You will want to make sure you pay your credit cards off before the statements close. Don’t confuse a statement close date with your due date, they are not the same. Your statement close date is typically the same date every month and your first statement will likely close 30 days after your card is approved (you can call to change the date). Your due date and minimum payment (generally 21-25 days after the statement closes), is going to be based on your statement outcome.
If your statement closed with no balance you will have no minimum payment due. If your statement closed with a $1,200 balance and you paid it off in full on your payment due date, your credit report would still show $1,200 in revolving debt. Boo! You don’t pay any interest if you pay your card off in full by the due date but it will still show a balance on your credit report thus bringing your score down. Pay-your-cards-off-before-the-statements-close (30% of your total score weight).
That $1,200 in credit card “debt” (yep, it technically counts as debt even if you pay it off on your due date) will bring your score down because your credit utilization has increased. The best thing to do is to pay your credit cards off in FULL 4-5 days before each statement closes. It does seem strange but it will reflect no balance (debt) to the credit bureaus resulting in a higher credit score and giving you a better chance of getting the best rate on a home/car. Some people pay off their credit cards in full every week just to make sure no balance is on the card when the statement closes. Whatever works best for you, just make sure you are not carrying a balance the day your statement closes or it is going to reflect on your credit report for at least 30 days.
Homes purchases are given more scrutiny than a vehicle purchase so make sure you talk with your lender three months in advance for their guidance**
I will finish with this, you don’t need to use your credit card monthly to build credit. I have 15 or so credit cards I never use and they still help my credit score because they show available credit (unused available credit is great to have) and they show a long history of on time payments. Even if I don’t have a payment to make it will still show as “on-time”. You do not want to close your oldest credit cards. Credit account history is a big factor in your credit score calculation, lenders like to see long-term accounts that have been managed well. That is why I recommend your first couple of credit cards be no-annual-fee cards so you can keep them open for a lifetime.
As always, reach out to Miles To The Max on the Book of Faces if you want to talk.