Thursday, October 6, 2011

Geeze. Give Me Some Credit

Some things in this world just make little to no sense.  Wheel taxes.  The Kardashians.  And credit.
The thing with credit is that it takes credit to get credit, much like new graduates feel the pressure to have job experience to get a job.  It's a total catch-22.

Here are a couple of things that I've learned so far.  Hopefully they will help you, too.  Please bear with me.  We're dealing with complicated subject matter here.  (Unlike said Kardashians.)

In my quest for fiscal knowledge, I have found that one of the best ways to raise one's credit score is to use a credit card.  (Remember to check Credit Karma to see your score for free.)  Oh, and pay it off in full each month.  Just pay a regular expense, such as a cell phone bill or a trip to the grocery, with your credit card.  Come home, unpack, and virtually swipe that debit card to pay off your credit card purchase.

This way you use a small part of your credit limit, which improves your debt-to-credit ratio.  And make consistent payments without carrying a balance.  This looks good to Mr. FICO.

You may be saying: But TomTom, how do I get a credit card?  Excellent question, you.

Recently I applied for a card from a major company and was instantly denied.  Limited credit history.  What a bummer.  I have a steady job, stable income, pay my bills on time, etc.  It didn't matter.  My score was considered fair, but the 'hard inquiry' from that company lowered my score by 20 points.  This is what's known as a double whammy.  You try to scrape together a decent score, but your efforts are only rewarded with a swat at your points.  Le sigh.

I was able to get a no-frills card from a local bank, and after using my card one time (and paying it off, as mentioned above), my score went back up by about 20 points.  I look for it to increase as I continue to make a credit card purchase at least once a month, indefinitely.

Why does this matter?  Your credit score is a numerical way of expressing your reliability.  At least in "The Man's" eyes.  If you plan to buy a house, then the higher your score, the lower your interest rate.  If you apply for a job, the potential employer may check your credit score.  Collections from Verizon?  Goodbye, corner office.  Or tiny cubicle. 

These are not circumstances to be taken lightly.  If you are in college, please don't be like me and treat pre-approved credit offers like they're covered in warts.  Compare your offers and take a card.  It doesn't mean you have to max it out or even carry it around all the time.  Again--small, regular purchases that you pay off.

If you have teenage children, call your credit card company and have your child(ren) added as authorized users.  Then don't even tell them until they're older.  That way, your score becomes their score, and they don't have to do anything to earn it.  (It's one of the few times in life that I will endorse that mentality.)  When you go to remove them as authorized users, it will not affect the score of either party.

If you've made it this far, thanks!  I hope that this has been useful information.  On Specs Appeal I try to share only what I feel is crucial for your daily life.  Please remember that I am not a financial expert and am only sharing things that I have learned in my own experience.  There are tons of great books, blogs, websites, and so on, but if I can be of assistance, please let me know!  Mazel!


  1. Guess what, I actually read through that and I love the tip about adding our kids when they're older but not telling them. Great idea!
    Thanks Tom!