March 06, 2015

7 Tips for a Great Credit Score

We all knew, keeping a good credit score is not easy task especially for the one new hires or students in U.S. The main reason behind this is we are not able to understand how the credit score system works. But not anymore. I have articulated below tips which worked very well from my own practice. If you follow these instructions, it will work for you too.
    1.    Credit Unions: Pick the credit cards which will have lowest interest rates in case you are in real need. The Credit Unions are always known for their lowest interest rates. Their normal interest rates(APR) range anywhere between 7% to 12%. Examples: DCU, Michigan Credit Union etc.

    2.     Rewards, We love it: Keep a credit card which will give great reward for using their card on spending. For example, Amex Delta SkyMiles card. Every dollar you spend with this card will earn two Delta miles and when accumulated enough, can be used to get free Delta air ticket. This covers your annual holiday airfare to Miami Beach or Los Angeles or New York City.

    3.     Learn To Control Credit Score: It is important to make sure you have a credit limit of at least 5 fold to your monthly spending. For example, my monthly expenditure is $1000, hence I should have at least 5X1000 = $5000 worth credit limit. This will ensure your credit utilization is not more than 20% and will help keep a great credit score.

    4.     Never lose money on Interest: Yes, you heard it right. Be smart and learn how you can have zero dollar interest incurred on your spending. The key is to pay your statement balance in full before the due date. For example, as of today 01-MAR-2015 my Amex Delta Card statement balance is $2000 and the due date for a minimum payment of $50 is 07-MAR-2015.


    If I only pay the minimum balance of $50 or any less than the statement balance of $2000, I will be incurred an interest of ~$32(17% APR of $2000) for this month.

    Let's say I paid my full statement balance of $2000 before the due date of 07-MAR-2015, the credit card company will not charge you any interest. This is a reward for making timely payments in full and pretty much all credit companies reward it.

    5.     Scrap Store Cards:: Keep  DO NOT apply for store credit cards. They suck. They always have ridiculously high interest rates and no rewards. This will also ensure not to have too many credit checks on record. Be advised that each hard credit check bring down up to 25 points from your credit score.

    6.     Do not let memberships tap your money: This is a very genuine case again where we all lose money. The reason is just our negligence, not just paying attention to our credit statements.

    If you have enrolled for a company membership or club like gym, yoga center, golf club etc with your credit card, make sure to remove your card out of their system when you relocate or no longer using their services.

    Beware of signing any contracts with these companies, as they will continue to charge your card until the agreement tenure. Even if you file a dispute on these transactions, no wonder you will lose on them due to the paperwork you signed.

    7.     NEVER miss a minimum payment: This could be your worst nightmare if you fail to make a minimum payment before due date. This is an intolerable behavior for credit companies, in other words you simply lost their trust. Those missed payments record will be carried up to seven years on your credit history and there after it's not easy anymore to get approved for a new loan or card. You need to start all over again.

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