In the last post I wrote about how my wife’s credit score (783) was significantly higher than mine (747). That just won’t do — I embarked on a credit-score-improvement quest that includes research and experimentation.
The experiment is already paying off in unexpected ways. I got a $100 bonus and began using a 1.5% cash-back Quicksilver card as my day-to-day card. This a small upgrade from my 1% cash-back card. I also convinced my wife to get a Citi Double Cash Back card for most of our recurring monthly expenses that ends up saving us 2%.
I learned more taking with my brother about his credit card management techniques. It turns out that he and his wife are pretty expert at credit-card savings. He has various 5% cash-back category cards he uses to buy groceries and gas. They also have 2% cash-back cards for non-category purchases. He also uses a neat trick to stretch the 5% grocery purchases further… buying pre-paid gift cards at grocery stores for, say, Home Depot or Target — effectively getting 5% off of purchases there too! Financial savvy definitely runs in the family.
Let’s not forget mileage cards too. My United MileagePlus Explorer Card is the only card I have with an annual fee ($95). I fly often enough on United that it is worth it to me. And recently between my wife and I we recently bought 5 tickets with United miles for myself and some family members (Tip: if you want to help someone buy a ticket with your miles, don’t pay to transfer your miles to them… instead simply buy the ticket for them with your miles!)
The Credit-Card/Credit-Score Experiment
As expected, getting two new cards temporarily lowered my credit score — from 747 to 728. However, it recovered a bit… to 735. So what did I do… get one last new card… The Chase Freedom Card with a $200 (20,000 point) bonus.
I decided to get a %5 cash-back “rotating-category card.” It was the $200 bonus that caused me to chose this this particular one. The criteria for collecting the bonus is pretty simple: charge $500 of purchases in the first 3 months. I view this as purchasing $500 worth of stuff that I would have bought anyhow — Christmas gifts and such — for only $300.
This third new card will probably cause another temporary downward blip on my credit score. What’s important about this last card is that it brings my total credit card limit (amongst all active credit cards) to $61,700. This means that the debt (see previous post) of approximately $12,000 will get below the critical level of 20% of utilization of available total credit… which should help my credit score in the mid to long term. In the meantime I am “floating” $12,000 in debt for free at 0% interest for 15 months.
What Next: A Credit-Score Challenge?
My personal challenge is “no more new cards until 2016.” I’ve had my fun getting 3 new cards that I believe will 1) help my improve my credit score in the long-run, and 2) help me save money (via cash-back programs) on purchases.
Onc challenge will be in keeping some activity on all of my open cards, and earning maximum cash-back while resisting the temptation to overspend just because there is a small reward. I hope to have a zero balance before the teaser 0% APR rises to some ridiculous level (of, say, 19%). I will keep you updated here.