Credit Tips & using it for Vacation

Responsible Credit is your way of using other people's money to make more money for yourself.

Have you ever wondered how a credit score works? You pay all your bills on time, you are responsible with your credit cards, and you don't have a ton of debt. So why does your credit score never break 750? Here are some great tips on building credit and paying off debt.

“Money Talks, but Credit has an echo.” - Bob Thaves

Pulling your free credit report: A lot of websites claim they will let you pull your credit report for free, but they ask for a card and later charge you for a service you didn't want. You are entitled to a free credit report every year from the credit company please visit the following web site for your truly free credit report:

https://www.annualcreditreport.com/index.action

You can shield your Credit by locking or freezing it. This will give you alerts when someone tries to use your credit. It does not prevent current accounts from reporting or pulling your credit, only new accounts from being opened without an alert. It also prevents 3rd parties from viewing your credit. There are exceptions to this as well, see the credit bureau's web sites for more information. Locking your credit report is easier than freezing it. Once you sign up for your account, you log in and swipe to lock or unlock your report. When you freeze your credit, however, it can sometimes take a couple of days to unfreeze and requires a pin number that you do not want to forget. If you have been a victim of identity theft and want to protect your credit with guarantees, you must follow procedures set by the state, which you can also find on each credit bureau's web site.

Equifax Lock - easy to lock and unlock your credit. Has an online version or an app for your phone. After the data breach in 2017, they have made this a free service for life: www.equifax.com/personal

Equifax Freeze: You place this freeze by filling out the following form. However, it requires a pin to freeze and unfreeze (DO NOT forget this pin) . This is also a free option: www.freeze.equifax.com

Transunion True Identity - easy to lock and unlock your credit. Must do this one online, no app available. This is a free site. membership.trueidentity.com

Transunion Lock and monitor: This one has a monthly fee, but it also monitors your credit report, allows you to view your report on a daily basis, and gives you your credit score. It also has an App available for your phone: membership.tui.transunion

Transunion Freeze: You place this freeze by filling out the following form. This is currently also a free option, but it can change any day and usually cost about $10 to freeze and unfreeze your credit: www.transunion.com/credit-freeze

Experian Lock: This one requires a Monthly Fee, but it also monitors your credit report and provides you with alerts and other helpful information: usa.experian.com

Experian Freeze: You place this freeze by filling out the following form. However, it requires a pin the first time (DO NOT forget this pin). This is currently also a free option, but it can change any day and usually cost about $10 to freeze and unfreeze your credit: experian.com/freeze

Understanding how credit work:

According to Experian, there are five things that determine your credit score.

1. Payment History:

Your payment history makes up 35% of your credit score. Bad reports will usually stay on your credit report for 7 years, except bankruptcies, which stay on your credit report for 10 years. Good reports stay on your credit report for 10 years. Once a year you can pull your credit report for free. You should review your credit report and make sure that all information is correct. If there are inaccuracies in your report, there are instructions on the report on how to dispute the inaccuracies. You need to check all three credit bureaus separately. Remember, some creditors will report to all three credit bureaus, but some only report to one or two. The way they report can also affect your credit score at each bureau, making your credit score different at each credit bureau.

You can pull your free credit report by accessing this link: www.annualcreditreport.com

2. The total you owe:

The percentage of credit being used (or money owed) makes up the next 30% of your credit score. You should try to keep your balance of revolving credit at 10-20% of your available balance. This can help build your credit faster than any of the other credit types. By having a balance that is too high or a balance of zero, you are hurting your credit.

That doesn't mean you shouldn't pay off your credit card balance at the end of every month. The balance on your credit card at the closing of the statement or on the day of payment is not usually the balance that shows up on your credit report. Most companies report all their cards to the bureau on the same day, though some will report your closing balance as your balance. Remember you can use your card to pay for most utilities, gas, groceries, and other monthly expenses. So by paying it off the day before they report and then using it the rest of the month, you are not only building credit, but you are avoiding paying those really high-interest rates. Even if you only pay $1,000 of your $3,000 balance, you are not paying the interest on the $1,000, and the next month, your balance will be lower.

The only way to make sure your card is showing the correct balance to build your credit is to find out the day your credit card company reports. You can call the number on the back of your card and ask customer service how they report balances. If they report all credit cards to the credit bureau on the same day, ask what day that is. Also go for major credit cards, American Express, Mastercard, Capital One, etc. When you open a store credit card, it shows that you are an impulse buyer and they do not build your credit nearly as fast and sometimes hurt your credit. Even the prepaid Credit cards help build credit.

You also don't want to overextend yourself on credit. A good rule of thumb is to stay under 36%, but 43% is the maximum allowed to still meet the requirements for a Qualified mortgage. Wells Fargo has a great Debt to Income calculator to help determine where you are and where you need to be to qualify for a new loan: wellsfargo-debt-to-income

3. The length of your Credit History:

The length of your Credit History makes up the next 15% of a credit score. This is the hardest of all the credit types to build. The only thing that builds it is time. However, it can also be quickly impacted by simple things. For example, you are looking through your wallet and come across an old credit card that you haven't really used in years. It only has a $200 limit, so you call and cancel and suddenly your credit score drastically goes down. What happened? Understanding that old card was your longest-running history, helps you understand that closing it made your credit history go from 10 years to 5, as nothing was open in between that card and your next line of credit. This can be detrimental when closing on a house. Once you are qualified for a home loan, you should not close any accounts, pay any accounts completely off, or add new accounts or new balances to revolving credit lines. All of these things will impact your credit score.

4. Types of Credit Accounts:

How many types of credit accounts you have make up the next 10% of your credit score. Creditors want to see that you have a good mix of both and can balance the accounts while still maintaining timely payments. Installment Credit: this is your mortgages, car loans, Signature loans, Student Loans, etc. This is when you borrow a set amount and make set payments until the borrowed amount is paid in full. Revolving Credit: These are credit cards and home equity lines of credit. These have an available balance that you can borrow against. Some will have the full amount due at the end of the month, others will only require a minimum payment. Once paid, the available balance once again becomes available to borrow against. These accounts will stay open until you close them.

5. New Accounts

New Accounts opened make up the last 10% of your credit score. Adding one new account shouldn't have much impact on your credit score and if it does it will be very small. However, if you open or apply for multiple credit cards at one time, it could affect your credit score dramatically. Try not to open more than one credit account at a time.

Most banks have a lot of credit help on their pages. Just search the name of your bank and Credit 101. Again Wells Fargo has a lot of credit information if you can't find it on your bank’s web page: .wellsfargo-goals-credit/smarter-credit/credit-101/

Using your credit to fund your vacation:

Have you ever wondered how some people jet set all over the world for vacation, when you know they make the same as you?? Small business owners and households can take advantage of great credit card perks, by just spending their regular monthly budget.

1. The key to taking advantage of credit is to pay it off every month:

If you have a Delta card, a Hilton card, or just a Chase travel card, if you are paying the high interest rates every month and not paying off that balance, the cost far outweighs the benefits. Even if you have a $10,000 limit, always stay within your budget every month.

2. Choose the card that makes sense for your dreams:

What are your travel dreams? If it's to every National Park in the US in a motorhome, then it doesn't make any sense to to get a Delta card to rack up miles or a Hilton card for free rooms. A better choice would be to get a card that gives you cash back on food and gas purchases. However, if your dream is to visit Europe, then a Delta card might be just what you need to book those high price airfare tickets.

Do your research on what it is you need and what your travel expenses will be. Then find the card that makes the most sense for that travel. If you are a small business owner, open a business card and use it for everyday purchases, racking those miles up fast. However, even if its for your own house hold, you still have a lot of expenses every month, from gas to groceries, to kid's school clothes and supplies. Just remember to pay it off every month to not incur those high interest rates.

If you already have high Credit card debt refer above on how to pay it off fast, before you start working on building credit for a vacation.

3. You can even pay creditors that don't take credit

Want to build points even faster? Check out Melio. It allows you to pay creditors using your credit card even when they don't' accept credit cards. However, you pay them, then they mail a check, so this is an account you need to be ahead on your bills, so the check has time to get there and not cause you to be late on payments. You can check out Melio at: https://app.meliopayments.com/

4. Benefits of Different Cards

There are so many cards out there, how do you chose what card is best for you. Here are some great sites that break down the pros and cons of each card. Always pay attention to the annual fee. The interest rate does not matter as long as you stick with the philosophy of paying it off every month.

The Points guy: https://thepointsguy.com/credit-cards/travel/

US news: https://money.usnews.com/credit-cards/travel

Nerd Wallet: https://www.nerdwallet.com/best/credit-cards/travel?trk=nw_gn_5.0

Lending Tree: https://creditcards.lendingtree.com/airline

Forbes: https://www.forbes.com/advisor/credit-cards/best/travel/

CNBC: https://www.cnbc.com/select/best-travel-credit-cards/

5. Special trips

There are also cards for special places like Disney for example. If you are planning a grand vacation to a certain place it is well worth looking at cards that give you special advantages at that location. You might also just be a lifer of all things Disney, like my family and travel there every couple of years. Whether its Disney or maybe a certain resort in Mexico. It is well worth looking into what advantages a time share or special credit card will give you. Just make sure that the advantages well outweigh the cost.

Another great thing to consider is an Airbnb in a location that you visit often. For example my husband's parents live in another state in the winter and we love to visit because when it's negative degrees here it's in the 70's and 80's there. By buying an Airbnb there and hiring a property manager, we are able to visit for free every year. The house pays for itself and we use a Delta Sky card to pay for all the expenses that household incurs, giving us free flights every time we go to visit. Note that it takes 5 years for it to pay back your initial investment and 10 to pay itself off and start making money (depending on the location). However, when we retire we will have a home in sunny Arizona that will be paid off for us to use when it gets cold here. Visit my blog on buying out of state to get more information.