Work Your Credit Score Like a Pro

First, a personal story.  Not long ago, I closed some credit card accounts.  No big deal, but we were only using three cards because they were the rewards programs we were using.  The other cards never got used and sat around in the lock box, so there didn't seem to be any point in keeping the accounts open.  When we went to buy a car, we found out that our credit score was barely at the minimum number required to get the best loan rate.  This was shocking because just a year earlier the same auto broker had told us we had "Buick Lesabre Credit."  Meaning that we had the kind of credit score you usually see in people older and more conservative than us (we're in our mid-30s), i.e. the kind of people who would buy a Buick LeSabre.  Nothing had changed in our situation.  We had no late payments, we had the same mortgage, and the same jobs, and yet our credit score was much lower.  Later, I re-opened one of the accounts.  It turns out that it was liked to a hotel rewards program that we had built up a lot of points in.  The program expires your points if there is no activity in your account for 12 months.  Since we had a baby we don't stay much in hotels so the only way for there to be activity was to use the linked card every once and a while to add some new points.  Shortly after that, we got an offer to buy out another car from the lease on some very favorable terms.  This time, our credit scores sailed over the required number although nothing else had changed.  The only difference was that one credit card which happened to have a $14,000 limit.  That extra credit limit apparently lowered our ratio enough to significantly raise our credit.  The real snag here is that we pay the full statement balance every month so that we never pay any interest.  In other words, we don't even have any credit card debt.  (Read here about Paying Off Your Cards Doesn't Equal a Zero Balance - Coming soon).

The Rest is Coming Soon

--Last Update 03/05/08