Things You Expect that Don’t Happen

When I get married, we get a joint credit score: Not so.  Each person has their own credit score ’til death do you part. However, when you open accounts jointly, that information will be reflected on each of your credit reports, for better or for worse.

My job/income impacts my credit score: Sorry, but making six figures, winning the lottery, or inheriting a fortune will not give you a good credit score.  Your net worth and income are not factored into your score.

Paying off credit card debt will boost my credit score 50 points: Depending on how much credit card debt you had, you may see some increase. However, credit card utilization is an important component of your credit score and those with the highest credit scores have about 10% utilization.

Being an authorized user on a credit card will impact my credit score: Co-signing for a credit score can have an effect on your credit score, but unfortunately just being an authorized user won’t change your credit score one point.

I only have one credit score: There are several different credit score providers and each credit bureau provides their own credit score.  However,  these companies all use the same criteria to judge your credit worthiness and the scores basically fall within the same range of each other (good, ok, or poor).

Checking my credit score will lower my credit score: False. When you check your credit score at sites such as Credit Karma, it’s a soft pull so it won’t lower your credit score at all.  Only hard inquiries by lenders impact your credit.

Things You Don’t Expect that Do Happen

If you don’t use your credit cards, your credit score won’t change: In order to have a good credit score, you must have credit available to you and use it responsibly. If you don’t have or use credit, you may have no credit history at all and if you do, your credit score won’t be as good as someone who consistently demonstrates responsible use of credit over time.

Credit bureaus don’t make mistakes: Nearly eight in 10 credit reports contain a serious error or some sort of mistake, according to a survey by the U.S. Public Interest Research Groups. Because many errors can negatively impact your credit score, it’s important to check your credit report regularly and dispute any inaccuracies you find.

If a bill or debt isn’t generally reported to the credit bureaus, missing a payment won’t affect your credit score: Any time you pay a bill late or don’t pay at all, that activity can be reported to the credit bureaus. Different companies have different policies about reporting late payments, but never assume that just because you’ve never seen a particular bill listed on your credit report that it can’t negatively impact your credit score if you don’t pay it.

Your credit score only impacts your ability to get credit or a loan: False. Employers, insurance companies and rental or leasing agencies all check this number.  Your credit score can prevent you from getting a job or the apartment you want. In addition, people with bad credit scores pay more for insurance premiums than those with good credit scores.

Having a variety of debt impacts your credit score: This one is true.  Auto loans, credit cards, mortgages, and student loans all impact your credit score.  In fact, the more variety of debt, the more responsible you appear to lenders (so long as you’re responsible with this debt).

We all like free money. It’s my favorite kind. I’m talking about the $20 bill lying on the ground. The birthday check from Great Aunt Millie for $5. The extra 30 minutes someone overpaid on the parking meter that you get to use when you park there. Windfalls like these almost always bring a smile to anyone’s face.

So why would you pass up free money? The problem is, there are plenty of opportunities, even in this day and age, to get money for nothing. Of course there is a price – you may have to fill out a form, or walk to a bank, or call an 800 number. But in practical terms, we’re talking about nothing. So where do you get this free money? Who is crazy enough to give it away? Your employer, the federal government, banks, credit card companies, airlines, supermarkets? The answer: all of them!

Not taking advantage of an employer match in your 401(k).

This is a biggie. If your employer offers a matching program for your 401(k), what they are telling you is for every $1 you put towards your retirement – up to a certain level – they will give you $1. You don’t have to stay later, or hang with the boss under the mistletoe at the holiday party. They’ll just put it in your 401(k) and walk away. It may take a year or two to vest fully, but it’s your decision to stay or leave. Don’t pass up this unless you feel that you don’t really deserve any more of your company’s money than they graciously give you in salary.

Keeping cash in a checking account.

I know it’s been a while since most of us did basic decimals in grade school, but let’s review: .5% interest means you will get one half of one penny per $100 capital per year. That is pretty bad, but it’s probably better than you’re getting in your checking account. Shift some of that money into a high yield savings account and you’ll get 4% or more on that money: that’s an extra 800 half-pennies per year! The same money, still lounging around unused in an account, will generate 8 times as much interest – money for nothing.

Not using a cash back rewards card.

Credit card companies are not our buddies. They are not in business to make our lives more convenient – they are in business to trick us into running up big balances. What easier way than telling you that every time you spend $100 they’ll give you four shiny new quarters? The trick here is to turn the tables on them. Put all of your expenses on a cash-back credit card each month, then pay off the balance in full. They’ll probably be muttering and complaining in their plush credit card executive offices, but they’ll give you the money. I get cash back on my donations to charity because I do this. Think about that – I give money to charity but I use a cash-back card that pays me 1% back. If that isn’t free money, I don’t know what is.

Failing to join your supermarket ‘frequent shopper program’.

Most big supermarkets have a “card” price on their store brands. If you use your ‘frequent shopper card’ they give you big discounts. All they ask in return is the ability to measure your buying patterns for marketing purposes. That may be a little creepy knowing that all that data’s being compiled about you, but hey! I’m not about to pay $1 for something I could pay $.50 for just by giving out information to Pathmark. I may regret getting a flyer in the mail but most of these supermarkets let you opt-out of mailings.

Withholding too much on your taxes.

The federal government is a pesky creditor. Imagine if you went to a nice restaurant and while you were eating the waiter came by every 10 minutes to ask for another 1/6th of your bill. Annoying, isn’t it? Well, Uncle Sam can’t wait until April 15th to get your tax payment – he needs it now and he needs it bad. But he also lets you decide just exactly how much should be withheld from your paycheck every month. Imagine you’re back at the crazy restaurant. The waiter comes by and wants $10 every 10 minutes. Would you give him $15 each time and tell him to give you the change back after dinner? Why would you want him holding your money for you? Why do you want the government holding your money that could be in a high-yield savings account? Reducing your withholding can put some money in your pocket NOW instead of later.

Not joining airline/hotel/etc. frequent flyer programs.

I know the value of a frequent flyer mile isn’t what it used to be, but if you fly they don’t charge you anything extra to put the miles in an account. I’ve paid for enough flights and hotel rooms over the years using points that I think it’s worth it. I would have paid for those flights and rooms otherwise. Using points is a hassle, I know, but it’s still something for nothing. The “something” is a little bit less every year, but it’s still there.

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There are a million ways to get a little extra cash, and with the economy the way it is, extra cash is always welcome!

photo credit: pfala

Blue Cash from American Express

I have been a big fan of Blue Amex cards for a long time now. Amex is the greatest card I’ve ever owned for two reasons. First of all, they have the best record of your spending of any credit card, bar none. I get a fancy year-end report categorizing my spending and I can download it in all kinds of ways from the website. Second of all, they are the best credit card company if you need to dispute a charge. They don’t argue with you – if you call up and dispute a charge, they take it off your account immediately. They’ll work it out with the vendor and if it’s settled, then you don’t have to worry about the charge. Other credit cards may make you pay, then send a refund if it’s settled.

Throw in a 0% introductory rate, no annual fee and 5% cash back on just about everything, and you’ve got a card you can’t beat.

Discover More

The Discover card is great for shopping online. You can earn up to 5% cash back at some retailers. There are no annual fees. I don’t use it as much as the Blue Cash card, but it never hurts to have a backup for online shopping to prevent too much risk of identity theft!