{"id":2389,"date":"2012-06-06T19:48:51","date_gmt":"2012-06-07T01:48:51","guid":{"rendered":"https:\/\/worldwanderlusting.com\/?page_id=2389"},"modified":"2012-06-06T20:38:22","modified_gmt":"2012-06-07T02:38:22","slug":"how-credit-works","status":"publish","type":"page","link":"https:\/\/worldwanderlusting.com\/?page_id=2389","title":{"rendered":"How Credit Works"},"content":{"rendered":"<p>When I was a child, I heard everywhere that credit cards were evil.\u00a0 My wife watched a film in school that was called &#8220;The Perils of Plastic.&#8221;\u00a0 It talked about the dangers of credit cards, and taught her that they were &#8220;bad.&#8221;\u00a0 The truth is that when they are used incorrectly it can negatively affect your future.<\/p>\n<p>The reality is that credit is essential these days.\u00a0 Without it most people would have a difficult time purchasing a home or investing in a good education. We use it for vehicles, boats, loans,\u00a0 and much more.\u00a0 It is a measure of your ability to pay people (banks) back when they lend you money. You need to make sure that you have a good credit score so you can use it to secure some free travel.<\/p>\n<p>There are many scales that are used to determine your credit worthiness.\u00a0 The most common scale that is used is called a FICO score.\u00a0 This score has a range from 300-850.\u00a0 Keep in mind that there are three different companies that issue you a FICO score, they are TransUnion, Equifax, and Experian.<\/p>\n<p>You are entitled to receive a <a href=\"http:\/\/www.annualcreditreport.com\">free credit report<\/a>(without the score) every year from each of the three bureaus.\u00a0 I would recommend that you space out those free reports all across the year so you are constantly watching for anything that might be a problem.\u00a0 There are a lot of services that offer you credit monitoring, but I wouldn&#8217;t pay for one of those.\u00a0 I&#8217;m too cheap.\u00a0 I have found <a href=\"http:\/\/track.linkoffers.net\/a.aspx?foid=2865932&amp;fot=9999&amp;foc=1\" rel=\"nofollow\" target=\"_blank\">Credit Sesame<\/a> to be very useful.\u00a0 They provide the score to you (no report) at no cost.<\/p>\n<p>I have personally applied for four different cards over the last calendar year and my Experian score has increased by 8 points in the last year.\u00a0 Make sure you calculate your decisions.\u00a0 I do recommend that you put your great credit score to work though \ud83d\ude09<\/p>\n<p>FICO scores are determined by five different categories.\u00a0 The pie graph below came from myfico.com\u00a0 <a href=\"http:\/\/worldwanderlusting.files.wordpress.com\/2011\/05\/fico.png\"><img decoding=\"async\" loading=\"lazy\" title=\"FICO\" src=\"http:\/\/worldwanderlusting.files.wordpress.com\/2011\/05\/fico.png?w=300\" alt=\"\" width=\"300\" height=\"133\" \/><\/a><\/p>\n<p><strong>Payment History<\/strong><\/p>\n<ul>\n<li>Never miss a payment<\/li>\n<li>Never miss a payment<\/li>\n<li>If you are late&#8230;pay as soon as possible<\/li>\n<\/ul>\n<p><strong>Amounts Owed<\/strong><\/p>\n<ul>\n<li>Never owe more than 30% of your balance<\/li>\n<li>i.e. Your credit limit is $10,000&#8211;Never owe more than $3000 at the statement closing date<\/li>\n<li>You <strong>don&#8217;t<\/strong> have to carry a balance on your card in order to help your credit to grow.<\/li>\n<\/ul>\n<p><strong>Length of Credit History<\/strong><\/p>\n<ul>\n<li>This is what your average length is of all credit that you&#8217;ve ever been issued.<\/li>\n<li>i.e. You&#8217;ve had your mortgage for 10 years, a credit card for 8 years, and one car loan that you had for 6 years.\u00a0 You would add all of these up (10+8+6=24)\u00a0 24\/3=8 years would be the average length of credit history.\u00a0 The longer this is the better.<\/li>\n<li>For this reason we always ask you to keep your credit cards for at least one year.\u00a0 <strong>Don&#8217;t cancel them immediately after getting the bonus.<\/strong><\/li>\n<\/ul>\n<p><strong>New Credit<\/strong><\/p>\n<ul>\n<li>This is in reference to the amount of inquiries that you have on your credit report.\u00a0 Each inquiry takes approximately 2-6 points depending on your scenario.<\/li>\n<li>\u00a0When applying for a new account <strong>most<\/strong> credit card companies only check one of the three bureaus.\u00a0 (Capital One checks all three)<\/li>\n<li>Spread your inquiries amongst all three of the companies.\u00a0 You can ask us if we know which card pulls from which agency.\u00a0 If we know, we are more than willing to help.<\/li>\n<\/ul>\n<p><strong>Types of Credit Used<\/strong><\/p>\n<ul>\n<li>Credit Cards, Mortgages, Charge Cards, and Finance Accounts are all different types.\u00a0 They want to see that you have a variety of these accounts.<\/li>\n<\/ul>\n<p>Wanderlust with us.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>When I was a child, I heard everywhere that credit cards were evil.\u00a0 My wife watched a film in school that was called &#8220;The Perils of Plastic.&#8221;\u00a0 It talked about the dangers of credit cards, and taught her that they &hellip; 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