your credit score is more important than you think

The day I turned 18, my parents applied for a credit card in my name and started using it for bigger purchases to help build my credit for me.  Both of my parents have always been very smart with money, so reminded me that credit cards were not to be used in place of money. If you couldn't afford that thing you wanted, you didn't get it. My entire young adult life and to this day, I am still very weary of credit cards, especially after witnessing so many friends get themselves into a financial mess because of it. I treat credit cards like black magic - if I use it, I'll be cursed, destined to continuously rack up debt and never make the payments on time. Aside from a few missed payments from being young and dumb, I never got myself into any trouble with my credit card and pretended as though it really didn't exist. Even in my own wallet, I never allowed it to have a home there just in case I was ever tempted. Out of sight, out of mind, right?

Dave Ramsey would applaud me for these efforts, but despite what he says, credit cards are still a significant player in your game of finances and I'm just now starting to come to terms with it. Ramsey's method of cutting up all your cards and never applying for one ever again is implied to those irresponsible with having them at their disposal, but for myself and others who avoid credit card debt, they are an asset.

Since my main goal in life is to finally purchase and own my own home, an outstanding credit score is a defining factor in whether or not the interest rate on your mortgage is going to be low or going to be shit. In a nutshell, the higher your credit score, the less money you will pay in interest over the life of your home loan. I assume everyone wants to pay less money, no? So it’s time to start rebuilding.

My credit score is currently a “fair” 653, which really isn’t all that great (a good score is in the 700’s/800’s). The fastest, easiest way to rebuild that number higher is to stop ignoring credit cards and start using them, paying them off in FULL every month. Paying them in full and NOT carrying a balance over to the next month is the key thing here. Carrying a balance not only causes you to pay unnecessary interest, but does nothing to build up your credit. To help with this, you can log-in to your credit card account online and set up auto payment so that it will automatically pay whatever your balance is before the due date.

The card I currently possess is a Chase Slate card - no annual fee, a great interest rate, but no rewards for using it. There are many cards that offer 1, 3, or 5% back on gas purchases, groceries, and sometimes things like Amazon or other retailers during specific times of the year. Since making the Reddit subreddit, Personal Finance, a daily read during my website rounds, I’ve learned a lot about the credit cards that offer you these rewards and decided to apply for the one I liked the best: the Sallie Mae Master Card. This card offers 5% cash back on the first $250 you spend per month on gas and groceries (and also the first $750 for books for those in college). You also receive 1% cash back on every other purchase, earn 2500 bonus points ($25) for using your card within the first 90 days, has no annual fee, and your rewards do not expire.

Sounds almost too good to be true, right? Well, it kinda is. After getting some outstanding questions answered, I immediately applied for the card. Not 5 minutes later, after doing some more research (cause I can never do enough research on any decision I make), I learned your credit score had to be outstanding in order to be accepted for this card. Shit.

Sure enough, a few business days later, I was denied due to insignificant credit (i.e. - never using my card and ignoring it) and my credit score. To make matters worse, my credit score went down 13 points for having a credit inquiry (meaning the credit card company pulled my report to see if I was worthy, which does against you).

But, there was hope! Per some suggestions, all I needed to do was make a simple phone call and ask for a reconsideration. A nice girl answered, asked me what I did for a living and what my annual income was. She inquired about the few dumb late payments on my Chase card and I responded to her honestly, letting her know I had lost my job at the time and simply did not prioritize. Within 7 minutes, I was approved and the card was in the mail. Completely painless.

I plan on using this card solely for gas purchases (and possibly groceries), since I spend roughly $200/mo on gas. With auto-pay set up, it will be just like using my debit card, except that I actually get free money for using it. It’s a win/win.

So if you’re like me and believe credit cards are the devil, take some time to reconsider your evaluation on them. As long as you’re smart about them, you won’t ever have to worry about paying interest or going into debt because of them.