Saturday, June 28, 2014

Credit score update and new credit card approval

I regularly monitor my credit to make sure there are no red flags.  Before I apply for any new credit, the first thing I do is make sure I have a good credit score.  I like to make sure my score is at least over 740 before applying for a new credit card bonus offer. 

Your credit score
Your credit score is calculated based on these 5 factors:

35%: Payment History (how timely and consistent your payments are)
30%: Credit Utilization (debt-to-credit ratio)
15%: Length of Credit History (when did you get your first credit card?)
10%: Types of credit used (mix of credit and loans, revolving, consumer finance, mortgage)
10%: Recent searches for credit (hard inquiries and new accounts)   

There are 3 major credit reporting agencies: Experian, Transunion, and Equifax.  Each credit agency uses its own formula to calculate your score.  While you can directly buy your FICO score online at, many other online sites offer credit scores as well.  Because different companies use different credit criteria, your credit scores will likely vary between different sources.

For most people, I do not recommend paying for your credit score.  There are plenty of good online websites that offer truly free credit scores and reports. These sites do NOT require your credit card information and the credit scores provided are really free, not some 7-day trial where they bill your credit card afterwards. 

Sites offering free credit scores that I recommend
Credit Karma gives you a simulated Transunion score and VantageScore.  You can update your credit score once a week.

CreditSesame gives you a simulated Experian score.  You can update your credit score once a month.

Quizzle gives you a simulated Equifax and VantageScore.  You can update your free credit score and report once every six months gives you a simulated Experian score that you can update once a month.

Some credit card companies provide free credit scores
If you are a Barclaycard credit card holder, you can get a free FICO score.  My favorite Barclaycard credit card is the ArrivalPlus MasterCard.

If you are an American Express credit card holder, you can get your free simulated Experian credit score and report once a year.  My favorite AMEX card is the Starwood Preferred Guest credit card.

Discover credit cards also offer free credit scores.  I won’t comment here because we don’t own any Discover cards. 

After checking my various credit scores, I had the confidence I needed to apply for another credit card!

My next credit card
I just applied and was approved for the Citi Executive AAdvantage World Elite MasterCard.  You may have read about this offer on every travel hacking blog out there.

This bonus offer is for 100,000 American Airlines miles after spending $10,000 in 3 months.  As a card holder, you get a $200 statement credit, 2 miles per $1 spent on American Airlines, free Admirals Club (airport lounge) access for you and family or you and two guests, free checked bag, priority boarding, and no foreign transaction fees. 

While this is a great card and an excellent sign up bonus, it is not for everyone.  If you don’t think you can spend $10,000 in 3 months with normal or manufactured spending, I don’t recommend applying for it. 

This card has a $450 annual fee, which is not waived the first year.  Once your $200 statement credit kicks in, you can think of this annual fee as $250.  Admirals Club membership, which is included, is normally $500 for new individuals and $825 for married couples.

If you read the wiki in the Flyertalk thread, you will see that many users have been able to avoid paying the $450 annual fee.  They accomplish this by spending $10,000 before their first statement closes, receiving 110,000 miles (100,000 bonus miles + 10,000 spending miles, and then canceling the credit card before the annual fee gets posted.  I was pretty surprised to hear many people applying and getting approved for up to 4 (FOUR!!!) Citi Executive AAdvantage World Elite MasterCards!

If you’re interested in this card, you can apply for the offer here. 

My wife and I regularly apply for credit cards with big bonus miles.  With a healthy credit score, we haven’t had any problems getting approved for credit cards with great sign up bonus offers.  This has allowed us to travel on relatively little money.  The more we can save on travel, the more we can invest towards financial freedom. 

We are already looking forward to our next big trip.  Stay tuned for updates on our upcoming trip to Japan (Tokyo and Okinawa), and Taipei, Taiwan! 

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