Credit Score History

By April 18, 2017Personal Finance

As you may know, credit score is just a number telling possible lenders are you trustworthy creditor or not. Some may say it is an indicator of your financial health. Information from your credit report serves as input data for calculation and resulting number lays in range of 300 to 850. The higher – the better for you.

I knew nothing about credit score in 2015, except the fact that it directly impacts your life. When you come to leasing office to rent an apartment, first question you get is – “Where do you work? Do you have credit history? What is your credit score?” Going to car dealership – same story. As I discovered in a hard way, even price of car insurance depends on your credit score somehow.

As a person who just came to US, I didn’t have a credit history. I had a vague understanding of what that term really means. Colleagues advised me to open credit card at one of nearest banks, which I happily did. Bank approved CC for me basing on my offer letter from current employer. OK, first step is done, now let’s try not to make stupid things.

From my experience, each type of debt should be avoided. It’s a negative wealth, basically, which will drag you down if you fail to manage it. But, that’s the American way of living I was told, everybody takes credit, mortgages, car loans, and you should be doing the same!

Shopping, travel and 0% APR (Annual Percentage Rate) for 12 months is a funny thing on brand new credit card. In a couple of months I had a balance of over 5000 USD. Ouch. It has to be paid back. And better do this sooner than later, before 24% APR strikes. First you think that you can always pay in full if needed. Second, you realize that you don’t actually have that much money – rent eats half of your monthly salary, plus you have to buy something to eat and pay the bills. Third, you find yourself able to pay back debt in small chunks which not the way you planned before. Bummer.

That’s what banks are counting on. They give you high credit limit and 0% APR for a year or more, hoping that you accumulate huge balance and will be unable to pay it back on time. They even sweeten the pill with cashback offers, like 1% back on all purchases and higher percentages for gas/groceries. But just one late payment or monthly interest will nullify all previous rewards. Banks in a business to make money after all. You think you can hold everything under control? I did and paid all my balance back, but still with a small interest (about 20 bucks).

But I needed my credit score to go up, hoping that this will allow to decrease expences in different areas of life. I checked my score almost every week, seeing it climbing up and falling down. It became sort of a game – can I push it higher? What if I open one more credit card, will it go higher or not? Turns out you can’t do much about it, only make payments on time and wait – time is on your side. In a year I had credit score of 681 – not bad for a total noob. After second year it went to 740, which is a good credit score according to CreditCarma. So far so good.

Positive outcomes:
– no need to pay 1.5x of monthly rent security deposit when leasing apartment
– car insurance rates dropped significantly (like 50%)
– access to credit cards with great sign up bonuses

Negative outcomes:
– lost some money due to paid interest

To sum everything up, after several years my credit history is doing just fine. Guess I’m the desired client for banks now, they regularly send CC offers by mail to me. Thanks, but I’ll pass this on. Have more important things to work on, like slashing last bits of debt.

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