The Broke Professional - Optimize Your Financial Life

How to Raise Your Credit Score FAST

Ride some coattails to a higher credit score!

Living off the grid sounds great.  You don’t have to field calls from telemarketers or keep up on with the latest Trump headline.  As long as you find a way to take care of hygiene once in a while, life will be good.

For those of us not looking to live in the wilderness with our family, a credit score becomes very important.  To get a house, car or education, you will need a loan at some point.  In order to get a loan, and then get a great interest rate on the loan, you will need a great credit score.

Many writers, including myself, have written about how to increase your credit score.  FICO, the people who assign your credit score, even have a nice graph that shows what factors affect your score the most.

As long as you make your payments on time and keep your credit utilization low, you should be good.

It can take years to build up a great score.  But what if you want to increase your score quickly?  And with almost no work needed?

There is a way to do just that by using a little feature all credit card issuers offer.  Enter the authorized user.

Authorized User Pros

Almost all credit card companies allow you to assign an authorized user (AU) to your account.  The primary card holder will sign them up, and it can be usually done online by entering some information about the AU.

Once the AU is approved, they get their own card with their name on it.  But all charges need to be paid by the primary card holder.  If the AU goes on a spending spree, the burden will still fall on the primary card holder.  So be very careful who you choose.

The AU does get a number of benefits:

1.  Credit score boost!  This is arguably the biggest benefit of being an AU.  If someone is young with no credit history or has a low credit score due to some past mistakes, becoming an AU can be a good option if the primary card holder has a great credit score.  Being an AU will put the primary card holders info on the AU’s credit report.

While nothing is guaranteed in the credit score boosting arena, if the primary card holder has a great score and a stellar credit history, the AU will almost always see a boost in their own credit score.  This can especially be helpful if one spouse has a great credit score and the other needs to build some credit.  Just add the spouse as an AU and watch their score skyrocket.

2.  Using a great credit card they would have otherwise not have been approved for.  Many people either have no credit or a low credit score.  This means they will likely not be approved for any of the awesome reward cards on the market.  Even though the primary card holder technically gets the rewards, if a family member is an AU it’s more points for everybody!

Having access to a great card such as the Chase Sapphire Preferred or American Express Platinum card has many additional benefits such as primary rental car insurance and travel benefits.  And with the associated credit boost that comes with being an AU, they might be able to get that great credit card on their ownat some point!

3.  Responsibility.  With a safety net.  A credit card is like a machete.  It is a tool that can be used to your benefit.  You can track all of your expenses in one place.  And you can earn some great rewards depending on what type of card you have.  Responsible credit card use has many benefits.

But it is also a tool that can harm you if not wielded properly.  Late payments and carrying a balance will dig you a financial hole real fast.  Double digit interest rates will quickly erase any gains from investments you may have.  And it’s really easy to get into credit card debt if you’re not careful.

Being an AU eliminates the risk of you getting into trouble with a credit card.  But only because the responsibility is on the primary card holder!  Hopefully, they are savvy enough to be able to erase your mistake and counsel the AU on not making them again.  This is a rare free pass in the financial world.

So the risk falls squarely on the primary card holder.  The AU is in the clear.  But if they’re not careful, the primary holder just has to make a call and tell the company to drop the AU.  So the risk is there, but can be minimized in an instant.

Big Upside with Little Risk

Adding an AU is an easy process that can be potentially beneficial for the AU.  It can provide a nice credit score boost if the primary card holder has a great score.  And the AU will get the benefits of using a credit card with potential rewards.

The risk falls on the primary card holder.  If the AU has a spending problem, the primary holder has to foot the bill.  Luckily, they can also cancel the AU in an instant.  So the risk is relatively small.

So to summarize, you CAN increase your credit score pretty quickly if you become an AU with someone that has a great score.  A lot will still depend on your own credit activity, but if you make it a point to pay your bills on time and not over utilize your credit, signing up as an AU can provide a nice credit score boost.

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Credit Cards vs Debit Cards: Not Even Close

Poor debit. He never stood a chance.

We don’t use cash much in this country.  Most online and in person transactions are done by credit or debit card.  Even with things like Apple and Samsung Pay, a card is still the thing making the transaction.

But is credit or debit the better option?  Do people even know why they use a credit card or debit card?  This post will answer both of these burning questions.

So in honor of the great (and overrated?) Floyd Mayweather retiring this year, here is the round by round breakdown of the matchup between credit cards vs debit cards:

Round 1: Credit Score

Unless you live off the grid, having a great credit score will give you lots of advantages.  You’ll be able to be approved for the best reward credit cards.  You will most likely get approved for and be offered the best rate on loans, including car loans and mortgages.  And achieving a high credit score isn’t too complicated.

People with high credit scores are just more trustworthy in the eyes of lenders.  And responsible credit card use will help you get a high credit score much easier than a debit card would.

The companies that track your credit history don’t care how much you use your debit card.  They want to know how many credit cards you have and if you pay them back on time.  And the more responsible you are with your credit, the more credit banks will be willing to lend you, which increases your credit score even more!

But you can’t get all of those credit boosting benefits if you use your debit card.  Start small by using one credit card and paying it off in full every month.

Winner: Credit cards.  Debit was just being toyed with in the first round.

Round 2: Rewards

Now the fun begins.  I think there should be some incentive in choosing to use a card for payment instead of cash.  And credit cards provide that incentive in the form of credit card rewards.

It’s no secret that I enjoy chasing credit card sign up bonuses.  They are an easy way to get some cash back or travel points for spending money on the things will buy anyway.  Even if you don’t chase sign up bonuses, many reward cards will give you 1-2% cash back on every single purchase.  Why would you not take advantage of that?

Not every credit card comes with rewards.  But it’s easy to find many that do.  Debit cards?  Hardly any give you rewards.  And the debit cards that do have rewards offer very minimal incentives.

Whether it’s chasing sign up bonuses or just getting some incentives for every purchase you make, credit cards are superior over debit in every way.

Winner:  Credit cards by a landslide.  I don’t think debit even landed a single punch.

Round 3: Fees and Interest

Here’s where things can get a little dicey for credit card users (but only if your’e not careful!).  When you swipe a debit card, that money comes straight from your checking account.  So there’s no need to worry about paying off a balance on time or accruing interest.  Unless you love overdrafting your account, you will never spend money that you don’t have or incur any fees with a debit card.

Credit cards are not so nice to people.  If you are late with a payment you will get hit with a fee.  If you don’t pay your balance off in full, you will be charged ungodly amounts of interest.  And if you do things like this consistently, you will make the bank very rich while making yourself very poor.

So the biggest things to keep in mind for credit card users is to always pay on time and in full.  Any rewards from credit cards will quickly be negated by fees and interest.  And many cards charge an annual fee, even if you don’t use the card!

So if you know you are the type of person that will not pay in full, then stick with debit.  While you will have a boring life, you will avoid getting into credit card debt, which has ruined many people’s lives.  Just don’t overdraft your account.  Those fees are pretty egregious.

Winner:  Debit by a hair.  I think credit was feeling bad so they let them get a round.

Round 4: Liability and Disputes

I have a feeling this is the knock out round.  Like I said before, there should be some incentive to using a card instead of cash.  And while credit cards can offer nice rewards, another great incentive is liability protection and disputing transactions.

If someone steals your card or gets the number somehow, most likely they will try to run up some purchases as quickly as they can.  This happened to me a couple of times.  I’ll see an unusual purchase or get a text about one, and then contact the card company.  What they usually do is just send you a new card with a new account number and give you an immediate credit for those fraudulent purchases.  Pretty easy.

Debit cards are not so easy.  Since you can bypass the PIN feature for debit cards at most stores, it’s easy enough for someone to steal your card and use it anywhere.  The problem is, the money they spend is siphoned directly from your checking account! Which means you run the risk of losing all of your liquid funds in an instant.

And while you will most likely get your money back, the process is longer with debit cards and you will be left to deal with a depleted bank account for a few weeks.  There is just so much more liability protection with credit cards it’s not even funny.

Another nice feature with credit cards is the ability to dispute transactions.  If you bought something by accident or are not happy with your purchase, you can dispute it and your card issuer will usually just give you a credit for it while hashing things out with the company.  They are fighting for you right after they get your money back.  With debit cards, it’s much tougher to dispute a purchase and even if you do, it takes longer as well.

Winner:  Credit cards.  Debits corner had to throw in the towel to save him.

Winner by KO:  Credit Cards!

Having financial awareness, especially of why you use credit cards instead of debit, is the key to financial success.  There are just so many inherent advantages to credit that it’s almost a no-brainer in an optimal financial plan.

So take some time to find the right credit card for your needs, make sure to pay the balance on time and in full, and enjoy the benefits for years to come.

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