You’ve Got the Credit, So Should You Use It?
At our Boost Credit 101 offices the other day, we had a young worker who had a friend come into town. This friend wanted to go someplace fancy to eat and suggested one of the more expensive eateries in Denver on Larimer Square, a single block downtown with the most expensive shops and restaurants; it’s so fancy, large strings of lights adorn the space between the buildings, year round, down the block to remind everyone how fancy the area really is. It’s so fancy, that if we had one of our cardholders who sell their authorized user tradelines going anyplace in Larimer Square, we’d strongly recommend not using their card in case of breaching the 10% utilization barrier we set for fear of having the statement cycle and potentially going on someone’s credit report over-utilized. This may sound dramatic, but the menus at some of these places would make your head spin like a football spun on the ground after a Tom Brady touchdown to…whoever can spin the football very fast.
The beauty part is, that this young worker’s friend insisted on going, and paying, so, problem solved, but let’s say you are in position where you’ve got good credit, good limits, and you can go to any of those restaurants, slap that plastic down, and sign your name with flourish as multiple handsome men, or beautiful women, depending on your gender (and preference) look–or even cheer–on from the background. So, should you?
YES you should!
You worked hard to get your credit where it is, or at least paid attention to it diligently over the years and maintained it, or maybe you even googled “tradelines for sale 2018” a few months back and got yourself a fancy credit boost and parlayed that into some large limit cards. Let’s breakdown these two scenarios: first, you’re the salty credit veteran on the high seas around FICO island who has spent that time building it up over time. You’ve put in the work, and you deserve a treat. What’s a hundred bucks in order to feel good for a night? Right? Next scenario, you’re the person with those big limit cards you just got, where before your limits hovered somewhere around the $300 mark (where that $100 was 33% utilization), but now you’ve got yourself a $10,000 card, a hundred dollars on a meal, pshaw, that’s only 1% of the total limit! You have ladies that will swoon, men who will grin and rub their handsomely groomed chins while gazing at you in admiration. Of course you should!
NO you should not!
You have good credit, and you got it there by actually starting to pay attention. You saw how easy it was to destroy your scores, and how hard it was to get it raised. You got the negatives removed, decided to buy credit tradelines, got your scores where you wanted, and got approved for some good credit cards. $100, on a single meal? That’s ridiculous. With proper planning you can make that $100 cover lunch and dinner for an entire week for a single person. That’s one meal versus fourteen, not including breakfast of course. You do not overutilize, you realize that putting every dollar (that you need to spend) on cashback cards is a winning formula for getting ahead in life. Interest? That stuff’s the devil incarnate. Give you locusts and hurricane frogs rather than spend a dime on interest! With the money you save by being frugal, and with that well-earned cash back, you start investing in a Vanguard fund with low expense ratios. You will be financially independent as fast as you can even if you have to ride your bike in the freezing cold to save gas money.
Which one are you?
Hopefully you’re neither of these two extremes. Someone who thinks, eff it, I can put this big dinner on my card because I want to when they really have other expenses to think about is reckless, but perhaps you make plenty of money and this isn’t an issue for you. You don’t need to be on the other end of the extreme and watch every penny. What’s the point of saving and making that money to enjoy it at some nebulous date in the future after all? We do recommend that you always, always pay off your credit cards on a month to month basis, and if you can’t, keep it under 10% utilization. If you can do this, you are on your way to 800. And maybe someday you’ll come to us to get paid what you’ve earned by selling your own seasoned trade lines.