How does credit work? Solutions and Suggestions!

How credit works:

Your credit score can vary between the 3 major credit bureaus: Experian, Equifax, and Transunion.  Each score is built up primarily from the same factors:

  • Credit card use (utilization)
  • Payment history
  • Derogatory marks
  • Credit Age
  • Total Accounts
  • Hard Inquiries

For a free detailed report on your credit, I use the following two sites:



Playing the free travel game:

You’ll need to have at least a credit score of 700 or higher to ensure you get approved for credit card bonuses.  To check your (approximate) score for free:



Understanding Credit Utilization:

  • Credit utilization is based on the amount of TOTAL available credit you have among all credit lines. Example:
    • 10 credit cards with a $10,000 credit line on each one, you have a TOTAL credit line of $100,000
    • $200 on 5 different credit cards, that’s $1,000 of your total credit line used which is 1%
  • If you have absolutely no debt (no loans or credit card debt) you credit score will be negatively Credit thrives on debt, but when used responsibly.
  • To keep the highest possible utilization score, you need to:
    • Keep total credit utilization between 1% to 20%
    • On any single credit card, stay under 50% of your total available credit. Example:
      • You have an American Airlines credit card with a $10,000 credit line. If you use $5,000 on just that credit card you’ll be at 50%.  This will negatively impact your score, but if you stay at 49% or less while your TOTAL utilization is under 20%, you’ll be using your credit effectively


How To Improve Your Credit Score

  • Keep credit utilization low
  • Keep any credit cards that have no annual fee open to build credit history. The longer you have a credit card, the stronger your credit history will be.  You do not have to use these credit cards.
  • If you score is less than 700, you can use “credit score piggybacking.” That means you become an authorized user on someone’s account that has excellent credit.  By association, your score will jump up.  A service called TradelineMaster.com does this service at a cost (I work with them).  If you have a score over 750 and credit cards with lines over $20k+, email me for a referral at dan@blorg.org