#1 Way You Have Not Tried to Improve Your Credit Score

During the past 20 years, I may have checked my credit score three times.  Truth moment! This is a topic I have not cared much about since making the decision to live debt-free.  My wife and I have not had a conversation (that I can recall) about credit scores in over a decade. Don’t misunderstand, we talk about money all the time but not credit (that money belongs to someone else).  If you are curious, my score is 818. The highest FICO score is 850.  

After learning my three-digit number, I began to wonder why it remains so high although I have no debt. Here is my assumption.  During a summer internship with Wachovia bank in 1994, I signed up for a credit card. I am sure someone at the bank probably said, “You need this so you can start building credit.” Sound familiar? Although Wachovia bank was purchased by Wells Fargo in 2008, my credit history started 23 years ago.  My credit card company sent a letter recently which stated:

As a reminder, a FICO score consists of the following:
•    Payment History – 35%
•    Credit Utilization – 30% (percentage of credit available that has been borrowed)
•    Length of Credit History – 15%
•    New Credit – 10%
•    Types of Credit – 10%
 
After my wife and I paid off our mortgage, we established a home equity line of credit (HELOC). It has never been used and I’m 99.9% sure it never will. I have only two credit lines on my credit report, a credit card and a HELOC.  

I think my credit score is over 800 because my available credit is very high; however, my utilization rate is 0%. There you have it. My ability to borrow but lack of borrowing due to my debt-free living choice may be the #1 way most people have not tried to improve their credit score. 

View this video for a simple 4-step process to eliminate debt
https://www.youtube.com/watch?v=wO2I_3TDJZY

How to Jump Start Your 2018 Vacation

I attended an event with my wife recently and eventually found myself engaged in a conversation about money. 

A young lady began to explain her budget and I got the feeling she was looking for feedback. Based on what I learned about her financial habits, I said, “Do you mind if I ask you a few questions?” She said, “No!” I took this as permission to invade her privacy (just kidding). One of the opportunities for improvement I discovered was how she and her husband save and plan for vacations. 

For most of us, our vacation expense consumes the largest amount of cash used within one respective month (emergency expenses excluded). Think about your last vacation. How much did you spend after adding airline tickets, rental car, hotel fees, gas, parking, meals, souvenirs, baby-sitting, and shopping for clothes? Here are some simple tips to help jump start your 2018 vacation plans.

1.    Set a realistic vacation budget - Determine how much money your last vacation cost. Next, ask yourself … could I afford it? If you are still paying for fun you had last year, probably not. 
  
2.    Save on a consistent basis - If you usually spend $2,500 for a vacation (depending on your family size, this number could be higher or lower), start saving $208 a month ($2,500/12 = $208.33) for the next year versus using a credit card and then paying interest upon your return.

3.    Repurpose extra income - If your employer provides a year-end or holiday bonus, save this unexpected wealth. Use your 2017 tax refund as a resource to fund your travel budget.

While conversing with the lady, I explained that my wife and I stay one year ahead on our vacation budget. The money we are using for vacations this year was saved in 2016. The money we are saving in 2017 will be used in 2018. At the current time, we have approximately all the money we need to travel for the next 12 months. 

The hardest and easiest part about this process is the first step … saving. Today, you have the choice to begin saving for next year’s trip. Here’s some motivation.  Consider how less stressed you will feel when looking for a vacation destination next year and realize it can be paid for in cash. Do the math because numbers do not lie. All it takes is discipline – the ability to train yourself to follow a code of behavior – and you already have plenty of that. 

What money tips do you have for planning a stress-free vacation?