You probably use credit cards when traveling. Who does not use them...right? They are convenient, safe, and save money when it comes to exchange rates. Exchange rates at currency exchanges and foreign banks are NOTORIOUSLY BAD with those on credit and debit cards very close to the great rates the banks get. Credit card and ATM fees can eat into your savings, but you will still save money when compared to foreign currency exchanges.
The other consideration, when using credit cards, is your interest rate. Most people do not pay their balances in-full every month, so those charges incurred while on vacation are multiplied exponentially based on how long you carry a balance and HOW HIGH YOUR INTEREST RATE IS! Your credit card interest rate, whether very high, very low, or somewhere in between, is based almost solely on your CREDIT SCORE. FICO, previous known as Fair Isaac Corporation, has been providing credit scores for years, but many people do not know that the VantageScore may soon replace your "FICO" score.
I was watching 60 Minutes on CBS recently and there was a story on the three national credit bureaus, Trans Union, Equifax, and Experian, and the fact that ten percent (10%) of Americans, one in every 10, have errors on their credit reports. I was even more shocked to learn that one out of five of us, five percent (5%), have errors on our credit reports BAD ENOUGH TO HURT OUR CREDIT SCORES! I will get back to these problems, huge problems in-fact, a little later, but first I want to understand the credit reporting process a little better.
“VantageScore is the credit industry’s first credit score developed jointly by the three national credit bureaus. This innovative new approach to credit scoring simplifies the credit granting process for consumers and creditors by providing a consistent, objective score to the marketplace. Credit scoring is used to help potential lenders and users of credit reports quickly measure your credit worthiness and decide the type of risk they are taking by doing business with you. In addition to your credit score, lenders may also consider other factors such as your income, assets, length at current residence and employment history. There are many different scoring models used in today’s marketplace and different criteria used by different lenders. Regardless of what scoring model is used, they all have one purpose: to summarize your credit worthiness.”
1. Make payments on-time
2. Keep a good balance of accounts and credit limits (higher is better)
3. Maintain a reasonable debt to credit limit ratio (not too high and not to low)
4. Use your accounts and credit cards regularly (at least once a year)
5. DON'T close accounts if possible, particularly before shopping for a loan!
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