Point Me To First Class 3. The Truth About Rewards Cards and Your Credit Score
Mar 20, 2023
Clear breakdown of what actually shapes your credit score and which factors matter most. Practical rules to protect your score while collecting rewards cards. How new cards can cause short-term dips but sometimes help long-term. Concrete advice on payment history, utilization, account age, and mix.
AI Snips
Chapters
Transcript
Episode notes
Credit Score Factor Breakdown
- Payment history, credit utilization, new credit, credit age, and credit mix are the five factors that determine your credit score, with payment history and utilization carrying the most weight.
- Payment history is 35% and utilization is 30%, while new credit and credit mix each are about 10% and credit age is 15%.
Why Credit Utilization Drives Your Score
- Credit utilization is the percent of available credit you're using and strongly affects scores; lower utilization is better.
- Keeping utilization around 10% or less yields a strong positive impact on your score according to Devon's examples.
Add Cards To Lower Utilization Not Raise Spending
- Getting new credit can temporarily lower average account age and add inquiries, but it also increases available credit which can reduce utilization.
- If you keep spending steady, adding cards often lowers utilization and can improve your score over time.