MICE, Ink & Wanderlust

My Route to 884 FICO and Zero Debt Before Leaving the States

Debt elimination for me was a matter of reducing amounts I owed without incurring any further debt. My method of choice was the snowball method. I purchased my home in 2006. I also had a rental property, a car loan, and a bunch of other debts totaling around $35K. Thankfully, I had no student loans as I’d always paid my way as I went.

To eliminate my debt, I used a spreadsheet to arrange them in order of highest interest rates. This spreadsheet is the exact one I used. I then made two payments per month to help knock down the interest faster on those that used daily APRs. So if the minimum payment was $30, for example, I would make two payments of $25 on the prioritized debt of the moment while making just over the minimum payment on the others. Once a debt was eliminated, I went to work on the next one on the list.

At the same time, I continued building my credit. Contrary to what some think, one can acquire credit cards without mismanaging credit. The key is simply self-control and a commitment to manage credit responsibly.

I reached the 800 Club in early 2013 when my credit was a mix of:

  • Mortgage
  • Car loan
  • Home improvement loan
  • Seven credit cards, including three department store and four major cards (2 Chase, Amex, and Citibank)

Although this was just over four years after I lost a rental property through a voluntary foreclosure in the housing market crash of 2008, the fact that my remaining credit was impeccable apparently counted higher than the foreclosure. So, this proves that even if you have a blemish or two on your credit report, focusing on building and maintaining all of your other accounts in excellent standing could help offset and fully overwhelm the negatives.

At the time my credit usage was around 25%, so I set out to reduce that percentage by increasing my available credit. Experts recommend keeping credit usage below 30%; I aimed for under 10%. Here’s how that turned out:

884FICO

Tricks for a Lofty Credit Score

  • Each year I added one or two new credit cards (no more than three inquiries every two years) until I reached $125K in available credit and my usage was diminished to below 10%.
  • Every year I use each card a minimum of once to keep it active, charging no more than $10-50 and paying it in full upon receipt of the bill (when it would have been reported to the credit bureaus).
  • I use no more than 2-3 credit cards to pay for everything so that I accumulate rewards and miles for my travel.
  • I never pay attention to finance charge rates because I never pay them. I do not charge more than I have cash on hand to pay charges in full by the due date. I have taken considerable advantage of zero percent interest financing with Home Depot, Best Buy,  Nebraska Furniture Mart and the like for larger purchases, but I am exceedingly careful to avoid finance charges. I have not paid finance charges on credit cards in over a decade.
  • I choose cards based on the benefits. If it does not benefit me significantly to have it, or if it’s a store card at which I do not shop regularly, I do not apply for it.
  • I try to keep all inquiries on my credit file to no more than three every two years, i.e. car loans, lease applications, business accounts, etc.
  • I aim to limit spending on each individual card to below 25%, although on my primary card during certain seasons, I have occasionally gone over that. To avoid this, I shifted the bulk of my available credit from my Chase Freedom, Slate, and Freedom Unlimited cards to my Chase Sapphire card since that’s the one I use most. For example, if my Chase Freedom credit limit was $10K, I moved $7,500 to the Sapphire. If Slate was $5K, I moved $3,000 to the Sapphire. This enables me to make larger purchases on this card without ever exceeding my self-prescribed usage limit for each individual card.
  • When I surpass a certain threshold on my Sapphire card, I pay it down before the bill is even generated so that it is not reported on my credit at all.

I passed the 850 credit score mark in 2018, when I reduced credit card usage to 5%. At the same time, I’d reduced my spending across the board, making far fewer purchases as I prepared to leave Corporate America (hopefully for good!) in January 2019 to under 3%. Throughout 2019, 2020, and 2021 thus far, I have kept my credit availability of $120K to below 1%.

The advice that you need a mix of credit card types is a myth. I sold my house in 2019 so I have had no mortgage, no car loan since 2018, and I have no student loans or other types of debt, yet my credit score has continued to soar over 850 anyway with my having only revolving credit.

As I prepared to leave the States, I focused on minimizing my belongings and eliminating unnecessary purchases. I wished I could have kept my house and used it as a rental property, but the headache of finding good tenants compounded by my desire to simply get away from it all (and that city), so I sold it and relocated south with my sons to Houston. I then leased a place I could easily walk away from and start my global journey when the lease ended. I also leased a car rather than purchase one so I wouldn’t have to deal with storage fees or my car sitting up deteriorating for months on end. Car lease ends July 3, so I’m returning that the day before I leave.

As a result of years of careful debt elimination and credit building, I’m leaving the United States with zero debt, over $100K in available credit, a credit score just under 900, significant savings, and my only bills for the next year, not counting travel and travel health insurance every six months, will be my storage unit, storage insurance, cell phone, global wifi, and life insurance.

One huge added benefit of having so many credit cards with zero balances is that I am able to add my sons as authorized users and give them an overabundance of available credit to help boost their credit scores while I maintain control of all the credit cards. Both of my sons had the advantage of graduating high school as members of the 800 Club with credit scores over 810.

What credit tips have you learned that made any difference for you? Which of the above have you tried or plan to utilize?

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