What Adding 100 Points to Your Credit Score Could Mean

Credit scoring can feel like an abstract concept. It’s tough to think in concrete terms about how a few points can impact your ability to get a loan or a credit card.

For example, what could adding 100 points to your credit score actually mean to your finances? If you’re not sure, take a look at the details below – you might be surprised at what you find!

How does credit scoring work?

Before discussing the impact of tacking points onto your score, let’s take a minute to review how credit scoring works.

Your FICO score (the most commonly used credit score in the United States) uses a scale of 300-850 to rate consumers on their creditworthiness. The higher your score, the better. The FICO model uses the following five factors to determine your score:

• Payment history – Are you paying your bills on time? This accounts for 35% of your score.


• Amounts owed – How much do you owe on your credit accounts in relation to your available credit? This accounts for 30% of your score.


• Length of credit history – How long have you been using credit? This accounts for 15% of your score.


• Mix of credit accounts – Do you have a variety of different credit accounts on your credit report? This accounts for 10% of your score.


• New credit inquiries – Are you trying to apply for too much credit at once? This accounts for 10% of your score.

What adding 100 points to your credit score could mean

Adding 100 points to your credit score is significant, but what it could mean to your finances depends on your starting point. With that in mind, here are some possibilities if your original score was:

500 – With a credit score of 500, you probably found it almost impossible to qualify for a credit card or loan. To be clear, 600 still constitutes poor credit in the eyes of most lenders, and you’ll likely have to pay a high interest rate on the credit products you manage to obtain.

But making the jump to a 600 credit score will give you a reasonable chance of getting certain credit cards. If you do, using plastic responsibly will help boost your score even further. It might not seem like much, but going from 500 to 600 will position you for future financial growth.

600 – Adding 100 points to a credit score of 600 will open a lot of financial doors. Once your score hits 700, you’ll be able to qualify for credit cards that require good credit. This is great news, because these cards tend to come with rewards programs (unlike most of the cards for people with poor credit). You can start racking up points or cash back with every swipe!

Also, with a credit score of 700, most banks will agree to offer you other types of financing without requiring a cosigner or charging a sky-high interest rate. It’s likely you’d even be able to obtain a mortgage.

700 – Bumping a 700 credit score up to 800 will put you in the big leagues. With a credit score this high, you’ll get approved for nearly every credit card on the market (assuming your income is high enough). This means you can get a card that offers primo rewards, including some of the more exclusive travel credit cards.

A credit score of 800 also means that you can get the most favorable terms on almost any loan you apply for. In other words, having good credit means that you can borrow cheap!

Tips for pumping up your score

If you’re excited about the possibilities that will open up with the addition of 100 points to your credit score, you’re itching to get to work on your score. If so, here are the Nerds’ top tips for improving your credit:

• Pay your bills on time – No exceptions! This is the most important thing you can do for your score.


• Keep your credit utilization low – Don’t use more than 30% of the available credit on any of your cards at any time.


• Use credit early and consistently – The easiest way to do this is use your credit card for as many purchases as you can and pay it off every month.


• Borrow sparingly – Applying for several loans or credit cards in the span of a month or two will ding your score. Only apply for credit you really need, and put a lot of space between new applications.


• Check your credit report at least once per year – Mostly, you should be reviewing your credit report for errors. If you see one, take steps to have it corrected.

The bottom line: Adding 100 points to your credit score could have a big effect on your financial life. Use the Nerds’ top tips to get to work on your score today!

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How to Get Over the Minimum Payment Slump

We’re total number nerds here at NerdWallet! But some people aren’t quite as infatuated with math. Case in point: A study by a Boston College marketing researcher showed that telling consumers how much interest they were incurring by only making the minimum payment on their credit cards didn’t affect their payment amounts. If you’re stuck in the minimum payment hamster wheel, here’s how to get off it.

Increase your payment to lower your monthly costs and simplify your finances

If you only make the minimum payment, you’ll be in credit card debt for years. Aside from accumulating interest charges, this means you’ll have to make your minimum payment each month well into the future, which keeps your monthly expenses high. Every extra expense can be a hindrance if you get into financial straits due to job loss, medical issues or any other hardship. By paying more than the minimum, you’ll reduce your future monthly expenses tied to paying down your bill.

Along with higher monthly expenses, you’ll also have to keep track of your account for as long as you have it. By paying off the account faster, you’ll have one less due date to worry about.

How much extra should I pay?

In a perfect world, you’d pay off as much as you possibly can out of your discretionary income each month. You would increase your income and/or cut your expenses and direct your extra dollars to paying off your credit card once and for all. This is a great option that we highly recommend.

However, if you don’t want to allocate that much money toward debt, there are a couple of simple increases you could make. One is doubling your minimum payment.

Here’s a scenario: If you have $6,000 in credit card debt at an interest rate of 18% and your minimum payment is $120, you’ll pay it off in seven years and seven months by making only the minimum payment. But if you doubled it and made payments of $240 a month, it would be paid off in two years and seven months. That’s five years less just by doubling your payment!

A second option: You could also pay your credit card off in three years by paying the three-year amount on your credit card statement. To find this, go to the “Minimum Payment Warning” section of your statement. You’ll find the amount of time it will take to pay off your card with the minimum payment and an alternative payment that will wipe out the balance in three years. By making the alternative payment, you’ll significantly reduce not only your payment timeline, but also your interest accrued.

Note: You’ll only make progress on your credit card debt if you aren’t incurring new debt. When you’re in debt-payoff mode, don’t charge more to your card.

Bottom line: If the extra interest accrued doesn’t persuade you to make more than the minimum payments, think of it in terms of years in debt. To shorten the amount of time you’re stuck in debt, use your excess monthly cash flow to pay it off, double your minimum payment or make the three-year payment. You’ll pay less interest, lower your future monthly expenses and limit the number of bills you have to keep track of for years to come.

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Is There Anything Wrong With Transferring the Same Balance From Card to Card?

Trying to avoid the scourge of credit card interest is a good idea. Given that most plastic carries a double-digit APR, you’re saving yourself big bucks by figuring out ways to dodge it.

If you’ve been relying on balance transfers to steer clear of interest payments, you might be wondering if there’s anything wrong with transferring the same balance from card to card. Before applying for another card that’s offering a 0% promotion, take a look at the details below – the Nerds will help you decide if it’s a good idea or not.

Transferring a credit card balance can be a smart move

Just to be clear, the Nerds aren’t categorically opposed to transferring a credit card balance. In fact, there are a lot of good reasons to consider moving your high-interest debt onto a 0% card.

The first and most obvious reason is savings on interest. As of July 2014, the average APR on a credit card is hovering around 15%. If you’re carrying debt on a card that’s charging this rate, you could be shelling out hundreds of dollars per year on interest.

But if you transfer that balance to a card that offers an introductory 0% period, you’re skirting those costs for the length of the interest-free period. Ideally, you’d reinvest the savings into your debt payoff and eliminate your balance before the 0% reprieve comes to an end.

Another good reason to transfer your balance(s) to a 0% card is to simplify your financial life. If you’re carrying debt on multiple cards and can consolidate them all into one monthly payment, you won’t have to worry about several billing due dates. If you struggle with organization, this can help you avoid missing a payment.

There are pitfalls to transferring the same balance again and again

Transferring a credit card balance to a 0% card is certainly not a bad idea if you handle it carefully. But certain problems can arise if you keep transferring the same balance to a new 0% card every time your current interest-free period is coming to an end.

For one thing, you’ll have to keep paying out in balance transfer fees. Most credit card issuers charge 3% of the balance transferred every time you move your debt onto one of their cards. If you’ve been shifting the same balance from card to card for years, you’ve likely racked up hundreds in balance transfer fees.

Another consideration is credit card issuers’ policies on balance transfers: Most only offer 0% promotions to new customers. This means that if you already have a card from a particular bank, you probably won’t be able to transfer a balance at 0% to any of its other cards. This won’t be a problem for the first several transfers you do, but eventually you’ll run out of issuers to choose from.

Take a hard look at your finances and address larger problems

If you’ve transferred the same balance over and over again, you should interpret this as a sign that it’s time to take a hard look at your finances. Remember, a balance transfer should be used as a debt payoff tool. If you can’t seem to get there, you might need to reconsider how you’re managing your money.

The Nerds have a few ideas to help you take control of your funds so that you can finally achieve freedom from credit card debt:

• Do some math – Do you know exactly how much you need to pay each month to erase your balance before the 0% promotion is up? If not, get out a calculator and figure it out. Then make a commitment to that monthly payment.


• Rework your budget – Revisit your monthly spending plan to be sure that you’ve allocated enough to debt repayment.


• Cut unnecessary expenses – If you need to find extra funds to meet your debt payoff goal, figure out ways to cut unnecessary expenses. Let’s be honest: Do you really need that monthly cable subscription or weekly manicure?


• Brainstorm extra-income opportunities – Besides cutting expenses, another way to get out of debt faster is to take on extra work. Consider getting a second job or taking on overtime at your current gig.


• Reach out for help – If your debt is overwhelming, it might be time to think about visiting a credit counselor. Visit the National Foundation for Credit Counseling’s site to find reputable resources in your area.

The takeaway: There’s nothing wrong with transferring your credit card debt to a 0% card. But if you’ve moved the same balance several times, you might need to overhaul how you manage your money. Use the Nerds’ tips above to get your finances straightened out!

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I’m Starting College in the Fall — Do I Need Good Credit to Get Student Loans?

After 12+ years of schooling, it’s time for your reward — more school! If you’re heading to college this fall, you may wonder if the amount and interest rate of your student loans are dictated by a credit score you likely don’t have yet. Here’s what you need to know about credit and student loans.

Student loans: Federal vs. private

Federal student aid is available for U.S. citizens or eligible noncitizens with financial need enrolled in an eligible degree or certificate program. Federal loans don’t require a credit history or a cosigner. Furthermore, all undergraduate students enrolled at the same time will receive the same interest rate as their undergraduate peers. Graduate students pay a higher interest rate than undergrads, but will still pay the same rate as other graduate students. Federal student loan interest rates aren’t set according to credit scores.

However, students who don’t demonstrate a financial need based on their parents’ income may have to take out private loans. These loans are made by lenders, such as banks or credit unions, and have variable interest rates that are generally much higher than federal loan rates. As with any other loan, you’ll either need good credit or a cosigner with good credit to get approved for private student loans.

If possible, you’ll want to go for federal student loans. Not only will you pay a lower interest rate and not require a cosigner, but you’ll also be able to deduct the interest paid on your taxes and defer payments until after you’ve left school.

Should I start building my credit if I’m eligible for federal loans?

As an adult, you’ll need good credit for many things, including getting an apartment and a cell phone, as well as getting approved for a credit card or car loan. Generally, credit is built using a credit card, but due to the Credit CARD Act of 2009, you likely won’t be able to get a credit card to start building credit until you’re 21 without a cosigner. The exception to this: if you make a full-time income while attending school.

If you choose not to get a cosigner, you can get a secured credit card or ask a family member with good credit to add you as an authorized user on one of his or her oldest cards. Secured credit cards are backed by a cash deposit usually equal to the card’s credit limit, so the bank doesn’t incur risk. Here are some of our favorite secured credit cards.

As an authorized user, you’ll have the power to make charges on a credit card — provided the primary cardholder gives you a card — but aren’t responsible for the payments and can’t make changes to the account. If you choose to go this route, decide on a monthly spending limit with the primary cardholder and don’t exceed it. Also, have the primary cardholder contact his or her issuer to ensure that authorized users are reported to the credit agencies.

Bottom line: You don’t need good credit to get federal student loans, but you’ll need good credit or a cosigner if you need private loans. Regardless of which types of loans you go for, make sure you start building your credit for everything else you need credit for — like apartments, cell phones and car loans.

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Which Retail Credit Cards Offer Chip Technology?

If the retail data breaches of 2013 and 2014 left you wondering if there’s a safer way to pay, you’re in luck. As the United States implements EMV (also known as chip) technology, using your credit card at your favorite stores should be more secure.

In fact, a few retailers have announced that they will start issuing chip-enabled credit cards. Which merchants have embraced EMV technology, and where should you look for a chip-enabled card? Take a look at the details below for more information.

Retailers move slowly to chip technology

Although chip technology has been available for years – and is widely used in other parts of the world – the U.S. is dragging its feet about shifting to it. The main reason for this is cost; retailers will have to pay big bucks to upgrade their payment terminals to be EMV-compatible.

How much are we talking? According a report in Bloomberg Businessweek, it costs merchants $500-$1,000 per terminal to make the switch. That’s not chump change, especially for small businesses.

But there are also costs associated with producing chip-enabled cards. The same Bloomberg article noted that EMV cards can cost up to $2 each to make, but magnetic-strip cards only cost a few cents apiece. This means that both retailers and credit card issuers have good reasons for delaying the move to full EMV implementation.

However, change is under way. Visa and MasterCard have set an October 2015 deadline for retailers and issuers to make the move to chip-enabled cards and terminals. After that time, if credit card fraud happens, the party with the lesser technology will be held liable. This is a big incentive to shift to EMV as soon as possible.

Sam’s Club MasterCard leads the pack

While many retailers aren’t enthusiastic about the switch to EMV, a few have started to make the move well in advance of the October 2015 deadline. Sam’s Club is leading the pack: On June 23, 2014, it became the first mass retailer to offer a chip-enabled credit card. Walmart, the parent company of Sam’s Club, announced that its co-branded cards will start coming chip-enabled later in 2014.

What’s more, all of the payment terminals at Walmart and Sam’s Club stores in the United States are capable of accepting chip cards. This puts these retailers significantly ahead of others when it comes to EMV readiness.

But Target isn’t far behind. In April 2014, the retailer announced that it will switch all of its co-branded credit and debit cards to chip-and-PIN capability by early 2015. At the same time, it’s also upgrading all of its payment terminals to EMV compatibility. The New York Times reports that Target’s cost to switch over all of its payment cards and terminals is $100 million. However, this is probably a worthwhile investment for the company, which experienced one of the biggest data breaches in history in December 2013.

Want a chip in your credit card? You have options!

Although very few retail credit cards are currently chip-enabled, there are a lot of other cards on the market that come with this technology. If you want a chip in your credit card, you have options.

For example, as of summer 2014, Citibank offers EMV chips in all of its consumer and college credit cards. Most other issuers offer chips in at least some of their products, so check out the Nerds’ full list of America’s best EMV credit cards. Just remember that until merchants start using EMV-enabled terminals, you won’t get the benefit of enhanced security.

The takeaway: U.S. retailers have been slow to make the move to EMV technology, but a few are leading the pack. If you want or need a chip-enabled card, you have lots of options outside of retail cards. Check back with the Nerds often for more updates about this important topic!

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Moving This Summer? Use These 5 Credit Card Perks to Make It Easier (or at Least a Little Cheaper)

Let’s face it: Moving is a difficult and unpleasant chore. No matter how excited you are about all the fun you’ll have in your new place, dealing with the process of getting there is nothing but a hassle.

Since summer is prime moving time, this is the perfect opportunity to review some common credit card perks that could make the task easier – or at least a little cheaper. Take a look at the details below to find out how your plastic might have your back during your next big move.

1. Rental car insurance

If you’re planning on renting a car for your move, you can feel comfortable turning down the optional insurance offered by the rental agency if you’re booking with a major credit card. Every big credit card network (Visa, MasterCard, Discover and American Express) provides some type of free rental car insurance if you pay for the rental with your card.

Coverage varies greatly depending on what type of card you have, so it’s wise to get in touch with your issuer before booking your rental. But relying on your plastic instead of the rental car company for additional coverage could save you about $25 per day.

Note: Most credit cards exclude large vehicles like pickup trucks, vans and very big SUVs from their rental car coverage program. But if you don’t have a lot to move and a regular car will suffice, this is a good perk to keep in mind.

2. Introductory 0% APR promotions

In an effort to attract business, many credit card issuers offer 0% APR promotions for new customers who sign on to their cards. If you have good credit you might be able to get a card that charges 0% APR on purchases for 6-12 months.

This is a great deal if you’re moving, because there are many unexpected expenses that come with settling into a new home. Having a cushion of time to pay them off before incurring interest will make your move a little less stressful. Just be sure to be disciplined about eliminating your balance before the interest-free period is up.

3. Return protection

Moving involves a lot of guesswork: Will those new drapes look good with my new couch? Will the new duvet clash with the color of the walls? How many picture-hanging hooks will I actually need? Inevitably, some of those purchases will need to be returned. If the store won’t take something back, your credit card might have you covered.

Most credit cards offer some type of return protection, which will refund you for a purchase you made with the card even if the retailer won’t. Again, this benefit varies with the type of card you have, and almost all policies come with exclusions. Check with your issuer for more details, but be sure to keep this benefit in mind if you run into a décor disaster.

4. Extended warranty

Many people view a big move as a good time to upgrade some of their electronics and appliances. But if one of those items breaks after the manufacturer’s warranty has expired, it could dampen your enthusiasm for your new place.

Luckily, though, most credit cards offer some version of an extended warranty on items purchased with the card. In many cases, this could lengthen the item’s warranty for up to a year beyond what the manufacturer is offering. But you guessed it: It’s smart to check with your particular card issuer to see what their extended warranty policy is.

5. Signup bonuses

If you’re in the market for a new credit card, a big signup bonus is one feature you might be looking for. But have you considered that you could use your bonus points, miles or cash back to offset some of the cost of your move?

Many credit card issuers allow you to convert your rewards to gift cards or merchandise, which could be a good option if you’ve just moved to a new home. If you can use your signup bonus for home-improvement-store gift cards or a new appliance, you might be able to score some great items for your new place.

Just be sure to do the math to see if gift cards and merchandise redemptions give you a good value on your points; in some cases, it might be better to cash them in for something else.

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