Why this is important to me
One idea my marital partner and I have is to buy a home before/when we have a child. There is a lot we don’t know about this, and we will get to learn about that in later posts. I have done some research about it by reading the book “I Will Teach You to be Rich,” by Ramit Sethi. Honestly, I hate the title, but I love the content and the writing. He covers budgeting, investing, home buying, and more. One of the things I learned is that your credit score will matter when you go to get a loan from your bank for a home.
There are two things I know can make your credit score better:
- having multiple lines of credit
- paying the debt off
In case you are not sure what your credit score looks like, there are three great places to check. My Fico has all the bells and whistles and therefore is maybe the most accurate, it does cost money. You can get a free report from Annual Credit Report. Most people use Credit Karma. To be honest I used My Fico and my score was off by like three points from what my credit card company projected through their app.
Where we are
Because I did the research about it and have been working on it, my credit is in the 780s. My marital partner just checked his for the first time and is in the 730s. Both are good enough to buy a house. I think the minimum you have to have is 620. The higher your score, the more likely a bank will be to give you a loan. The higher your score, generally, the lower the interest rate will be on your mortgage.
I have been learning a little bit about mortgages too, a super adult word that previously made absolutely no sense to me. More on that in later posts.
We both have student loans and we are both signed up for a United travel card through Chase. My partner has never used his, and I am in debt because of mine. I had about $5000 at the beginning of the year to pay off on the card, and that is down to about $1500. I used this calculator to figure out how to pay it off in a year.
Where we are heading
Now that I know our scores I want to bump my partners up and keep mine heading ever higher. Again, having multiple lines of credit really helps. I have a cash-back card that he is not on. The next step is to get him on that card. Then I want to pay off my debt on my travel card and make sure we are set up to pay the full balance every month.
What I, and millions of other people, Americans especially, don’t realize is that the interest on credit cards will eat you alive. The interest on my travel card is 15%! What is crazy about that is the interest gets added to your full balance, so you accrue debt, like, exponentially or some shit. Let’s say your interest is 10% and you have $100 on it. If you don’t pay that off 10% of $100, or $10 is added to your account. Now your balance is $110. The next month you don’t pay it off will then be $11 added to the balance, for a total of $121. The next month $133.10. At the end of 1 year will be $260. So you have more than doubled the balance of your card. And 10% would be great for an interest rate. And that is how they get ya. Ye,s it seems like buy something you don’t have the money for now and pay it off over time, but if you pay the minimum due, it will take you forever to pay off your card. I really recommend trying that calculator out if you have a balance and playing around with how long it will take you to pay it off.
With all that, it seems scary to open another credit card, and my partner seems terrified of them to begin with. So the next step is to get him comfortable with using them, and set them up to pay off the full balance every month. If you pay off the full balance, you do not accrue any interest. We are then going to use the travel card to pay for all things travel related and the cash-back card to pay for everything else. More on which cards we are using later. The other thing to check out if you have cards is to get into the weeds of benefits. They don’t always make these super easy to find, but like our travel card has a thing with Groupon where we earn miles if we use that. So I am going to start planning our date nights around that because we will both get the discount and get air miles to help us with future travel. So yeah, that is what is coming next, being super adult like about credit cards and debt.