FICO Score Open Access: You Now Get A Free Credit Score When You Apply For A Credit Card

light-bulb-momentI recently had a connect the dots moment I’d like to share with you. In a program called FICO Score Open Access, FICO announced on November 4, 2013 that it plans to allow any lender who uses FICO scores to determine an applicant’s creditworthiness to allow the score to also be available to all applicants for free. So far only Barclaycard US and First Bankcard have signed up, but surely a tremendous amount more credit card companies will sign up once the word gets out to consumers.

When I applied for the Barclaycard Arrival World MasterCard to get double travel rewards points recently (see my review), I received my latest credit score in the mail of 805. At the time, I didn’t think it was strange because I always got my credit score in the mail during all my previous eight mortgage refinances. I also hadn’t applied for a new credit card in a decade so I thought receiving my score was just status quo or at least a nice gesture by Barclaycard. The reality is that most credit cards don’t send you your credit score if you apply for their card. The reason why we do get our credit scores during a mortgage refinance is because we’re paying to refinance or take out a new mortgage. Nobody pays to apply for a credit card!

As any proud personal finance blogger would do, I proceeded to write a post on how to improve your credit score to 800+ with this newfound information. We know that pulling your credit score too often may bring down your credit score. The idea is that if there’s a sudden rush of credit inquiries, it may signal the person is in a cash crunch.

Can you imagine getting your credit score pulled, getting denied by the credit card company, and being left in the dark as to why? That would be as aggravating as getting a college or work rejection letter in the mail with no reason for denial. The new FICO Score Open Access plan will supposedly allow participating banks to show applicants their credit history, any late payments, and debt levels.

You can still get your latest TransUnion credit score for free from a trusted company like GoFreeCredit.com if you aren’t looking for a participating rewards credit card. Just make sure you cancel the credit monitoring service before the grace period is over if you don’t want to get charged for such a service. But now if you apply for a Barclaycard US you get the side perk of a free credit score in the mail.

I’m predicting Barclaycard US and lesser known First Bankcard are going to gain outsized market share of new credit card applicants until every other credit card company participates as well. The FICO Score Open Access system is a great step for consumer rights.

RECOMMENDATIONS

Barclaycard World Master Card: If you are an avid traveler and looking for a travel rewards credit card, you can sign up for the Barclaycard Arrival World MasterCard with no annual fee with double the points on travel and dining and 20,000 signup miles ($200 value). Barclaycard offers $200,000 in automatic travel accident insurance, reimbursement for expenses if your bag is lost or delayed, trip cancellation coverage, and $0 fraud liability.

Discover Credit Card: Are you looking for the best credit card for balance transfers, flexibility, and rewards? Check out the benefits of the Discover it® credit card and maximize your purchasing power. You can earn 5% cash back rewards without any annual fees, over limit fees, or foreign transaction fees. And did you know Discover has been ranked #1 for customer loyalty for 17 years in a row? Discover it cards are accepted at over 9 million merchants nationwide and their U.S. based customer service team is available 24/7. Just remember to spend within your means!

Check Your Credit Score: Take a moment to check your free TransUnion credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance. The average credit score for rejected mortgage borrowers has risen to 729 due to more stringent lending requirements. Do you know what your score is?

 

A Correlation Between The Number Of Credit Cards One Has And Net Worth

Average credit card interest rate chartI believe the ideal number of credit cards is three or less as stated in my  post, “How Many Credit Cards Is Too Many?” One of the main reasons for having three or less is so that you don’t spend too much time playing the churn and burn game for rewards points. Once in a while is fine, but there is a law of diminishing returns.

If you’re spending time applying for new credit cards, reading about new credit cards, keeping tracking of all your credit cards, and canceling your credit cards, then you are taking away time from making more money elsewhere. Your mind focuses on the small picture when it should instead be focused on the big picture. Furthermore, unless you are an organizational machine, you will undoubtedly miss a payment or forget to cancel your card before the introductory period is due thereby negating some of the initial sign up benefits.

Everybody should have at least one credit card for convenience sake. Many credit cards have travel insurance which comes in handy when you lose your luggage in a strange land and need a place to stay. Credit cards help build credit which is important for individuals looking to buy a home or apply for a coveted job. Buyers protection is also a great reason to have a credit card just in case you want to dispute a vendor.

THE IRRATIONALITY OF PERSONAL FINANCE

How Many Credit Cards Should I Have Until It’s Too Many?

Various types of credit card logos, Visa, Mastercard, AMEX, DiscoverI was having lunch with a buddy of mine when he whipped out his foot long man wallet to pay the bill. “Whoah!” I said. “Where do you keep that thing?”

“In my man bag, of course!” he replied with pride. Todd lifted up his soft leather Bally bag that probably cost a thousand dollars. “Have a touch,” he said as he tossed it over. Todd’s bag was as supple as a baby’s bum.

The reason why Todd’s wallet is so big is because he has 10 credit cards all nicely color coordinated from top to bottom. The most prestigious cards – the black ones of course – were at the top. But as I looked closer at his collection, every credit card of his said “Preferred,” “Platinum” or “Elite.”

One could call Todd a credit card connoisseur. “I’ve got a card for every purpose,” told mentioned proudly. “Never leave home unprepared!”

Despite what is probably hundreds of thousands in credit at his disposal, Todd still rents a one bedroom apartment and has less than $80,000 his 401(k) at 35 years old because he’s spending all his money! In fact, he admitted to having around $18,000 in revolving credit card debt spread across seven cards. At least he’s got a nice BMW 650i coupe on lease for $899 a month.

So I got to thinking, maybe the reason why Todd has so little assets for a man making six figures a year is because of temptation from all his credit cards. When there are no cookies in front of me, I never eat desert. As soon as you put out a tray of gooey white chocolate chip cookies at my disposal, it’s game over!

THE MOST CREDIT CARDS I’VE EVER HAD

Determining The Value Of Your Credit Card Rewards Points

Honolulu, HawaiiI’ve only got one personal credit card and that’s my Discover rewards card. I like concentrating all my spending on one card so I can get maximum points to buy things like a home theater system, nights at the Halekulani Hotel, gasoline cards, and tennis racket grips!

Credit card reward points have value and like anything with value we tend to hoard. I know plenty of people who never use their reward points for years, only to see the cost of things skyrocket. Worse yet, some credit card reward programs expire after so many years.

My favorite example of a rise in rewards points cost is a round-trip ticket to Hawaii from California. Over the past 12 years, I’ve gone to Hawaii over 20 times. It’s a direct 4.5 hour flight from San Francisco, and I absolutely love it there for obvious reason. If any readers want to meet up in Honolulu the second half of April let me know!

Before the year 2000 it cost 25,000 points for an economy class round-trip ticket valued at roughly $350. In other words,  it took 75 points to buy $1. In 2013, the same flight now costs 35,000 to 50,000 points depending on the time of the year. Meanwhile, you can get tickets during the off season through Hawaiian Airlines, Alaska Airlines, or United for just $300 from San Francisco! It now takes ~120-170 points to buy $1.

Not only does it now take 60-100% more points to get a similar ticket, the cost of directly purchasing a ticket has stayed relatively flat. As a result, whenever I can purchase a ticket for less than $350 to Hawaii, I do so without points.

CALCULATING THE VALUE OF CREDIT CARD REWARDS POINTS

Who Should Get A Black Card? Probably Not You!

Visa Black Card CommercialThere once was a time I was rich, but never famous as I traveled internationally four times a year for business. Each destination hosted loads of other folks who wanted to learn about the next money making idea in the global financial markets. With me was an American Express corporate card where I could expense relatively freely to the tune of ~$50,000 a year. The card provided travel insurance, access to airport lounges, concierge services, and more. 50K may sound like a lot, but that’s nothing compared to the hundreds of thousands in expenses I hear from some Black Card spenders!

I don’t have much coming in anymore, but I do have a lot of freedom. It’s a tradeoff many will take at some point in their lives. Given my desire to simplify things, I’ve only got one personal credit card, which is the Barclaycard Arrival World MasterCard with no annual fee. There’s no annual fee and all my spending is concentrated here to maximize my rewards points.

Since we live in the land of consumerism where we want things and we want them now, I thought it’d be a good idea to do a post for all you Black Card aspirees out there. Some get Black Cards just for its status symbol. Meanwhile, other people are a little less vain and use their Black Card for better access and service. Whatever the case, I’d like to introduce my guidelines for those who can and should not get a Black Card.

SHOULD YOU GET A BLACK CARD? LET’S SEE IF YOU QUALIFY