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- Reflection No. 18
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Happy Friday, folks! We made it to the end of the week—whew! After the last few Reflections, you might wonder: what impact does credit card churning have on your credit score—the one score that really matters?
Good news: this week’s Reasoned Reflections dives into everything you need to know about credit scores, how they work, and how churning can affect them. Let’s break it all down together!
TODAY ON REASONED REFLECTIONS:
Personal finance articles 💰;
Credit scores;
Time to reflect;
Quote of the Reflection.
Personal Finance Articles 💰
Time for a bit of R&R
I predict the stock market will…
My Take - Let’s be honest—who really knows what the stock market will do in 2025? While it’s fun to speculate, the best approach is to focus on what you can control. Don’t try to time the market; instead, trust the process. If you’ve got time on your side, remember that time in the market always reigns supreme.
My Take - I don’t necessarily agree with the entire list—life is all about balance. If you find value in a subscription service or enjoy treating yourself to a nice meal out every now and then, go for it! You do you. That said, I absolutely agree that gambling is a total waste of money. And as for buying a brand-new car? No thanks. The depreciation that happens as soon as you drive off the lot just isn’t worth it to me!
It’s time to update your money relationship
My Take - We all have to make money decisions. It’s just part of being an adult. As we look back on our financial habits from 2024, what lessons can we take away? The start of a new year is the perfect time to make adjustments and set ourselves up for success.
My Take - This list is packed with great financial moves for 2025. January is the perfect time to start strong—consider increasing your 401(k) contributions if you’re able. It’s also a good opportunity to evaluate where your money can be most productive: investing in the market or paying down debt. Even small adjustments now can lead to big results later!
My Take - 1031 exchanges can be tricky to navigate! This article clears up some of the most common myths surrounding these types of exchanges. If you’re in the real estate game or thinking about renting out property, it’s definitely worth a read.
TOGETHER WITH FINANCE BUZZ
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Reflection No. 18: All You Need to Know About Credit Scores
I - Issue: What is there to know about credit scores?
R - Rule: Your credit score is a snapshot of your creditworthiness. Lenders primarily use it to determine the likelihood you will repay your debts. The higher your score increases your odds for loan approval and usually gets you better rates, too.
A - Analysis: The credit score originated from FICO—formerly known as Fair Isaac Corp.—and has become a central piece of personal finance in the U.S. Equifax, Experian, and TransUnion are the largest credit bureaus and each primarily tracks factors like your repayment history, credit usage, and account age.
Your credit score can have a pretty big impact on your finances since the lender uses it to help determine the rate it charges you for your loan. Think of your credit score like a scoreboard in a game—the higher, the better (except golf… I desperately wish high scores were good in golf). The range is 300-850; the higher your score, the better your financial opportunities. Here’s the breakdown:
Poor: 300-579
Fair: 580-669
Good: 670-739
Very good: 740-799
Excellent: 800-850
Now that we know higher is better for our credit score, let’s look at what criteria goes into generating the credit score number.
Key Factors in Credit Score Calculation
Payment history
Do you pay your bills on time? This factor carries the most weight and directly reflects your reliability as a borrower. Late payments—even fashionably late payments—can hurt your score. This has a big impact and carries the most weight when your score is calculated.
Credit history
This looks at the age of your accounts and your credit mix (mortgages, auto loans, student loans, credit cards, etc.). Older accounts and a balanced mix of credit types improve your score. This factor also has a significant impact on your score. Pro tip: keep your oldest credit card open!
Credit usage
Credit usage measures how much of your available credit you’re using. Aim to keep this below 30%—high usage signals to lenders that you might be financially overextended. This has a high impact on your score calculation.
Total balances
This factor considers the total amount of debt you owe across all accounts. It has a medium impact, but paying down balances can make a big difference.
Credit checks
Frequent applications for credit raise red flags to lenders and can lower your score slightly. Hard inquiries usually only stay on your credit report for two years. Thankfully, this factor has a low overall impact.
Available credit
This measures the unused portion of your credit limit after accounting for balances owed. It has a low impact, but maintaining plenty of available credit can help your score.
Improving Your Credit Score
If your score isn’t where you want it to be, don’t worry—it’s fixable. Start with these steps!
Always pay your bills on time—credit cards, mortgages, student loans, you name it.
Keep your oldest accounts open to boost the average age of your credit history.
Stay under 30% credit utilization by keeping balances low.
Pay extra when you can to reduce total balances faster.
If you’re into travel hacking or credit card churning, remember that frequent credit checks can ding your score, and opening new accounts will lower the average age of your credit. Thankfully, credit checks have a low impact, and you can offset the age issue by keeping your oldest accounts active.
C - Conclusion: Understanding the factors behind your credit score is crucial—especially if you’re travel hacking or churning cards. With attention to detail and discipline, you can build and maintain a score that works in your favor.
Time to Reflect…
Keeping track of your credit score is important for your finances. It affects the rates you’ll get on mortgages, auto loans, and private student loans—and it plays a key role in your credit card churning strategy. You don’t want a hard inquiry hitting your report unless you’re confident you’ll get approved for that new card.
Personally, I like using Credit Karma to monitor my credit score. I check it weekly (it updates regularly, and yes, I’m a little obsessed). Many major credit card issuers also offer free credit score monitoring, so take advantage of those tools to stay on top of your financial game!
Quote of the Reflection
“Fortune befriends the bold.”
-Emily Dickinson
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