Many people, especially those who routinely travel on business, use credit cards as an accounting tool. They’re a great way to have all the records of gas purchases, hotels, airline tickets, etc. in one place.
And if your employer is reimbursing you for travel, it’s easy to pay those bills in full each time they arrive, so the balances don’t build from one month to the next. That should show up as no debt at all, right? Wrong.
Companies report on the statement balances, so the only way to avoid having those charges figured into your credit score would be to pay them off each month before the statement was generated.
If you have a credit card with a moderately low limit, and your travel expenses each month bring you near the limit, you could be doing more damage to your credit score than you realize.
One way to avoid this is to ask your employer to furnish you with a card for those expenses he or she reimburses. Then the expenses won’t show up on your credit report at all.
But what if you pay your own expenses? You may be a sole proprietor traveling or entertaining for your own company. In that case, call your credit card company and ask to have your limit increased, so the debt to limit ratio is lowered. Sometimes you can go on line and fill out a quick form to have this arranged – provided you have a good payment history with the card issuer.
But be careful – they may pull a “hard credit report” before granting the increase. As you probably know, the number of inquiries on your account also plays a big role in determining your FICO score. So if you’re about to apply for a loan for a home or a car, you might not want to do this. Call customer service first and ask the procedure.
If you believe they’ll generate an inquiry on your credit, you can instead spread your purchases over several cards, keeping the ratios low on each of them.
Quick credit tip: If you’re going to need credit within the next few months, a quick way to raise your FICO score is to stop using this convenient bookkeeping method. Write a check, or use your debit card for these expenses and let your credit cards go unused for a while.
After you have your new loan, get busy on raising those limits so you can go back to the convenience of using the card.
Author:Mike Clover
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