Credit Card Makeover: Educating James


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James is getting an advanced degree, and he also wants to advance his credit score. He's about to learn how a credit card can help buy a house!

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James is a master’s student in South Florida. Unlike many college students, he’s steadfastly avoided credit card debt. But now he’s looking for new cards that will boost his credit and help him save on some big after-graduation purchases.

Where James is…

“The only reason I got a credit card is to establish a credit history – because I know I’ll need one to make big-ticket purchases like a car or a house.

“I currently use my mtvU Citi Visa Platinum Select. I like the ease of gaining the credit card with little income, but I hate the constant emails they send about adding expensive services I don’t need. I always pay my entire balance in full – normally $15 to $75 per month. I’ve never checked my credit scores or pulled my credit report, so I have no idea how good my credit is.”

What James needs to do…

James has got a lot going for him: He pays his bills in full and on time, which avoids interest charges and revolving debt. He also recognizes that credit cards are a valuable tool he can use to build his credit history in order to qualify for future loans.

What he might not realize: Having a high credit score can also help to rent an apartment, reduce his insurance costs, and pass an employer’s background check.

James should definitely check his credit history, and maybe his credit score as well. Not doing so is like taking a course, then not bothering to check the grade.

Everyone should look at their credit history, checking for errors and otherwise making sure everything’s kosher.  You can get a free copy once a year from each of the big three credit reporting agencies by going to annualcreditreport.com.

At least six months – preferably a year – before applying for a car or home loan, James should check his Fair Isaac FICO score, the score used by the vast majority of lenders.  Unfortunately, getting a FICO score costs $19.95, although there’s a hack: You can get a free score by enrolling in a $14.95-per-month credit monitoring plan, then quitting within the 10-day cancellation period. Just make sure you understand exactly how to cancel before doing this, because if you don’t cancel within the 10-day window, there’s a minimum of three months in the program.

There are also free scores available online, although they’re not widely used by lenders. CreditKarma offers “VantageScore” and “Transrisk” scores from TransUnion.  Credit Sesame offers a free “National Equivalency” score from Experian.

What cards should James get…

Citi’s website no longer features the mtvU card, but Capital One still has its MTV Visa, which is similar. That card made my list of The 7 Worst Reward Credit Cards last year. I didn’t like it because it offered harsh terms and scant rewards. At least it has no annual fee.

James could start by calling Citi and asking them to stop spamming him. While he has them on the phone, he should ask them if he can be approved for their Dividend Platinum Select Visa Card for College Students.

This card will help him earn 5 percent cash back at supermarkets, gas stations, utilities, and drugstores for six months, and 1 percent thereafter.  It also offers at least 2 percent cash back from rotating categories of merchants such as department stores, jewelry, apparel, restaurants, and hotels.

Another card he might like is the Blue Cash Everyday Card from American Express. It also has no annual fee and features 3 percent cash back at supermarkets, 2 percent cash back at gas stations and department stores, and 1 percent cash back on all other eligible purchases.

We all need to look at credit cards as not just a method of payment or a way to borrow, but as a tool for improving our credit history. By taking the time to expand his credit card portfolio, James will bolster his credit score as he prepares to enter the job market – and earn himself some valuable rewards.

Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are the author’s, not those of American Express, and have not been reviewed, approved, or otherwise endorsed by American Express. This site may be compensated through the American Express Affiliate Program.

Stacy Johnson

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