John Ulzheimer has 13 credit cards, but he’s never paid a cent in interest, his credit score stays above 800, and he’s never dug his way out of consumer debt.
That’s because he knows exactly what he’s doing.
Ulzheimer, credit expert at CreditSesame.com, has over 23 years of experience in the consumer credit industry and has even worked for credit bureau Equifax and for FICO, the creators of the most widely used credit score in the country.
“The initial strategy wasn’t to just open a bunch of cards,” he remembers, “but when I went to work for FICO, I realised that if you have a lot of cards, pay them all on time, and keep your balances low, you’re actually benefiting from that.”
“A lot of people are critical of my example,” he acknowledges. “But having a lot of cards is only a problem if you aren’t responsible with them — if you let the cards control you.”
Here, we’ve highlighted nine of the credit lessons to learn from Ulzheimer’s experience. Even if you plan to stick with the three or four held by the average American consumer, see what you can glean:
1. Have a reason for opening each card. You should have a use in mind for every card before you apply. Ulzheimer only opens cards that have a purpose, like his Delta Reserve card. “I live in Atlanta and fly Delta all the time,” he explains, “and the card earns Medallion miles, which allow me to do things like upgrade to first class and check bags for free. It makes my travel much more convenient and enjoyable.”
2. Keep your cards open. Unless you’re paying exorbitant fees, or find that you can’t control yourself with too much credit, there’s no reason to close your cards. While closing a card won’t shorten your account history, it will decrease your total amount of credit available and therefore increase your credit utilization rate, which could have an adverse effect on your credit score. Ulzheimer’s oldest card is from 1999.
3. Keep your cards active. “I don’t use all 13 cards at the same time,” explains Ulzheimer. “I rotate one or two into regular use to make sure they all get some activity, so the issuer doesn’t proactively close them.” Credit card companies want you to use their cards, so if you haven’t touched yours in a while, they can take it upon themselves to lower your balance or close the card altogether. They must notify you if they do, but why would you want to take that chance?
4. Be deliberate about which card you choose to use. On the recommendation of his accountant, Ulzheimer uses a business credit card for his professional expenses, a credit union card for small, everyday purchases like gas or dry cleaning, and his favourite rewards card — the Delta Reserve — for bigger purchases, like furniture or auto work. When he signed his son up for a summer of camps, he used three of the cards that have lain dormant for a few months.
5. Never spend money just to get rewards. “I call this chasing rewards, where you buy things or open cards you wouldn’t normally to get the points,” Ulzheimer says, noting that he uses his cards only to spend money he would anyway. “It’s incredibly dangerous. Most people who find themselves in terrible credit card debt attribute it to using cards this way.”
6. Get close with your account statements. Ulzheimer logs into his accounts every day — sometimes more than once. He doesn’t find it difficult to keep track of them because he’s familiar with exactly which cards he’s using and how much he’s spending. “I’m very engaged with my bank accounts,” he says.
7. Be on top of your payments. Ulzheimer pays all of his credit card bills manually — no auto-pay for him — and makes a point of logging into his account and paying the balance even before the statement period closes and a bill is sent to him. “That way, I never carry a balance, and it doesn’t show up on my credit report,” he explains.
8. Space out your new accounts. There’s no need to go out and get a dozen credit cards today. In fact, Ulzheimer advises against it. “Don’t acquire a bunch of cards all at one time because the hard inquiries will destroy your credit score, and you probably won’t be approved for all of them,” he says. “This is a long-term strategy.”
9. Use credit cards as they were intended. Credit cards aren’t meant to let you spend money you don’t have, and treating them that way is what gets too many of us in trouble. “You have to use credit cards for what they were designed for: convenient shopping,” cautions Ulzheimer.