Below are the 5 Steps to constructing your very own credit portfolio. This process takes some time but in the end it will dramatically improve anyone’s financial situation by maximizing their average cash back rate. This page can also be found on the side bar under Credit Plan as it is a very important underlying theme throughout my site and in my past and present posts.
Assess your current credit situation
How many credit cards do you currently have? What are their rewards? What is your credit score? What is your yearly income? These are all very important questions you need to answer when starting on this journey. It helps set a benchmark of where you currently are and where you need to go.
Identify your spending habits
Where do you spend your money, how much do you spend, and what do you spend it on? Do you do a lot of traveling? Do you online shop? How much do you spend on gas and groceries each month? I recommend looking back at least six months to do some good trend analysis on how you spend your money. Knowing how much you spend is as important as where you spend that money. This information will start guiding you for what types of credit cards you need to be looking at.
Fuse your information
Take your answers from Step 1 and put it together with the answers from Step 2. How do your current credit cards match up with your current spending? Are your highest rewards cards being utilized with the way you spend your money? Do you notice any trends with what you are spending your money on?
Strategize and execute
Use your fused information and now setup a game plan. Where are your weaknesses in your credit portfolio? What new cards are going to give you the biggest cash back return on what you spend most of your money on? How is your credit score hurting or helping you in regards to getting approved for new cards? Do you need to build more credit before applying for higher tier cards? Should you close any of your old cards or will that adversely affect your credit score? Do you have any big purchases coming up where you could take advantage of sign-up offers with new cards you are looking at? What card are you going to apply for first? Once you have all your answers start implementing your plan!
This is the longest and most tedious step but after it is complete you will be well on your way to constructing your complete credit portfolio. Utilize my reviews, lessons, and credit portfolio guideline to get all the information you need.
Adjust as necessary
A credit portfolio is a living and breathing thing that should change with your lifestyle. Maybe when you first started building your credit portfolio you never traveled but now with your new job you are flying and staying at hotels every month. This could indicate a very big change to your credit portfolio. Or a new card might come out in the future which has a higher cash back rate in a category you spend a lot of money on. No matter what the case is, it is always a good idea to monitor what is out there for credit cards and self-reflect on how your spending evolves over the years.