Meet The Credit-Card King With $300,000 in Credit

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Meet the Credit-Card King With $300,000 in Credit

by Jennifer Waters Thursday, June 23, 2011
Meet Pete D'Arruda: A man with 25 charge cards, more than a quarter of a million dollars in available credit -- and a lot of financial self-control. D'Arruda says he has more than $300,000 in available credit thanks to some 25 Visas, Mastercards, and individual store, airlines and gas cards -- or about $12,000 per card. If he throws in his home-equity line of credit, it's close to $400,000. "It's not taboo to have a bunch of Pete D'Arruda credit cards," said D'Arruda, a personal finance consultant who has been building his credit trove for about five years. "It's about how you manage them."
Courtesy: Capital Financial Advisory Group
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The founding principal of Capital Financial If Your Airfare Drops, You Advisory Group in Cary, N.C., and author of three May Get a Refund personal-finance books is testing the more-isbetter theory of credit cards: The more cards and available credit one has, the better the credit score -- assuming, of course, the bills are paid promptly. With a FICO credit score in the 810-815 range, it's working for him. But credit-agency experts say it's unnecessary and could create a financial maelstrom for those less diligent with their money. "For many people they would end up with $350,000 in debt and that would not be a very good thing," said Rod Griffin, director of public education for Experian. D'Arruda charges everything from coffee to the rent for his office space on credit cards. He prides himself on his ability to manage them all and to pay them promptly, keeping himself from falling into a debt spiral. "I like to pay my bills on time," he said. "Even though I have all those outstanding potential balances, I don't have many outstanding balances." What he does have, he boasts, is hundreds of thousands of miles and points, numerous discounts and even freebies from retail stores and vacation spots, waived annual fees on some credit cards and better interest rates on insurance and car and home loans. Typically, the higher the credit score, the lower the interest rate. What's more, he's got a running tally through credit-card statements on where he's spent money both personally and for business. "I'm getting paid to have a good credit score," he said.
http://finance.yahoo.com/banking-budgeting/article/112976/meet-credit-card-king-with-30... 6/24/2011
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He's got a Disney Visa card from Chase -- with Buzz Lightyear on it that entertains his daughter Carrie -- with which he's accumulated enough points to pay for a Disney cruise this Thanksgiving. His platinum American Express card points will cover the airfare to Orlando, Fla. Even cards with fees are a bonus for D'Arruda. He's got a Visa Black Card, a new elite card with concierge service, access to airport lounges, cash-back rewards or airfare on any airline with no blackouts. He's assessing it for a year to determine if he'll use the rewards programs enough to cover the cost of the $495 annual fee, but he got the fee waived to do so. "They pulled my credit score and saw that I was a good risk," he said. Credit scores are calculated through a complicated and proprietary algorithm of measures that differ among scoring agencies. However, there are three major pieces of your credit-score picture that all follow to closely The most important: Your bill-paying history. It will account for as much as 35% of your total score. Pay all your bills on time. Even if it's just the minimum payment, make sure that bill is marked paid on the designated date -- or sooner. D'Arruda said he sometimes makes two payments a month to keep his balances in order. Next up is what credit-ratings agencies call the "utilization rate," or your debt-to-availablecredit ratio. D'Arruda, who said his typically stands at about 10% to 15% and no more than 25%, began this credit-building experiment based on the simple notion that your credit score is mostly determined by the amount of available credit subtracted by the amount outstanding. It's a fussier method than that, but your utilization rate is worth some 30% of your score. Creditors don't want to see the ratio over 30% and consider it an important link to your financial acumen and any lifestyle changes you may be facing. "You don't need a lot of credit cards to have a good utilization rate," said Barry Paperno, consumer operations manager for myfico.com, the consumer arm of credit-scorer FICO. "And obtaining 25 credit cards for your score is overkill. Utilization looks at percentages more than dollars." Consider it this way: If you have $300,000 in available credit and carried a $30,000 balance, your utilization rate is 10%; if the available credit stands at $3,000 and you charged $300, your utilization rate is the same. What you must have are credit limits that meet your charging needs, said Steven Katz, senior director of operations for TransUnion, the credit- and information-management company. "You may need a smaller number of cards with higher limits or more cards with smaller limits to stay under that 30% utilization rate." Don't max out one card over another either in order to keep the utilization rates under 30%, he added. If you take out a store credit card with a $5,000 limit and you charge $4,750 for a home-theater system, your utilization rate on that card will set off alarms. "It's a good idea to try to keep the balance on each card under 30% of the limit," Katz said. "It will help guide your efforts to keep your overall credit use low." A perfect score is near impossible to get and having credit but not using it won't get you there. That's doesn't mean that you have to carry a balance that you must then pay interest fees on each month. You just need to use the card and pay it off to maximize your credit score. "The ideal place to be is under a 10% utilization rate but over 0%," FICO's Paperno said. "There needs to be some kind of recent activity" to activate a score.
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Your credit mix and history contribute about 15% to your score. Creditors like to see how you handle revolving credit, or credit cards, and installment loans, like mortgages and car and student loans. They average the age of the accounts divided by the number of accounts. Surprisingly, income doesn't play a very significant part of the credit score. D'Arruda had a long credit history before he started on this venture and said he was cautious about how much credit he applied for when. That's because your score gets dinged each time it's checked for new credit. Applying for too much credit at once has creditors worried that you're in a financial bind and getting ready to rely on credit you might not pay back. New accounts opened also impact your score by about 10% for much of the same reason. "Taking on new credit has shown to indicate a higher level of risk," Paperno said. "People who go into default tend to have added new credit more recent than those who haven't." D'Arruda admits he started collecting credit cards as a personal challenge to see how many he could get before he got cut off. The limits on each card vary, of course, and he's even got an American Express that has no limit, though he's not willing to test what that might mean. "This is a lesson in discipline," he said. "When you get the credit card, it's like free money. You have to manage them well. It all comes down to not overspending because it's not your money." And he said he only chooses cards that will help him with points, miles, cash back and other perks. He likes the 30% discounts he gets at Kohl's, for example, and the special sales offered only to Home Depot and Best Buy cardholders. He's a big fan of the Capital One card because it offers double miles. His tool for limiting credit-card abuse? A metal money clip. It only holds five cards at a time, which helps him to monitor spending. "You've got to treat it like cash," he said. "You have to pay it back and if you do it wrong, you have to pay a whole bunch more back." Jennifer Waters is a MarketWatch reporter, based in Chicago. ___ Popular Stories on Yahoo!: Money Rules You Should Break The Most In-Demand College Degrees Signs Your Housing Market is Turning Up Copyrighted, MarketWatch. All rights reserved. Republication or redistribution of MarketWatch content is expressly prohibited without the prior written consent of MarketWatch. MarketWatch shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. Follow Yahoo! Finance on Twitter; become a fan on Facebook. Show: Newest First
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Roger 19 minutes ago Report Abuse
This was a stupid article. I used a combination of 4 credit cards to build 2 house's with. Of course I did it between 2003 and 2006 when credit card companies were offering really low interest rates for long terms. Ironically though, most of the people I know who have had credit card problems had 3 to 7 cards. Month to month credit is good if you have an emergency account. My emergency fund is the $2,500.00 I have to keep in my checking account to avoid fees and get a decent .4% interest rate. The moral of this story is avoid debt!
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Bob B 20 minutes ago Report Abuse
Utilization seems to matter a LOT more than just paying bills on time. I have never paid a bill late and have a perfect bill pay record, yet thanks to medical bills, I have above average utilization. Down goes the FICO score! Ugh, whatever. FICO is a big sham.
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Kathleen 20 minutes ago Report Abuse
This is a dumb article. Everyone knows credit cards will suck your money dry. The only people who get anything out credit cards are the banks. Down with credit cards! Dont give the bankers any more money!
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A Yahoo! User 25 minutes ago Report Abuse
pete, its better to give me a credit card..... your lucky to have 25 cards....be wise.... using that.
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Copper Puma 25 minutes ago Report Abuse
This guy is preparing for the End Game. He's going to give away everything before he dies. Then, he is going to blow $300,000 on gifts for beautiful Filipinas in the Philippines and then give the finger to all these banks. He's going to drive his estate to zero and then purchase all kinds of things and then laugh at these banks on his death bed. He's going to stick it to the very banks, that created the Mortgage mess.
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Doreen 29 minutes ago Report Abuse
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Why?
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Mama Taz 30 minutes ago Report Abuse
I've been on the down side where I owed more than I made because I loaned money to " a friend" . I paied it all beck and built my credit score back to almost perfect. I've got cards that run almost as much as his but why brag about it? The best thing is that I don't pay any fees and never will. I you have to pay a fee the credit card is not worth it and doesn't really want your business.
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Smarter Than A Lib 31 minutes ago Report Abuse
credit cards and vicky valencourt are the devils

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Forevati 32 minutes ago Report Abuse
Credit is good for a one reason, to loan, that's it. The not good about credit is that you have to pay interest for the loan. As you read to this artical, income doesn't apply. Credit is good when you don't have high income. Regardless. If you have good credit and want to buy a home worth $275,000 home pay in 30 years you have to pay $174,690 in interest (if you're lucky and can actually pay in 30 years) $449,690 in total+TAX IN 30 YEARS!!!= You're screwed. Because the house is now worth a half of the price which is $137,500. Yet you still have to pay the rest of the loan and tax is still demanding. So does credit matters? YOU CHOOSE!
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Capn Cly 38 minutes ago Report Abuse
I had a $8.25 hr job but paid my bills every time. I amassed a nearly $200K total line of credit and never abused it. I went traveling for 3 years and rolled the balance from one 0% introductory rate card to the next without ever paying interest. My good credit rating meant I got the transfer fee waived. I paid it all off before the credit crunch and then bought a house. God bless credit!
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