Credit Cards

Tips on Building Good Credit

Credit Cards

Building a credit might seem like a mystic and obscure ritual that only a few of us are capable of performing through tremendous sacrifice. Of course, that’s misconception stems partly from ignorance and partly from laziness. Maybe you simply haven’t seen the necessary information written in everyday language and you don’t feel motivated enough to do the proper research while you’re occupied with your student life.

Here are different variables that are used when credit bureaus calculate credit scores and let you know what you can do to work on all of them as a laymen. To say it the simplest way, your credit score is a numerical representation of your financial history and the measure of your trustworthiness for potential lenders. We can debate whether it’s appropriate to use a single number to determine someone’s life and future, but that’s simply what happens every day.

First thing that is measured in your credit score is how diligent are you in paying your bills for the credit lines you have. The keyword here is, not surprisingly, credit. This means that having debit cards or paying your utility bills won’t help you, because you’re making payments using your own money not credit that some third party extended for you. A good way around this is deciding that you’ll pay for certain purchases, that you’d make anyway, such as gas or groceries, with your credit card, and then setting up automatic payments on your debit card to make sure you make credit card payments for the items you bought on time.

Length of credit history is something you can’t work on overnight. First credit card you open will usually have low limit and not too many perks, but ideally you should never cancel it. Having one card will increase your credit score a bit, which will allow you to acquire another one, preferably with better terms. The average age of all your open credit lines is taken into consideration, so it doesn’t make sense to keep applying for and then cancelling your … [Read the rest]

Why Credit Cards are Important

Many people never discover all options that are available with the right credit cards and they consider them to be unnecessary in their daily lives. Managing credit cards requires a certain level of financial responsibility and attention to detail, which might seem too difficult for many people. Some think that they have a debit card, so they don’t need a credit card.

First of all, having a credit card is one of the first requirements for building and maintaining a credit score. Of course, it’s not enough to simply possess a credit card; you need to use it regularly. The bank will notify credit bureaus of your credit card activity which will gradually build you a credit score. Insufficient credit score can stop you from getting loans or mortgages approved so you might not be able to make big purchases that you want. Most of us simply aren’t fortunate enough afford to make the most important purchases, such as a new house, in cash. It’s hard to raise such big amounts in such a short time. That’s why we must rely on loans, which are unattainable without a decent credit score. You should avoid applying for different credit cards and cancelling old ones every couple of months, because having your accounts open longer positively affects your credit score. The first credit card you’re able to get might not offer you many rewards or benefits, but you should keep it open as long as possible nevertheless.

Credit card allows you to go over your current budget. Of course, this doesn’t mean that you should spend like there’s no tomorrow, but if you know your finances well you can make responsible purchases that will be repaid during your grace period in order to avoid paying interest. Use credit cards for moderate expenses, like gas, some piece of furniture or a kitchen appliance.

One of the major benefits of credit cards is that they’re universally acceptable. It’s not uncommon that you’re unable to book a hotel room or rent a car if … [Read the rest]