Understanding how your credit score works and what causes it to go up or down can be very confusing for those that do not understand credit. Let us share some simple secrets we have learned over the years on managing your credit score.
It is important to understand what will help your credit rating and what can hurt it. I’ve listed some simple tips on how to use credit cards that have proven themselves useful.
Never do the following:
• Never purchase what you can’t afford to pay off in full when your statement arrives – In our experience this is the number one reason people end up in trouble and ruin their credit rating. Always use credit cards responsibly.
• Never take credit you don’t need – Regardless of the offers or temptations of free gifts to take a new card do not take it if you do not need it. Credit is not a popularity contest; you don’t need every card offered out there and it will hurt your credit rating if you get carried away. One major credit card should be all anyone needs.
• Never charge more then 50% of your credit limit – If you know you spend $2,500 a month on your card then you should have at least a $5,000 limit on that card. Approaching your credit limit every month, even if you pay your balance in full will hurt your credit score.
• Never shop around for credit if you get declined – Every time you apply for credit an inquiry shows on your credit report for all to see. This is a bad habit when you have been turned down by a creditor and try several other places hoping to get approved. This can lower your credit score, so find out why you were turned down and try to solve that problem rather then shop around.
Always do the following:
• Always pay off your bill in full every month – I cannot stress this enough. Some articles encourage carrying a balance on their credit cards, the truth is any positive effects it may have are negligible and the interest charges on balances carried forward far outweigh any benefit. Carrying balances is a path to deep financial trouble and should always be avoided.
• Always use your credit card monthly – Letting it sit idle is not building any credit history for you. Use your credit card for regular monthly expenses like gas, groceries, entertainment etc. But pay it off in full.
• Always make your payments on time – Even if you are one day late, you will effect your credit and be charged interest and other penalties. Always pay your bill by the due date.
• Always seek help if you get into trouble – If your financial situation changes and you are in trouble fix it or seek help. Debt settlement is an excellent alternative to bankruptcy, and will save you more money then credit counselling. Get help with your debt if you need it.
Bad credit when applying for a mortgage may result in a interest rate twice as high as common 5 year fixed term in today’s market. The difference in the interest rate may only seem small to some but when you factor in almost all mortgages compound interest your total cost to borrow that money may be ten to twenty-five times more.
By following these simple tips you can preserve your credit rating. Credit is really simple. Don’t take advantage of it and get yourself into trouble by biting off more then you can chew. A great credit rating makes a world of difference when you need it for important purchases like a home.
If you feel it’s time to do something about your debt, and want a free debt settlement consultation then please visit our home page and request a no obligation quote.