It is commonly believed by some that having a credit card will inevitably end up ruining their credit. The stories about credit card debt and destroyed credit reach people’s ears through friends, relatives, or TV, and convince them that having a credit card is a terrible decision.
This is not true. Like any tool, if a credit card is used properly it can lead to a lot of positive results. If used incorrectly due to recklessness or ignorance it is sure to bring about negative outcomes. Most people in the country actually do own credit cards, as a matter of fact, and many of them own more than one.
Credit cards originally had very little to do with a credit score.
They were simply used to eliminate the need to carry cash and provide an easier more accessible way to pay for expenses. If that is all you want to do, however, you can simply use a debit card. Although credit cards also provide this same simplicity, they are much more than just that. Credit cards also affect your credit. In fact many individuals have used a credit card to build credit. If you are trying to apply for a loan you will very likely not be accepted unless you have some form of credit history. Credit cards are one of the most common ways people build up a positive credit history which allows them to make other financial endeavors.
Debt and the length of your credit history are the two primary things that will influence your credit score.
If you have a lot of debt on a credit card it is going to negatively impact your score. Some debt might be alright, so long as things aren’t out of hand and you are still able to make your payments on time each month and avoid high spending. If the ratio of your debt outweighs your credit limit (your debt utilization ratio) then your FICO score is going to be hurting.
This also means that you don’t want to be spending money that is close to your limit each month. The bigger the difference between the amount you owe and the limit, the better your score will be. How much history you have will also be important factor, because if you have an older account, it will be a testament of maturity, experience, and consistency.
Having a credit card which positively affects your credit isn’t rocket science, it can actually be quite easy when you understand the basics. Don’t apply for any credit cards you don’t really need or plan to use. Having too many can eventually cause problems and possibly complicate your life. When you do decide on the credit card you want, only apply for that one credit card that you think is right for you.
Don’t apply for too many all at once or you’ll likely get denied. Make sure that you know what actions to avoid and what actions to take in order to achieve a healthy, good credit score. Having good credit is an invaluable tool which will aid you in most financial decisions, be it buying a new car or home, getting a job, or starting a business.
Categories: Credit Score