Worth Its Weight In Gold

By Misty W.

You’ve probably heard a lot about credit and how important it is. But what’s the big deal? There’s so much in your everyday financial situation to keep up with. If you continue to pay the minimum  on your credit card, you should be good, right? Unfortunately, it’s not that simple.

Sooner or later in life, you’ll most likely need to get a loan. Need help with your tuition payments? Time to buy a new car? Ready to get your own home? Time to apply for a loan! When you apply, lenders will look for credit experience, which tells them how responsible and how consistent you are with your payments. The better credit score you have, the more likely it is you’ll receive a better rate. Now, many will focus on their monthly payment being manageable – but the lower rate you have, the less you’ll pay overall!

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You build credit worthiness by making consistent payments on bills and loans; the longer the better. Lenders base the limit of what you can borrow on your credit experience.  Maybe you’re the kind of person who likes to pay cash for everything and doesn’t want credit cards or loans, because you don’t want to deal with any debt. While this is understandable, it’s incredibly important that you to have some kind of credit established. It helps lenders to see how much they can trust you to maintain a loan.

To build your credit, don’t overextend yourself with several different credit cards. Many businesses offer a variety of deals to encourage you to sign up for their particular card, we know! But this can cause a “high debt-to-income ratio”, meaning you have too much debt. The ratio is calculated by taking the amount of debt you have versus the income you’re getting.

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Remember, it is perfectly okay to have a few credit cards, but try to only use them in emergencies. We understand that life happens and sometimes your credit line is the best option, but try not to use more than half of the available credit. It’s important not to max them out because using the entire allowable balance can have a negative impact on your credit score. Plus, once they are at maximum, it can be more difficult to pay them off; especially as high as some of the credit card rates are. Keep in mind, negative credit can remain in your credit history for 7 years and bankruptcies can remain for 10 years. Why risk that kind of stress?

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So when making payments on your credit card or loan, try to pay more than the minimum and stay consistent. If they have a 0% interest rate, you definitely want to take advantage of that. Not having to pay any more than you already spent is the way to go! To pay off your balance during that promotional period, set up your own payment plan for the length of the offer period to make sure it will be paid off by that expiration date. That will save you a lot of money in the long run, a goal we always encourage!

If you have any questions related to your credit, send them to us via social media or the comments down below!