Credit Can Be Your Best Friend or Your Worst Nightmare

For those that are new to the credit world, understanding how to manage your credit is imperative.  I would like to thank Sal Bonanno from National Account Manager | First Premier Credit Repair for his article:
Bad credit keep people from buying a home, financing your education, and even from getting a job. This is why it’s so important to build good credit. Starting with your first credit card, everything that involves credit becomes part of ones’ credit history. To have a good credit history, individuals have to use credit responsibly. But what counts as using credit responsibly?
1) Only Borrow What You Can Afford – When you get into the habit of charging only what you can afford, it lets future lenders and creditors know that you are a responsible borrower. You’ll find it easier to borrow money and get new credit when you show that you know how to only borrow what you can pay back. Not only that, only charging what you can afford helps you  avoid excessive debt. The same thing goes for loans. Only take out as much loan as you can afford to repay, regardless of what the lender says you qualify for. Before you shop for a loan, review your budget to see what monthly payment you can afford. Make sure your loan payment doesn’t exceed the amount you’ve come up with.
2) Use Only a Small Amount of the Credit You Have Available – Maxing out your credit cards—or even coming close—while it is within your agreement with your credit card provider, it can be irresponsible if you charge more than you are able to repay.   A responsible way of using credit cards is to pay for it in full each month. Lenders know that borrowers who max out their cards can have difficulty repaying what they’ve borrowed. Staying below 50 percent of your credit limit is wise, below 30 percent is best to build good credit.
3) Start With Only One Credit Card – Many first-time credit card users accumulate a collection of credit cards within their first few years of using credit. Don’t make the mistake of opening up too many credit cards too soon. The more credit you have, the more you’ll end up using and the harder it will be to keep up with your balances and payments. In addition, too many inquiries into your credit and too many new credit cards can negatively affect your credit score. Learn how to be responsible with credit before you apply for additional credit cards.
4) Pay Your Credit Card Balance in Full – If you’re only charging what you can afford to pay, you won’t have a problem paying your full balance every month. Paying off your balance each month shows that you’re capable of paying bills, something creditors and lenders want to see. Since a large part of your credit score includes timeliness of your payments, paying your balances on time improves your credit.
5) Make All Your Payments on Time – Not all of your monthly payments are listed on your credit report, so they don’t affect your credit as long as you’re paying on time. But any bill can potentially wind up on your credit report if you become delinquent and the account is sent to a collection agency. Keep any negative accounts off your credit report to build a good credit score. A serious delinquency like a debt collection can be hard to overcome.
 6) If You Carry a Balance, Do It the Right Way – Having a credit card balance isn’t necessarily bad as long as you do it the right way. Pay more than the minimum each month to pay off your balance as quickly as possible. Avoid making late credit card payments and continue to keep your balance at a reasonable level (below 30 percent of the credit limit). If you follow these principles, carrying a balance won’t hurt your credit.
7) Let Your Accounts Age – The longer you’ve had credit, the better it is for your credit score. Leave your oldest accounts open since they help increase your credit age and build good credit. Closing the account won’t remove it from your credit report immediately. But, after several years, the credit bureaus will eventually drop old, closed accounts from your credit report.

And finally, get in the habit of saving.  Having an emergency savings will help you if you end up having a financial crisis.  It is recommended that you have 6 months of expenses saved up in a liquid savings account that you can gain access to.

Post reposted with permission:
Sal Bonanno
National Account Manager | First Premier Credit Repair
Main: 855.278.3578  Direct: 646.283.2783

Karen Jones is a Licensed Mortgage Loan Officer (NMLS 307015) located in Phoenix and serving Arizona and California consumers with their home lending needs. As a Banker of over 39 years, Karen is dedicated in ensuring that her clients are well educated and prepared for their new home purchase.  Learn more about our 100% Financing programs and obtain your Buyer Credit Approval before you start shopping. Let a home loan specialist guide you by contacting Home Loan Officer, Karen Jones from AmeriFirst Financial, Inc. located in Phoenix, Arizona.

 

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Karen Jones or AmeriFirst Financial, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. We will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

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