Credit – What Does It Mean to You?

CREDIT What Does It Mean to You? On The Money Team

Understand How to Control Your Spending and Paying Down Your Credit Cards

Multiple cards mean numerous chances to build debt. It’s also easier—and in the long run less expensive—to make larger payments on one card than to make minimum payments on many, one major card would be the goal. Don’t cancel the cards, just pay them off and stop using them. Better yet, destroy them. Keeping the accounts open actually works in your favor when it comes to your credit score because it gives you a higher available credit ratio. Be sure to check all your account statements regularly to ensure you’re not victimized by identity theft or hit with non-activity or other fees.

Stop Using Store Credit Cards

They typically charge the highest interest rates (up to 22 percent or more). Also decline discount offers that require signing up for a store’s card. If you need to use credit, charge it to the one card you are using for all your purchases.

Questions To Think About

Why does my credit score matter? What will it take to obtain credit? What is the importance of having a higher credit score vs a lower credit score?

Use a Debit or Pre-paid Card

If you must use plastic, or don’t like carrying cash, use a debit card that withdraws money from your checking account, or a pre-paid card with a fixed limit. You will get the convenience of a credit card without going into debt. Focus on learning to control your spending and paying down credit cards. Decide How to Use and Develop Credit

You need to be clear how you want to use your credit: convenience, emergencies, big purchases you can afford to pay over time. This will allow you to control the level of debt you build up.

FICO Score

A three-digit number based on the information in your credit reports. It helps lenders determine how likely you are to repay a loan. The higher your score the easier and more secure to obtain low interest loans many times with no money down, the lower the score the higher interest rate with the probability of being declined for credit seeking purchases and may need a down payment or even a cosigner.

Exceptional: 800 and Higher Very Good: 740 to 799 Good: 670 to 739 Fair: 580 to 669 Poor: 579 and Lower