Careful Credit is Better than no Credit!

Sep 8, 14 • News1 Comment

Careful Credit is Better than no Credit!


You don’t want to have a mountain of debt, but you also cannot avoid credit. The fact is that you need credit throughout your life, and you want to have a high score in order to enjoy the most attractive terms. Here’s what you should know about credit, building credit and how you can benefit from responsible credit building.

The Reporting Agencies and Credit Scores
Credit management starts with understanding how the credit reports work. The reports include information such as address and place of employment in addition to the loans you have. It lists information on when the loan was taken or the account opened, the high balance, current balance, available open credit and payment history. It also shows all inquiries within a certain period. The reporting agencies will create a score based on all of this information.
When you Need Credit

There are certain purchases that require credit. A new house, car, motorcycle or even a top-of-the-line computer will probably require the use of credit to make the purchase. However, a good credit rating isn’t just for getting a great rate on your next loan. Utility and cell phone companies will look at your credit score when determining if a deposit will be required. There is a growing trend for companies to look at credit scores when making hiring decisions, particularly if you’re in the field of finance. Your credit score can have an impact on numerous areas of your life, so it’s important to be responsible with credit.

How to Start Building Credit

The hardest thing about building credit is getting that first loan. One option is to have someone cosign for you. Another option is to get a secured credit card. With the secured card, you’ll put funds into a savings account. Your limit will be equal to those funds, and the company will reserve the right to keep the secured balance if you don’t make the required payments.

How to Build a Higher Score

The score is based in part on your available credit and outstanding balances. Owing more than 50 percent of your line of credit on a card will bring the score down. Late payments are particularly damaging to your score. If you open numerous accounts in a short period, then your score can drop as a result. Fortunately, there are several things you can do to build a higher score.
• Pay bills early..
• Maintain low balances in relation to the limit. If your card has a $4,000 limit, you should never let the balance go above $2,000.
• Put extra money on the bills every month to bring the balances down faster.
• Skip the department store cards to limit the amount of open credit accounts you carry.
• Leave the unused card accounts open to help develop a long credit history and raise your score.

Mistakes to Avoid

You need to use credit to build the score and enjoy the benefits, but you must be responsible about it. If you’re charging small items to build up a history, then keep track of your purchases every month and be prepared to pay the balance off when the card arrives. Otherwise, do not charge little items like gas for the car, groceries, clothes and other items. Use the credit cards when you want to make a bigger purchase, and then put extra money on the bill every month to pay it off quickly. Don’t fall into the habit of charging extra items and telling yourself that it’s only a few extra dollars a month. It will cost you far more in interest charges, and it can lead to a dropping credit score if you aren’t careful.

Allied Federal Credit Union knows that credit is important to your life, but we also understand that you have to be responsible with credit. We’re here to help you improve your financial situation, and we’re happy to provide you with the personalized advice that you need. Contact us today to learn more about how to develop credit and improve your score for better financial option in the future.

One Response to Careful Credit is Better than no Credit!

  1. Lenora jefferson says:

    Thanks for the so needed knowledge.Mrs.Jefferson

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