A Little Planning Can Save You Money and Keep Your Credit Score High
When entering the world of credit for the first time, new borrowers tend to make some common mistakes that can be easily avoided. Some mistakes cost you money, others hurt your credit score, but most can be avoided with simple planning and taking extra time to read the fine print on credit card offers.
Check Interest Rates Before Signing Up for Credit Cards
College students often get flooded with credit card offers, and many offer terms that seem too good to pass up, especially for those hurting for some extra cash after student expenses. “Interest free for one year” offers and “Zero interest on balance transfers” are common. But what some don’t realize is that the interest rates offered on these cards can be quite high-some as high as 24%, depending on the company.
Always do the math on these interest rates to see how much you will pay above and beyond the balance of the card. If you need to put $1000 on a credit card to replace a computer, for example, how much additional will you pay at 17% interest over the course of a year? How much at 24%? The answer might change your mind about how much and how often you use a credit card.
Set Automatic Payments, But Don’t Forget About Them!
Missed and late payments hurt your credit score. The easiest way to avoid missed or late payments is to set up automatic deductions for all your open active accounts, but it’s important not to simply set and forget these automatic payments. It’s important to periodically check on your automatic payments to make sure there are no errors or missed payments happening, and to insure that the minimums you pay (especially on credit cards) still applies based on your use of credit in the last few months.
Don’t Apply For Too Many Credit Cards
It may seem harmless to have several cards, especially if you only plan to keep some of them as a fallback in case you get into short-term financial difficulty. But when the day comes for you to apply for a more substantial line of credit (an auto loan or even a home loan) your actual debt may not be the only thing the lender considers. How much potential debt do you carry, based on credit limits and the number of cards you have? It’s also a bad idea to apply for unnecessary lines of credit when you’re trying to get a home loan or car loan; your lender will see the number of inquiries on your credit report and may adjust the credit decision accordingly. Too much credit or too many credit inquiries for different types of credit in the same time frame? Not a good idea.
Avoid Maxing Out Your Credit Card(s)
Carrying a large balance on your card may be unavoidable at times, but for a healthy credit score, it’s best to carry low balances and try to pay off your balance each month where possible. Keeping your balance under 30% of your credit card limit is a good goal to keep. The best thing you can do with managing your balances is to only charge what you can manage to pay in full. A zero balance will keep you from carrying balances, incurring interest charges, and risking a drop in your credit score due to high amounts of debt.
Consult A Credit Counselor To Improve Your Credit Score!
Are you preparing to apply for new credit? Having an optimal credit score will make for a smoother process. If you’re unsure where your credit is at, it’s always a good idea to consult with a credit counselor or credit expert. MSI Credit Solutions assists consumers with credit services, real estate services, and lending resources.
Call MSI Credit Solutions today at 866-217-9841 and receive a FREE consultation.
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*The information in this article has been provided strictly for educational purposes.