Managing your credit is one of the most important things you can do as an adult. You must establish yourself as a worthy paying consumer of credit before you are able to borrow money for some of the big expenses in life. A new home may be out of your reach if you don't take care with your credit cards early in your life.
Lenders will take a look at your payment history when they are making the decision to lend you money for a mortgage or a new car. You must have been taking care of paying your credit cards in a timely fashion in order to look favorable to the lender. Establishing credit early in your life and making sure you pay your bills on time will save you headaches in the future when you decide to purchase your first home.
It's a good idea to shop around for a credit card that suits your lifestyle when you are young and building a good credit history. Take the time to research the many credit card companies and select a card that will provide you with the benefits and rewards of a credit card. They are not all created equal so you will have to read their terms and conditions very carefully before you apply.
Once you receive your first credit card you should make it your habit to pay your bill on time every month. Credit is very valuable. It's too important to develop bad habits or get yourself into a great deal of debt. With discipline credit cards can be managed quite effectively and will tell future lenders that you are someone who consistently pays their bills.
The best practice for credit card use is to pay off your balance every month. Many people believe that you must carry a balance to show that you are paying monthly payments in a timely manner. This isn't necessarily true. Purchasing things that you can afford every month is a great way to show that you are able to handle credit wisely.
Start off with a secured credit card if you are trying to establish credit worthiness. You are able to obtain one quite easily with a deposit in the amount of your credit line. The lender is not taking a risk by asking for the deposit and is likely to provide the card. Over time you will establish yourself as someone who pays his or her bills and will be able to switch over to an unsecured credit card.
Use credit wisely and you will reap the many rewards of being a credit worthy consumer. You will be able to buy a home, car, college education if you are a wise credit consumer.
Do you wish you were debt free and on a road to financial freedom? Whether you have previously had a good credit standing and lost it, or you are just beginning to accumulate credit and establish a credit rating, a few standard concepts will help you in taking some steps in establishing good credit.
When borrowing money and establishing credit, you must be able to prove to the lender these four things:
1)Stability - prove that you can hold a steady job, and that you have lived in the same place for at least 2 years.
2)Ability to repay - Demonstrate that your income exceeds your expenses.
3)Assets - Lenders will look more favorably if you have assets such as a home, car or stocks, etc. that can serve as collateral. A savings account is another asset that looks good to a potential lender. If you set back a little each month, you'll soon have a nice asset.
4)Credit references - You need credit references and a good credit standing, so let's get started.
These four principles will help you establish good credit history, and from this a credit score to evaluate your ability to repay.
To maintain a good credit standing all purchases must be accounted for and budgeted. To be responsible, you will need to prepare a budget from year to year to keep your finances on track; there is no way around it. Obviously you cannot spend what you do not make, so the easiest way to prepare your budget is to list exactly what is coming into your household and where that money is going.
Make two columns on a piece of paper. Title one side inflow and the other side outgo. Under inflow, list all the finances that come into your household; paychecks from employment, part time jobs, side jobs, alimony, child support, everything. Under outgo, make a list of your expenditures, and be thorough. List rent or mortgage, utilities, food, gas, clothing, credit cards, loans, etc. everything that is spent in one month.
When you total each side, the inflow needs to be larger than the outgo. If it's not, then you will have to make some adjustments. It will have to come back into line because you cannot continue spending more than you are making. Think before you spend, and pay off your credit cards, the entire balance, every month. A good credit score is worth it's weight in gold in today's society where everything is bought on credit.
Both Michael D. Strauss & Steve Goodman are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.