From credit cards to car loans and even a mortgage, having good credit has a direct impact on how you live your life. That’s why you need to use your available credit wisely and not abuse it, but what does that mean exactly? You’ll find several tips below that will get you started in the right direction.
Using Your Available Credit Wisely
Whether you are just now getting your first credit card or you have been using credit for years, it is never too late to make sure you are using your available credit to your advantage.
1.) Understand what a credit card really is – You may not give it a lot of thought, but a credit card is really just a loan that carries a very high interest rate as well as other fees. If you leave a balance on your card, you can pay up to 25 percent, depending on your interest rate on that balance.
In addition, if you get a cash advance on your credit card, you are charged an even higher interest rate. Also, if you happen to make a late payment, you will be charged a late fee.
2.) Use your credit card for emergencies only – While on the subject of credit cards, try to use your cards only if you have a true emergency. That means the latest phone or tech gadget is not considered an emergency. Instead, you should save the card in case you have a medical emergency or car repairs or an accident. Pretty much anything else is more of a want than a need.
3.) Take care with your credit history – No matter if you have a little credit or a lot of credit, everything you do with it is recorded and tallied up as either good or bad when it comes to your credit rating. Keep this in mind before you add additional credit sources or use the ones you currently have.
If you use credit unwisely, then you will find it more difficult to obtain in the future and your interest rates can rise on current credit sources such as credit cards even if you are making your payments on time.
4.) Don’t borrow more than you can afford to pay back – If you are taking out a loan, be sure you consider all of the monthly costs before you agree to the terms and conditions. You want to determine your current budget and income and calculate whether or not the loan payments you will be adding can be made each month comfortably without straining your budget.
Don’t forget emergencies can happen as well, so if they do, will you still be able to make your payments? If not, you might want to reconsider the loan.
5.) Don’t borrow more than you need – It can be tempting to borrow as much money as a lender is willing to give you and your available credit allows, but that isn’t a good idea. If you borrow too much, it is easy to fall behind on payments, and that can ruin your credit for some time to come. Just determine how much you actually need to borrow and can afford to borrow, and then leave it at that amount.
Using your available credit wisely will ensure that you have the credit you need when you need it. Use it unwisely and you may find yourself in a situation where you can’t afford to buy a home or car.
This information was brought to you by BetterLoanChoice
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