Avoiding credit cards may seem like a logical solution to avoiding credit card debt. However, without a credit card or some type of credit, you cannot establish a credit history. Instead of steering clear of credit to avoid problems, learn how to manage credit wisely and achieve a high credit rating.
Significance
Used responsibly, credit cards and other types of credit financing serve a useful purpose. Without credit and the ability to qualify for credit, some people may never have the opportunity to buy a car or purchase a home. What's more, credit cards help in emergencies if you're short on cash.
Considerations
Having a credit card in your wallet makes it possible to purchase anything. But just because you're able to fulfill your every want doesn't mean you should max out your accounts or buy items you do not need. Credit cards help you build a good credit history; however, acquiring too much debt has the opposite effect and lowers your score. As a rule, do not let credit card balances exceed 30 percent of the limit.
Importance of Payments
Credit lets you borrow money and repay it over time. Thus, creditors and lenders expect you to make monthly payment on loans and credit cards. Simply sending payments isn't enough to keep a good credit rating. Payments must reach creditors on or before the due date. Penalties for missing or sending late payments include a late fee and a negative mark on your credit report.
Effects of Co-signing
Asking someone to help you establish or rebuild your credit history is a quick way to improve a credit score. Including your name on another person's credit card, and then having this established account listed on your credit report can add points to your score and put you on the path toward good credit.
Warning
Consumers recognize the importance of paying attention to credit card and loan statements to learn their due dates, interest rate and minimum payment due. Sadly, some people forget or fail to check their personal credit profile to make sure creditors are reporting accurate information. You can order your report online in minutes from Annual Credit Report. Check your report yearly.
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