B&B #4: Credit Cards! Yaaaay!
This episode is your guide to everything you need to know about credit cards:
How to check your credit score, secured cards, paying down credit card debt, rules for building up credit, opening a new card, points/rewards, and overall how to choose the best card for you.
Click here for more info on paying down debt.
The first thing you have to do, before you do anything, is to take advantage of getting your free credit report on annualcreditreport.com. This is the only site, annualcreditreport.com, that actually gives you free reports without trying to sell you anything else.
What’s gonna show up on your credit report, that you most likely will see, is your employer checks your credit, and your landlord checks your credit, all of these people are checking your credit and you’ll see that show up on your credit report as well. It doesn’t negatively affect your credit score. I know that that’s a common misconception that I’ve heard before, is if you check your own credit, or someone like your employer or your landlord checks your credit then it’s negatively going to affect your score. It’s not. It’s called a soft hit when somebody does that…It’s not a big deal. It doesn’t affect your credit score. The things that do affect your credit score are things like opening a new credit cards and having the credit company check your credit score. Having an auto loan company check your credit score, or the bank check your credit score. And you’ll see those checks on your credit report. If anything is less than a year old, that will probably also affect your credit score.
Student loan debt actually surpassed credit card debt in 2012, in terms of the amount of debt that collectively Americans have, but credit card debt is not far behind. There is about $854.2 billion in credit card debt…The average American household has $7k in just credit card debt.
There’s a lot of grimy secured card programs out there and here’s the reason why: Secured cards, the way they work is that you actually are your own creditor, and the secured card company will report your positive credit use to the credit bureau. So what that means is, if you want a $200 limit on your credit card, you have to give the credit card company a $200 deposit. And then you have to pay yourself back on time.
If you’ve gotten into credit card trouble before and you’re concerned about staying on time with your credit card payments and things like that, you actually don’t have to wait until a month has passed to pay your credit card off. You can pay off your credit card as often as you want. If you wanna pay off your credit card once a week, once every two weeks, just so you regulate that and you know that that money is actually gone, then do that.
Definitely don’t put all of your extra money to paying down your credit cards. Build up a savings first…Some of your money that you’re paying towards your credit cards needs to go into a savings account, even if its $25 or $50 a paycheck. Some of it needs to go into building up a savings account so if something comes up you’re not tapping into that credit card again.
For building up your credit, I wanna go over some of the key rules for keeping your credit score high and continuing to build your credit score. The first one is to pay your loans on time. Even if it’s just the minimum…The other thing is to keep your credit card balances at 50% of their limit.
If your not going to pay off your credit card in full every month, it is not worth any of the rewards or any of the points.
If you’re planning on taking out a bigger loan in the next 12 months, like an auto loan or a mortgage, do not open a new credit card, because, within 12 months, opening a new credit card will negatively affect your score.
Paying your payments on time is actually the biggest thing that affects your credit score.