BEWARE OF “CREDIT CARDS”
Let’s be honest; credit cards can be a scary. The idea of allowing yourself to get into uncontrollable debt can be very intimidating. A lot of people will avoid credit cards all together just to prevent the temptation. If this is you, when it comes to your credit, you have to face your fears and learn self-discipline. The best way to build your credit is through a credit card. Credit cards are a perfect way to show lenders your ability to repay borrowed debt. And ultimately, that you are responsible enough to have access to money without utilizing it.
Not all credit cards are the same.
- When I say credit card, I don’t mean a retail or store card. EX: Bealls, Target, Victoria’s Secret, Walmart, etc. It is in your best interest to obtain a major credit card that reports to all 3 of the credit bureaus (Experian, Equifax, TransUnion). If you obtain a credit card that only reports to one or two of the 3 major bureaus, you are only helping one or two of your credit scores.
It is best to keep your credit card(s) at a zero balance.
- Since your debt accounts for 30% of your credit score, it is ideal to keep your credit cards at a zero balance. However, keeping your cards at zero for too long can eventually cause the account to close; which coincidentally can also lower your credit score. The main reason you would want to have a non-retail credit card is the account will stay open longer at a zero balance. This makes it much easier to maintain and manage the account. If you are not using a store’s credit card, you’re not making them any money, and they will close your account. A major credit card will allow you to not carry a balance typically for about 12 months before considering to close your account.
You DO NOT have to carry a continual balance for your account to be considered active.
- If you’re thinking of getting a credit card and cutting it up to stop yourself from using it, don’t. There has to be occasional activity on the account for it to remain open. However, you do not have to have a constant balance to keep your account open. I would suggest putting gas or charging a small amount every 9 months or so then immediately pay it back. This will ensure your account stays active.
So, to sum it up:
- For overall good credit, you DO have to have a credit card.
- You need a credit card that reports to ALL 3 Bureaus.
- It is best to keep your credit cards at $0
- You DO have to use the card OCCASIONALLY to prevent the account closing.
If you need to establish a credit card, we recommend this website.