By Emma Diltz
Credit cards are a necessary evil, and it is better to start young to boost credit. It’s difficult to purchase a house or a car without showing fiscal responsibility. But, many young people, and even some matured adults get some level of anxiety when thinking about spending money they might not have.
Tip: One reason start early is that a part of your scores relates to “age” of your credit history. The more years you’ve been extended credit, the better for your score.
With a new piece of plastic comes great responsibility. It’s easy to fall into a spiral of spending and only paying off the minimum, or not paying at all and racking up a great amount of debt. If you’ve already hit a low score, here are some tips to boost it and feel confident when using a credit card to make a big purchase.
Credit score repair begins with the contents of the credit report. Sometimes it can be a simple fix, but the quickest way to find out is by reading the report. The report holds the data that is used to figure out the score. There’s a chance it could have errors, so it’s important to check for those first. Search for late payments and that each payment is correct.
Another way to keep the credit score under control is to set up weekly or monthly payment reminders. It is so easy to forget to pay it, with a crazy schedule, and if it is not in front of your face. I pay my credit card bill off as soon as it pops up. I have an app on my phone that lets me know when it shows up on my account, and I’m able to pay it on my phone. Most people have their phones on them pretty frequently, so if you’re able to manage your account, see your costs, and pay it off from your phone, there is a pretty high chance it will get paid off on time.
I usually limit myself to making certain purchases with my credit card. When I buy gas, groceries, or make big purchases that I know I have enough money to pay off quickly, I’ll use my card. Some cards give cashback bonuses for certain fueling stations or restaurants, so it’s beneficial to see if you can get any rewards for using some cards at specific places. By only utilizing it for some purchases, it is easier to keep track acquisitions and keep a healthy credit.
Often, a rookie mistake people make is opening too many cards around the same time. (Tip: The credit agencies ding you if you apply for too much credit and your score goes down).
It’s important to keep a realistic number of cards, even if there’s a $100 cashback with opening a new card or a free T-shirt involved. Opening too many credit cards to have more credit available has the potential to backfire and lower your credit. I only have one credit card, but I’m still relatively young, so as I build and maintain my credit for one card, I’ll feel more secure in my choice to open one or two more. Diversity isn’t bad, but it has to been done conscientiously.
But at some point, you should get that second credit card, even if you won’t use it. After all, your total percent of used credit is a factor. If you have a balance of $500 on a credit limit of $1000, then you have a 50% utilization, which gets you’re a middling score. I you open a second credit card, with another limit of $1000, then that $500 balance is only 25% of credit utilization, and your scores bounces up.
Remember, you can get free credit reports annually, by law, through https://www.annualcreditreport.com. Federal law allows you a free credit report from each of the three agencies – Equifax, TransUnion and Experian – once each 12 months.
Emma Diltz is a senior at the University of Missouri School of Journalism