First Credit Card - 5 Do’s and Don’ts
So you want a credit card? You want to be able to come and go as you please, buying now and paying later? Although it can be a great place to be, there are a few important things to remember before jumping into the credit card game. The main point being that all other things related to credit, begin and end with your credit report and your credit score. Think of your credit score as a grade on a test, you want it to be as high as possible. Learn these key aspects now and your credit score will thank you later.
1. Timely Payments. This point is very simple, maybe not always easy, but it is simple. Pay your bills on time! This is the most common reason as to why credit scores decline. If you are going to remember only one of these, make it this one. Paying your bills on time, can account for up to 35% of how your credit score is calculated. Take advantage of this fact and always make your payments on time.
2. Don’t Let the Credit Card Debt Pile Up. The bottom line here, is that you want to stay away from spending 25% to 35% of your credit limit. When you start to approach these percentages, your credit score begins to suffer somewhat. For example, if your limit is 8,000 dollars, once your balance reaches, 2,000 to 2,800 dollars, you might see your credit score adversely affected. The very best thing you can do for your credit score, is pay the remaining balance to most of the remaining balance each month.
3. Don’t Apply For A Lot Of Credit All At Once. Every time you apply for a credit card, the issuing bank pulls your credit report and credit score from one of the credit reporting bureaus. This is called a “Hard” inquiry, and it will slightly hurt your credit score. Although one or two of these in a short period of time will not impact your score too much, applying for many credit cards in a short period of time, tells creditors to be careful, as you seem desperate for spending power, and that you might overextend yourself. “Soft” inquiries are the kind that you yourself might initiate at any of the free credit reporting sites.
4. Fix Credit Report Errors. Every year you are entitled to one free credit report. Take advantage of this opportunity and check your credit report. Report any errors to the three reporting bureaus. Check out the following website for your yearly free credit report: https://www.annualcreditreport.com
5. Keep Unused Accounts Open. The final important factor in determining your credit score, is length of credit history. If you are looking for your first credit card, don’t worry, you will still be able to find one. But once you begin to acquire accounts, keep them clean, and keep them open. The longer track record you have of timely payments, the more willing banks will be to give you credit in the future.
Copyright 2008; Claire Blake. This article may be reprinted on the terms that it remains unchanged and the links stay active. Claire Blake has written numerous articles on credit management and is the first webmaster of a site that offers news and information on credit cards. If you’re looking for more information and want to fill out a first credit card application, visit her site today.