Every Household Should Have a Budget - Credit Cards

By
Mortgage and Lending with Bay Equity, LLC 770-634-4021 NMLS #206275 GA 25689

 

The next item in this series Every Household Should Have a Budget will address credit cards.  In our society credit cards have become an necessary evil.  You will need a credit card to make airline reservations, rent a car, or make purchases online.  You will also need credit to develop a credit score!

Each credit card, car loan, mortgage, student loan will be used to calculate your credit score.  If you don't have any credit, it will most likely be difficult for you to obtain a mortgage or car loan.

The calculation of your credit score is based on the type of credit you have, the length of time you have had credit, your payment history and credit inquiries.  Credit inquiries generally only will have a negative impact if you are continually applying for credit.  

Once you get that credit card, it is important that you DO NOT over extend yourself.  The balance should be at 30-50% of the credit limit.  For example, if your credit limit is $1000 the balance should be no more than $300-$500.  Once you exceed that amount, your credit score will start to go down.

One more thing I would like to mention about your credit cards, monitor the interest rate.  If you have been a long term client and paid on time, you may have some negotiating power with the credit card company.  

Again, the best advice, is to stay on top of these accounts in order to maintain your financial health.

Every Household Should Have a Budget - Getting Started

Every Household Should Have a Budget - Step 2

Every Household Should Have a Budget - Savings

Every Household Should Have a Budget - Checking Account

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Kathy Sheehan Senior Loan Officer

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770.634.4021

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Bay Equity LLC

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11475 Great Oaks Way, Suite 350, Alpharetta, GA 30002

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The opinions and general information in this blog are soley those of Kathy Sheehan.  Specifics regarding an individual case should be discussed in detail with a loan professional.  For a confidential consultation, please feel free to contact me via phone or email.  All terms and conditions are subject to change.

 

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  1. Brian Sharkey 08/18/2013 11:42 PM
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Rainmaker
1,317,601
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Kathy--  It is amazing that folks who just pay their bills on time without using credit cards are penalized.  I was always told growing up not to buy if I could not afford it. 

Aug 18, 2013 12:48 PM #10
Rainmaker
647,093
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Joan, I agree with you, but we must follow the guidelines.

Aug 18, 2013 01:11 PM #11
Ambassador
1,204,256
Ralph Gorgoglione
Maui Life Homes / Metro Life Homes - Kihei, HI
Hawaii and California Real Estate (310) 497-9407

Making the time to monitor one's credit limit and maintain a 30%-50% of the balance is a great tip for every household!

Aug 18, 2013 01:45 PM #12
Ambassador
1,704,110
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Kathy, this is Dave Ramsey country down here. He doesn't call it a credit score, he calls it a debt score. Although, I use credit cards, I pay them off monthly. Dave Ramsey actually suggests doing away with credit cards and only use debit cards. My kids are 21 and 19. They are in college but they are trying to be credit card free. I hope they are successful. I worked for a credit card issuer decades ago. It's so easy for people to get into debt that takes them years to dig themselves out of.

Aug 18, 2013 02:10 PM #13
Rainmaker
908,388
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Many banks offer debit/credit cards that are connected to a checking/savings account. Those credit cards work for renting a car or for anything else that requires a credit card. 

Aug 18, 2013 04:23 PM #14
Ambassador
2,009,952
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Kathy - It's unfortunate that credit cards are a necessary evil.

Aug 18, 2013 04:42 PM #15
Rainmaker
647,093
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Thanks Ralph!

Aug 18, 2013 09:50 PM #16
Rainmaker
647,093
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Tammie, I do not recommend that ANYONE carry credit card debt.  Consume debt like this can ruin someone's financial life.   I do recommend that they establish a credit history if they want to get a mortgage for a home at some point.  Those clients with no credit history/score or limited credit often find themsevles without a mortgage!

Aug 18, 2013 09:53 PM #17
Rainmaker
647,093
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Pamela, that is true,  I do know that car rental companies will hold excess funds on a debit card as a security deposit.

Christine, it is.

Aug 18, 2013 09:54 PM #18
Ambassador
1,241,523
Joni Bailey
101 Main St. Realty - Huntsville, TX
Your Huntsville / Lake Livingston Area REALTOR®

I just had a buyer that couldn't get a loan because he paid for everything in cash. So yes, it is a necessary evil that needs a budget, but requires discipline.

Aug 18, 2013 11:20 PM #19
Rainmaker
2,486,032
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Credit cards work as long as the person is directing and monitoring it all...the moment the card takes on its own identity, you are doomed

Aug 18, 2013 11:31 PM #20
Rainmaker
1,338,967
Wayne and Jean Marie Zuhl
Samsel & Associates - Clark, NJ
The Last Names You'll Ever Need in Real Estate

Great advice - credit cards are important to have, but equally important not to abuse.

Aug 19, 2013 12:03 AM #21
Rainmaker
270,797
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Kathy,

The interest alone will kill your credit score on top of exceeding your spending limits. Credit cards work when used in moderation. Raking up debt does nothing for you when you have/want to apply for a loan.

Aug 19, 2013 12:09 AM #22
Rainer
247,900
Gerard Gilbers
Higher Authority Markeing - Asheboro, NC
Your Marketing Master

Great information. I'm glad I ran across this post and will go back and read the rest.

Aug 19, 2013 01:14 AM #23
Rainmaker
592,740
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

Very good information on credit cards. I had no idea that using 51% or more of your CC balance would cause the score to go down.

Aug 19, 2013 01:29 AM #24
Rainmaker
647,093
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Joni, EXACTLY!

Richie, the point exactly!

Wayne and Jean, it requires discipline.

Phil, the interest on a credit cards  doesn't play a part in the scoring model. 

Thanks Gerard!  I am glad you enjoyed it.

Aug 19, 2013 01:55 AM #25
Rainmaker
647,093
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Than, the higher your credit usage the lower your credit score.  It is as simple as that.

Aug 19, 2013 01:58 AM #26
Rainer
115,674
Kelly Taylor
Keller Williams - Lakewood Ranch, FL

Excellent advice.I have been talking to both of my sons about the same topic for the last couple of years. It's a shame they don't teach them while they are in school.

Aug 19, 2013 03:03 AM #27
Rainer
103,157
Rosie Moore
Serving Sugar Land, Richmond, Rosenberg, Missouri City - Sugar Land, TX
This is wonderful advice. Credit cards can be a curse on your finances unless you use it wisely.
Aug 19, 2013 03:31 AM #28
Rainmaker
647,093
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Kelly, it is never to early to start that conversation.

Rosie, yes it can.

Aug 19, 2013 12:22 PM #29
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