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
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