10 Things You Must Know About Credit

10 Things You Must Know About Credit

Your first experience with credit can be a small confusing.

Managing credit wisely is an essential factor in your financial success so understanding all the elements of credit is key.

Building a basic understanding of how credit works can help you make the right borrowing and payment decisions through life.

With that being said, here are the 10 things you must know about credit:

Credit Is Not a Cash Substitute

Credit and credit cards are so simple for using, it is difficult not to think of them as an extension of your wallet. Unfortunately, being careless with your credit usage can lead to problems, especially if you borrow more than you can afford to pay back right away.

Even if you have been using credit for years, it never hurts to re-familiarize yourself with the basics of what credit is and how it works.

Having Good Credit Is Important

Never underestimate the value of the best credit. If you have operated under the assumption that credit is used for further than just credit cards and loans, you cannot be more from the truth.

Businesses who extend services to you before you paid for them have a valid reason for checking your credit and can deny you or include more requirements if your credit is not in better shape. For instance, you need credit for buying and renting a house, getting a new job, and even buying a cell phone or other utility services.

worrying about credit

Good Credit Does Not Happen Overnight

Good credit may be distilled down to a reputation to be responsible with the money you have borrowed.

Do not expect to go from 0-850 overnight. It takes time to build up a great reputation, you need months, even years of positive payment habits to prove that you are a trustworthy borrower.


Not All Credit Cards Are Created Equally

There’re so several different kinds of credit cards with low-interest rates, cards that pay travel rewards, cards for people with troubled credit history. It is as easy to get one that does not fit you as it’s to get one that does fit you.

Selecting the right credit card means understanding your current credit nailing and standing down your Wish list of credit card features. For instance, if you are just starting out with credit, you cannot qualify for a top-tier rewards credit card. Likewise, if you have got the best credit, you won’t be served well with a secured credit card.


Debt Can Happen to Anyone

Carrying too much debt can have a negative influence on your credit, making you look riskier to future lenders because you have borrowed further than you can afford to pay back.

Making better financial choices and using credit only as you need to will keep you from being bound by debt.


Many things do not impact your credit

Your credit score is calculated strictly from the info in your credit reports, which is limited in its scope. It cares about your history of paying back the money you promised you will.

However, lenders frequently consider other info when evaluating you.

For example, nowhere on your credit reports is your income, alma mater, and history of paying bills on time.


Learn the things that DON’T affect your credit

Yes, surprisingly, there’re things that don’t affect your credit score. Some of these include:

  • The amount of money you make. This has no bearing on your credit score. You can make money or very small money, and your credit score would not change regardless. Yet, your income can indirectly impact your access to credit and your credit score.
    For example, a credit card provider will ask you for your income. Then they will use it in conjunction with your credit report for deciding whether or not to give you a card and what the terms are going to be.
  • Your net worth. You can be a movie star with huge earnings living in a mansion. This will be fantastic, but it does not affect your credit score. What does affect your score is whether you made the payments on your nice mansion on time and in full.
  • Whether you are on welfare. If you receive income assistance from the government and disability, this has no impact on your credit score.
  • The ivy-league you did or didn’t attend. This info does not get published on your credit report and it does not factor into your credit score.
  • Whether you have been to jail. Your credit score does not change if you have been to jail. Your credit is impacted if you are sued and owe money, or if your payments aren’t made while you are in jail.
  • The kind of financial institution or financial services you use. It does not matter if you’ve your finances with a bank or a credit union. As long as you’ve got a credit history, it does not matter where you do your banking.

Closing Credit Cards Can Hurt Your Credit

You can be tempted to retaliate against an unaccommodating credit card issuer by closing your credit card and ending your financial relationship.

However, closing a credit card can hurt you a lot more than it’ll hurt your creditor, particularly if you are yet carrying a balance.

You Can Ask for Lower Interest Rates

Interest is the price you pay for the convenience of paying back money over time and is partly based on your credit history. With the best credit history, which is a reputation for handling credit responsibly, you can usually expect to pay lower interest rates than borrowers who have not been as diligent around paying their bills on time.

If you think you qualify for great rates, having a higher credit score 700’s or better puts you in a better position to negotiate a low-interest rate.

Having Too Many Credit Cards Is Possible

It does not take long to build a collection of credit cards. As soon as you get 1 credit card, it looks every other creditor wants to offer theirs too.

Having too several credit cards can affect your credit score and make it tough to keep up with your credit card payments.

Did you enjoy this article?

YMA Finnancial LLC enjoys writing articles to help educate everyone about credit and help by providing expert credit repair services.

Book a consultation with a professional business consultant today!

Need help with your credit now? Call us! 864-249-1439 888-531-6611

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