Get Smart About Credit Day 10.20.2016
300 to 850. That’s the average range for credit scores, and the higher the number, the better your credit. However, not everyone knows about credit, let alone how it works and that’s one of the reasons there is “Get Smart About Credit Day”. Every year in October (October 20 in 2016). Since it is Get Smart About Credit Day, we are talking about credit because that can be a painful part of the financing or leasing process.
Credit and How to Build It
Anyone can start building credit and learn about it any time. To break it down, a person’s credit, or credit score is just that – how credible are they with money, and how likely can a bank, credit union, or financing institution trust them to pay back what they borrow?
People can borrow money in a number of ways, loans and credit cards being the top two. If you’ve taken out a loan before or own a credit card, you can check your credit score online at CreditKarma.com or contact one of the following unions: Experian, Equifax, or TransUnion.
If you don’t have a credit score (or your number is low), there are a few ways to build it up.
- Having a steady income is always helpful, and by proper budgeting, one can keep up with bills and establish or build credit.
- Get a secured credit card. A secured credit card is kind of like a gift card. A secured credit card starts with a limit, say $500, and at the end of each billing period, you need to replenish the amount of money spent on the card. Over time, the limit will rise and so will your credit score.
- Use a credit card every month and then pay it off completely. This can be tough with big purchases, so try to use the card on small things like a quick meal or for a bag or two of groceries. That way, you can replenish the funds quickly and easily.
- Pay bills on time, or as soon as possible. Most companies dealing with credit and loans have a grace period. As long as you pay them what you owe within this time frame, your score won’t be affected. If you don’t know the grace period, contact the organization you owe and find out, so you need not worry if your payment is a little late.
- Control how many accounts are open. When it comes to credit, more isn’t necessarily better. Creditors wants to know you’re responsible. Have a maximum of two accounts to start off – one for daily expenses, one for emergencies only. Every time you open an account, your credit score gets pinged, so you want to start small. After three to six months, return to the idea of getting another account if you can handle it. Also, the more credit you have available on open credit cards, the more a creditor will view you as a liability. Example: If you have 5 credit cards, each with a credit limit of $5,000 provides you with $25,000 and creditors may look at that as a potential of $25,00 of debt.
- Check your credit score at least three times every fiscal year to have peace of mind as to where you stand and see if there are any errors that can be easily corrected.
- After having a secured credit card for a year, apply for a real credit card. Then, repeat steps 3-6.
Don’t let credit be the reason you don’t get into a new car. Be proactive and get smart about your credit today.