Why is it good to have a good credit score?
Whether you like it or not, having a good credit score is really important, at least if you choose to live in a big city in The US. Let’s face it, life is just so much easier when you have some little extra money, which you borrow and then comfortably pay back over time. Plus, borrowing is being encouraged by our system, so you can get a whole bunch of nice perks when using (the right) credit card. So, again, why is it important to have a good credit score?
A)It helps you save money. You can get a better interest rates if you are deemed reliable by your lender.
B)You can apply for credit cards that give you better rewards and bonuses.
C)You can borrow bigger amounts of money (which is good if you want to invest in something).
D) Our system is designed so that the more financially reliable you are, the easier, faster and cheaper it is for you to rent an apartment, get a car, go to school and do other things like that, that are imortant for your life’s success.
So, I say, right now, while we are living with the roommates and, therefore, have a bigger financial margin to use, is our time to tune our financial life for success.
What does a good credit score depend on?
The word is, FICO has been working on a new credit scoring system, which they are planning to launch by the end of this year/beginning of the next year. This system is designed to give a fairer judgement and better chance of getting approved for a loan or a credit card for people who are in the higher credit risk group. Things like rent, phone, cable and utility bills payments, as well as how often does this person change the address, will be taken into consideration when determining their credit score. So there might be some room for improvement for all of us out there!
When is it better use a credit card rather than cash?
Using your credit card is good when you receive cash back, miles, points or other rewards and bonuses on the money you spend. Therefore using credit is better than using cash when you have the right type of credit card and if you manage to avoid paying interest interest charges. To simplify it even more, paying by card is better if you can get the item for less money than you would get it for if paying cash (sorry, did I make it more complicated right now?).
Another situation when you would want to use your credit card rather than a debit card is when there is a possibility of fraud present. When someone steals money from your debit card they are stealing your hard earned cash while with the credit card, thiefs basically steals bank’s money, and you don’t have to pay it back because, according to federal law, you can’t be held liable for unauthorized credit or debit card transactions.
How to improve your score?
I’m absolutely positive that you already know what I’m about to tell you, but I’ll tell it anyway just in case some school kids are reading this. If you want to improve your credit score these are the things you should do:
Lower your utilization rate to 30% by either increasing your line of credit or applying for another credit card and transfering part of your balance from one card to another.
Make payments on time to avoid interest charges.
Try to pay off your outstanding balance as soon as possible.
Keep an eye on your transactions and stay in touch with your credit card company, negotiating your debt down.
What if you are in a credit debt trouble?
Then again, you should negotiate your settlement plan with your credit company and be relentless about it, maybe even go for “pay for delete” option here. But make the reps on the other end of the line really work with you finding the best solution for your problem.
Talk to your credit counselor to have him help you work out a startegy.
Ask a family member, a friend or a roommate with a better credit score to add you to their credit card account to help you improve your credit score (which could help you to get a loan to pay your credit card debt).
So why should you work on your credit score now, when you live with a roommate? Well, you don’t have to of course, and who am I to tell you what to do, right? Speaking for myself, I invest a lot of time and effort in fixing my not-so-perfect-credit score right now, because I have a very clear goal: I want to have my own place without having to share it with anyone, and a good credit score will definitely help me in achieving it faster. So I manage my finances wisely and fix things that need to be fixed in my life while I have a chance to do it, preparing myself for a bright and happy future.