Should There Be a Credit Card in Your Future VISA

Your credit score affects more than just whether you’ll be granted a loan, mortgage or credit card.  Insurance companies look at the score as a measure of responsibility.  You may pay higher premiums for auto insurance for example if your credit score is lower than someone who has good credit.  Employers review credit reports as a regular part of the employment process.

Use it or lose it
If you have credit start using it.  It’s not enough to just establish credit.  That’s only the first hurdle. If you have a VISA start using it.  Lenders not only look to see if another financial institution took the risk of granting credit but look to see if you’ve borrowed money and then repaid it.

Store credit may be the easiest option to start establishing credit.  Use the card for purchases and pay for those purchases in full for a few months.  Then apply for a credit card.  Again use the credit card for purchases you would normally budget cash for and pay in full at the end of the month.

A secured credit card is another option for someone with no credit.  You deposit with the lender an amount of money equal to the credit limit on the card, usually from $500 to $1000.  Use the card for 6 to 12 months regularly paying off the balance in full every month.  Eventually you’ll have established enough credit worthiness that you may be able to have the deposit returned to you.  Or you can use that account to demonstrate your credit worthiness to apply for a non secured credit card.

Your credit report will show these accounts, the outstanding balances, and your payment history. If you don’t use the credit there will be no record of timely payments.  You haven’t demonstrated that you’re a good credit risk.

Pay on time
Even a few days late matters.  Some credit card companies are sneaky.  They will receive a payment before the due date but won’t process in time.  Your check sits in the mail room for a few days. The payment won’t be reported late to the credit bureaus, but your account won’t be credited before the due date so technically you’re late.  That way they can charge a late fee.  Schedule your payments to arrive at least 3 or 4 days prior to the official due date.  And make sure there are funds to cover the fee the day you send the payment.

No missing payments
A late payment is better than no payment.  Don’t think you can skip a payment this month because you’re short of cash and send in a double payment next month.  A missed payment is more damaging to your credit score than a late payment.

Once you’ve missed a payment it stays on your record even if you make two payments the next month to make it up. Your bill paying history is an important part of your credit score.

Have more than one type of credit
It’s fine to have a car loan but that’s a secured loan.  If you don’t make the payments your car will be repossessed.  Establishing revolving credit through a credit card shows that you can handle credit on an unsecured basis as well.   That level of responsibility tells the lender you can manage your debt without the threat of repossession.

Use these tips to establish a good credit record for your financial future.