If your entire life you worked hard and paid your bills in cash, probably you do not have a credit history.
Why do you need a credit history?
Every time you purchase a home, rent an apartment, buy a car or another item, the seller checks your credit history. If you have none, chances are you will be denied. If you have a credit history which is not good, you will be charged higher interest rates because you will be considered a high risk.
What to do:
Have at least two utility bills in your name and pay them on time. Cell phone bills apply.
Have two credit cards and pay them on time. Please read the terms and conditions and COMPARE several cards. Some have huge annual fees. Stay away from them. As a general rule stores tempt you with discounts when you sign up for their credit car. If you plan to pay your store card every month and bring it to 0 balance, that is fine. However, if you charge a lot and are unable to pay it ALL before the month is over, check the interest rate the store will charge you. It could be more than 20%! One may grow old and still pay it! If that happens, check a regular credit card (Visa, Mastercard) check IF their interest is lower than what you currently pay, and TRANSFER. Do not forget to factor in the cost of the transfer.
Why it is important to not CANCEL any of your cards.
The easiest way is to take an example:
Let’s say, I have three credit cards. Each has a LIMIT:
Card #1 — up to $1,000
Card #2 –up to 2,000
Card #2– up to 3,000
TOTAL I am ABLE TO BOROUGH is 1,000 Plus 2,000 Plus 3,000 = $6,000
This is MY BUYING POWER: $6,000!!!
Let’s say I cancel the card which has a limit of $3,000. Suddenly MY buying power is 1/2! ONLY $3,000! MY credit score goes DOWN!!! since I could now only borough $3,000 and not $6,000!
So, instead of cancelling your card pay it off and keep it.
When you get special offers: 2% for 3 months make sure after 3 months your interest doesn’t jump to 20%.
In conclusion, credit cards used wisely could help you build good credit. Why is this important? People with good credit pay less interest on their mortgage, car payments, etc. If you do not have good credit, you are either rejected or charge a huge interest rate because you are considered “high risk.”
For married couples. While it is nice to have cards in both names, let’s not forget 50% end up in divorce. I have seen couples who divorced and FORGOT to separate their credit cards. 10 years after divorce, one of the partners defaulted on the JOINT card. Even if they were divorced the other person listed as a user of the card, became responsible for the payments.
Are credit cards a blessing or a curse? It really is up to you! Oh, and I didn’t make the rules:)!