I know my last post was on why you need to stop using credit cards. That is not entirely true. Now that you know the danger of credit cards, it is time to learn about one of the biggest benefits.
If you are under 25, chances are you are renting. If you want to purchase a car (with a loan) or house, you need a good credit score. Chances are you don’t have the $300,000 or so in cash for your first home purchase. What is the first thing a bank will look at when deciding on a mortgage loan? Your credit score.
A credit score is not born over night. It is not born over a month. It is not born over a year. It takes years to build a good score. I have had perfect credit since I was 18 (when I got my first card). In that time, I have used and paid off my cards in full every month. I have taken out a car loan and most recently student loans. I have always been early on my payments. My score is 734. That is still not even close to the possible 850. One screw up, however, can lead to a big, big drop.
I bet you are wondering how to get a good score? Step 1: Get a credit card and use it responsibly. The second part is as important as the first part. Unable to score (no history) is a better result than a bunch of late payments. So when you get a card, treat it like an extension of your checking account. You cannot spend more than you have. You will pay it off in full every month and not pay interest fees.
Using the logic in the paragraph above, you have started to track to 850.
