Long before we are old enough to take credit cards we, advertisers make sure we know about the plastic power: “It’s everywhere you want to be” “.” It is worth discovering. ” what’s in your wallet? “
While using an advertising campaign to choose a card is a terrible idea, slogans are a good thing: A credit card can be a powerful thing. For teens and 20-somethings looking to pick up a map first, by taking the time to choose carefully can save you money and provide a boost in establishing and building a historical credit.
An excellent credit score will be useful when you start thinking about buying a car or get a mortgage. Even if you do not plan to take a big loan in the near future, your credit information may be a factor in renting an apartment, getting a membership to a club or being hired for certain jobs.
Lenders use credit reports to determine how risky it is to a borrower – that is – a loan. However, the lender just wants to know if the borrower is able to repay the loan. If the borrower has bad credit, then he or she probably made some important financial mistakes or current and are more likely not to pay. On the other hand, if the borrower has good credit, then he or she has a history of repayment of the debt and the lender will most likely grant the loan.
Credit cards are actually short term loans that must be paid within a short period of grace. Get the first credit card can be difficult. Credit card companies have no basis of your credit history because they have not paid the money in the past. So how are you supposed to establish and build history without your credit score?
One way is to apply for a secured credit card. Secured credit cards are backed by a deposit you make in advance. Usually, the deposition amount is identical to the limit of the card. Everything else is as normal without a credit card security: the card is used to buy things; the monthly payments are made; and committed interest if you can not pay the full balance. A secured credit card should be a temporary step for building credit. Try to pay off the entire balance every month to show that you are financially responsible. After all, not only what they want to build a credit history, you want to build a good one.
Another effective way to start your credit history is to become an authorized user of the card of another person. Many parents give their children as authorized users on your credit cards to enable children to build credit without the legal obligation to pay the balance each month. However, if the person whose account is authorized to use the account does not handle correctly, mistakes could end up hurting more than helping your credit.
Once you establish your credit history, you can shop for your first unsecured credit card. You will quickly discover that there are many to choose from. A number of factors may help narrow your search.
The most important is how it will use the card. Will you use it only for emergencies? Otherwise you will have to pay in full each month, or will you carry a balance on the card? Once you decide how you will use the card, follow the self-imposed rules. It is very easy, and dangerous, dragging the map constantly and say it is for a good reason. But it is crucial to be stubborn about establishing good habits, even – or perhaps especially – at the beginning of life.
If you plan to carry a balance on your card, you should be aware of the speed of each card you are considering interest. The interest rate used by credit card companies is the annual rate, o-ABR. There are cards with APRs variables, which are based on a particular index (such as the US prime rate). There is also no variable APR, which are usually credit cards fixed rate. As a beginner, you probably want small, non-rate credit card APR variable, because knowing your interest rate will give you an idea of how much money is needed each month to pay at least the minimum amount due. A low APR card is not the variable will therefore help to create a monthly budget.