If you’re anything like me and other millennials I know, then growing up you were probably told not to get a credit card. Though the reasoning was never made 100% clear, credit cards were made out to be a sure fire way to find financial failure.
So, are credit cards all bad? Let’s take a closer look.
As we mentioned in our previous blog, there are 5 factors that go into creating your credit score. Having and using a credit card can have an impact on each of those 5 factors. Not having a credit card can also have an impact on your credit as well.
When thinking about how a credit card impacts your credit score keep credit utilization, mix of accounts, and age of accounts in mind. Getting a credit card will allow you to open a new line of credit that will add age over time and play a major role in your credit utilization.
Credit cards can also be helpful when/ if you find yourself in an emergency. Sometimes things happen and you are in need of more money than you have on hand. Having available funds via a credit card could be the saving grace you need to maintain and survive.
So does that mean that credit cards are all good?
Oftentimes the negative ramifications of a credit card that everyone fears are due to overspending and poor money management. Though you may have been afforded a $500 limit on your credit card it’s not recommended that you spend more than 30% of that during any given time.
Having a credit card is as much about gaining more financial freedom as it is proving your financial responsibility. As your credit card history builds, lenders will be able to see a record of how responsibly you’ve utilized your credit lines which will be used to calculate your score and determine future lending opportunities.
Are credit cards bad? No! Poor credit usage is bad. Having a good understanding of how and when to use your credit card can be a make or break factor in gaining the credit score that will help you build the life of your dreams. For more information on credit cards and building your credit call us today (833) 752-7334.