Credit cards can be a good thing if you know how to use one. These are ways that credit cards can make your life better:

1. Accumulate reward points for free merchandise. Get a reward credit card and get free stuff. Each time you use your credit card, you’ll accumulate points that can be redeemed for discounts on gas, movie tickets, restaurant gift cards, and more.
2. Buy now, pay later. Credit cards give you the option to make a purchase now and pay for it later. This is a great benefit, especially for emergencies or help with cash flow.
3. Accepted virtually everywhere. Credit cards are generally accepted everywhere. This is great when you are running low on cash.
4. Easy to carry. A credit card takes up less room than a wad of cash does.
5. Online shopping. Pretty much the only way to buy things online is by using a credit card. Your credit card comes in handy if you do a lot of online shopping.
6. Build credit. Using your credit card wisely is one of the best ways to build your credit. This will show lenders how responsible you are and make them more willing to loan you money.
7. Teach responsibility. Credit cards can teach you responsibility because you have to account for each purchase you make in order to stay out of debt.
8. Teach money management. Credit cards are a great way to teach you how to handle your money. You have to carefully budget your money and your purchases.
9. Variety of payment options. Many times, you can chose different payment options. You have the flexibility to chose your due date and payment amount.
10. Online monthly statements. Most credit card companies offer an online program where you can view your credit card activity. This helps manage credit card purchases tremendously.
11. Not having to carry cash. Isn’t it a pain and a hassle to carry cash all of the time? Credit cards make it so easy to swipe and sign.
12. Good Customer service (most of the time). You can’t call a customer service department if you have a question about the cash you carry. You can, however, call in regards to your credit cards and credit account.
13. Earn cash back. You can earn cash back through a percentage of your purchases. This is a great way to combat rising inflation too.
14. Give you a buffer until payday. Credit cards help get you through until payday, especially when unexpected circumstances arise.
15. Tool for tracking your expenses. It is so easy to track expenses and purchases now with different tools that the credit card companies offer. Most companies have an online tracking system. Many also offer a year-end statement that categorizes all of your purchases from the entire year.

These are just a few of the ways that credit cards can make your life better. Credit cards can be an unmatched tool that can assist you on your quest for financial freedom.

As people have become more dependent on credit to purchase homes, cars and more, the importance of your credit rating has also increased.  Often times, people don’t understand what affects their credit reports or rating.  Most people don’t understand that their credit rating is one of the most important things they can ever own and the importance of protecting it.  If you don’t understand something, how can you protect it?

Every time you use credit, you are borrowing money from someone else.  You promise to pay each amount back within a specified period of time.  Your lender uses the amount you borrow, the interest rate and the length of time you are going to borrow it for to determine your monthly payments.  You absolutely, positively have to make each monthly payment, and pay it on time.  Your credit score is a statistical number that shows the likelihood of your paying the lender back.  Your credit score isn’t just a number that the credit bureaus get out of thin air.  It is precisely derived from a set formula.

Each credit bureau uses different criteria for calculating your credit score.  However, they each use the same basic formula and come up with basically the same number.  One credit bureau might only look at your credit report, while another may use more than one factor.  Either way, each bureau gives you an accurate rating based on your credit.

There are many factors that can be used when determining your credit rating.  Your payment history, the amount of your current debt, the length of time in which you have had credit, the mixture of different kinds of debt that you have, and the number of inquiries on your record.  The more loans you are trying to take out (inquiries), the more it will drag your credit down.  Your credit score will also be lower if you haven’t had credit or used credit for a very long time.

Credit scores range from 350-800.  The higher your credit score, the better it is.  If you have a lower credit score, lenders view you as a higher risk than someone with a higher credit score.  In other words, someone with a credit rating of 350 is going to be a bigger risk than someone with an 800 score.

So, why is your credit rating so important?  Every time you apply for a loan or even hook up your utilities, your credit is checked.  Your credit rating is the easiest way for lenders or utility companies to see what kind of risk you are.  The higher the risk you are, the more your payments will be.  This is according to financial theory.  Theoretically, higher credit risk means that a “risk premium” must be added to the amount that you borrow.  Risk premium helps protect lenders, mortgage companies, credit card issuers and others that may loan you money.  Imagine what would happen if lenders gave everyone the same rate and same amount of money.  Some people would pay it back faithfully, while others took advantage of the system.

Credit ratings are a fragile thing.  You need to protect your credit score with everything you’ve got.  If you make your payments on time, be careful about how much you borrow and make wise purchases, you should be fine.  Understanding what your credit rating is and what it is saying about you could save or cost you.

Your credit score contains so many intricacies. It can be hard sometimes to keep track of everything and to understand how each of your accounts affects your credit score. Use this as your personal credit score guide. It will help you understand and track your credit report better.

First and foremost, you need to understand what a credit score is. A credit score is simply a number that is generated based on your credit history. This number is the fastest way lenders can decide if they want to lend to you or not. It is an easy way to determine how much of a risk you are. Make sure you also understand the credit score range. Credit scores can range from 300-850. The higher your credit score, the better your credit is. Any score of 720 or higher is considered excellent. Anything under 620 is viewed as poor credit. It is important to understand these ranges in order to keep yourself from credit score danger. Stay away from lower numbers so you can have excellent credit for the rest of your life.

The most common scoring method for calculating credit scores is the Fair Isaac and Company system, also known as the FICO. Understand that the Fair Isaac and Company is an independent company. However, all three credit bureaus worked closely with FICO to develop its scoring system. It has been in use since the early 1980s. Each bureau has its own version of the FICO system. Equifax uses the Beacon system. TransUnion uses the Empirica system. Experian uses the Experian/Fair Isaac system. With each bureau using its own system, each credit bureau will produce a different score for any given credit report. There is often a credit score disparity from bureau to bureau and as a result, many lenders will choose the middle score of the three bureaus, not an average or the highest.

Now that you understand what a credit score is, here is how your credit score is broken down.

35 Percent of your score is determined from your past payment history. This is because lenders want to see how responsible you are at paying your bills on time. Several things can bring this score down: how many bills you have paid late, how many collection accounts you have had, how many bankruptcies you have filed for, etc.

30 Percent of your score is based on the amount of outstanding debt you have. The FICO looks at how much you owe on your car or home loan, how many credit cards are maxed out, etc. The key here is to have very few accounts at their limit. The more accounts you have that are at their limit, the lower your score will be.

15 Percent of the score looks at the time length of your credit history. The shorter amount of time, the lower your score will be. You score will be higher if you have had established credit for an extended period of time.

10 Percent uses the number of inquiries. Why does it take this into consideration? Your score will be lower if you have had several inquiries on your credit report in a short period of time. This looks like you are taking on too much debt. It also indicates financial trouble. Try to keep your inquiries low.

10 Percent of your score considers the types of credit accounts you have. You want to have a variety of accounts on your credit report. If you have 10 credit cards (revolving accounts) and no mortgage or auto loan, your score will be lower. Again, lenders want to see a variety of accounts. This will indicate stability to them.

It is very important to understand all of the aspects of your credit score. You need to be familiar with the FICO scoring system in order to keep your score as high as possible. Take responsibility for your score and make sure you working getting and keeping it as high as possible.

As with other things in life, it pays to be responsible. It is so important for your financial freedom to have good credit and maintain as high of a credit score as possible. Nowadays, people with bad credit are given more opportunities than ever before. What they don’t realize, however, is that they are paying a horrible price. Here are five major reasons that a “bad credit” credit card can cost you hundreds or even thousands of dollars each year.

1. Interest Rates. If you have bad credit, you can still get a credit card. But, do you know how much your interest rate will be? Your interest rate will be considerably higher if you have bad credit. This is because you are viewed as a financial risk. Lenders will only give you a high interest rate until you have proven that you are no longer a credit risk. With bad credit, you probably won’t ever be offered a credit card with 0% APR. Instead, your introductory rate will be at least 15%.

2. Processing fees. Get prepared to pay a one time processing fee if you have bad credit. Lenders say “one time processing fee” to make it sound nominal. However, this is not the case. You will be charged a processing fee to cover the risk associated with lending to you. Save yourself money by only having good credit.

3. Annual fees. There are many credit cards available with no annual fee. If you have bad credit though, don’t expect to qualify for one of these cards. Once again, you’ll be charged an annual fee to cover the risk of lending to you. Annual fees aren’t just $20 per year. You could pay hundreds of dollars per year to have a “bad credit” credit card. Many credit card issuers will also charge monthly maintenance fees to your account.

4. Late payment fees. You certainly won’t be paying $10 late fees if you have bad credit. Credit card companies increase your late fee depending on how bad your credit is. Not only will you be paying quite a lot more for late payments, but credit card companies will be quick to report your late payments to credit bureaus. Save yourself money and the added embarrassment of paying late fees by making your payments early.

5. Lower credit limits. You can expect a lower credit limit if you have poor credit. This is because of the financial risk associated with low credit scores. Lower credit limits can also lower your credit score based on the balance amount charged relative to the total credit limit amount.

As you can see, there are several ways a “bad credit” credit card can cost you more money. It would be better to take a few months and fix your credit before applying for a credit card. You will get a better interest rate, no processing or annual fees, lower payment fees and higher credit limits. Give yourself all the opportunities you deserve with good credit.

It can be so frustrating to get a credit card if you don’t have any credit. There are some credit cards that you can get with no credit, but these are not ideal. With these types of cards, you’ll pay a higher interest rate and not get as many features. Try and build your credit before applying for a credit card. Here’s how.

To Start Building Your Credit

1. Get a bank account. Bank accounts go a long way in building your credit. Here’s the good news too…you don’t really need credit to open a savings or checking account. Your bank accounts will show lenders that you are responsible and stable with your finances.

2. Employment. Lenders like to see a strong employment history. They don’t like to see several periods of unemployment. This causes them to worry about the financial risk you’ll be when you aren’t employed. Get a job and stick with it.

3. Where you live. Have you lived in the same old place for a long time? Good thing. Lenders look to see how often you move around. The longer you live in one area, the more stable you are in the lender’s eyes. They also look to see whether you rent or own. Try not to move around a lot while trying to build your credit.

4. Utilities. If you live with roommates, put the utilities in your name. You’ll help establish your credit just by paying the electric, gas or water bill.

Those are some ways that can help you establish credit. Once you have established a little bit of credit, it is important to know where to start applying for credit cards.

Where To Apply For A Credit Card

1. Start with your bank. Your bank is a great way to start if you are applying for a credit card for the first time. Your bank is able to view your transaction history and see how well you manage your money. You have an established relationship with them already. Utilize that and get a credit card with them first.

2. Department store card. Department stores usually offer you a percentage off your purchase to save money when you apply for and use their credit card. Generally, this isn’t a smart idea because you get lured into the initial discount but don’t realize how high the interest rate is. However, if you are smart with your money and are trying to build credit, this may be the perfect place to start. Try and make a small purchase every month and pay it off before it is due. This is a great way to build your credit.

3. Secured credit card. A secured credit card is much easier to obtain than an unsecured credit card. A secured credit card is one that is tied to your bank account. It gives the credit company access to use your assets in case you fail to make your payments. If you are making purchases wisely, this could be a good route for you.

As you can see, there are several things that you can do to establish credit. You don’t have to have a long credit report to apply for a credit card. However, you will want somewhat of a credit report before applying. This will give you more options to choose from and keep your rate lower.