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August 5, 2016

Building your credit score means using credit.  If you want to have a great credit score and get the best rate on an auto loan or a mortgage you are going to need to show that you have a history or paying your bills on time and not over-extending yourself.  One great way to do that is to get a credit card.  Credit Cards allow you to use credit and develop a payment history.  But how do you pick a credit card that is right for you and what credit cards should you absolutely avoid?

Well to start, if you have absolutely have no credit history or a very poor credit history you will probably need to start with a secured credit card.   A secured credit is different a traditional credit card in that you have to pay a deposit to get the card.  This deposit will set your credit limit. So let's say you pay a $300 deposit then your credit limit will be $300.  This does not mean it is like a debit card, however, the deposit is just there in case that you are unable to pay your bill since you are considered a risk with no to poor credit history. When picking a secured credit card you need be sure that it will report to all three credit bureaus so that your positive payments show and help improve your score.

After having a secured credit card for a while you will be able to apply for a traditional credit card.  With a traditional credit card you will not have to pay a deposit but instead be given a line of credit.  With this line of credit you will be spending the lenders money which you will in turn be responsible to make a monthly payment.  Your minimum monthly payment will be equal to 4% of the total balance owed but you are always able to pay more or even the total balance off in full each month.

When picking a traditional credit card there are a variety of factors to look at.  One is the interest rate.  The lower the interest rate you can the better.  Another factor is fees.  Some cards charge a annual fee.  Some cards can charge a high fee.  When picking a card a you weigh just how much fee you think is acceptable.  Lastly, want to look at rewards.  Credit Cards these days often come with great reward for using them.  Some offer cash back, some offer airline miles, and some have random rewards that are redeemable for a variety of goods and services.  Using a traditional credit card responsible can have you enjoying all types of perks.

Now, not all credit cards are good credit cards  One type of credit card that we recommend to stay away from at all cost is a store credit card.  These are credit cards that you see offered to you a places like department stores, or furniture stores, or home repair stores etc.  These cards will promise 5-10% off of purchases but will come with high interest rates and fees with no rewards.  They also generally do not come with high limits so they are easy to max out and hurt your credit score.  As we stated before we say stay away at all cost.

Finally, as a last peice of advice we want to remind you that with any credit card you get to always make your payments on time and always keep your balances below 30%.  This will improve your score so that later you can get the home of your dreams.


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