6 Financial Points You Should Always Know
There are several financial tools available today. Understanding these financial points is extremely important. When used correctly, the various financial tools will noticeably help your financial life. For instance, having a good credit score means you will have to pay less in interest when it comes to borrowing money to buy a house or a car. However, when such tools are misused, they can cause damage to your credit score and you may sink into debt. It can also hurt your ability to borrow money in the future. Thus, there are few do’s and don’ts that should be followed whenever you are using these financial tools.
Don’t Just Pick Any Loan Or Credit Card
Just because you are running short of cash, you should not apply for a loan or a credit card. You should carefully go through the terms and conditions of the various options available. You should also go through your current credit status so that you will have a sense of how a prospective lender or credit card issuer will view your qualifications. You are entitled to one free credit report from each of the three credit bureaus every year. So, order your credit report and if in case you spot any error contact the bureaus right away. Knowing your exact creditworthiness will help whenever you are applying for a loan or a credit card. If you are a first time borrower, you should go after cards and loans that will help you to build up your credit histories.
Never Miss Your Payments
Applying for a loan or a credit card that does not suit your repayment ability can get you serious debts. If you fail to pay off your loan or credit card bills every month, you will have to pay interest and you may also be charged with additional charges. Thus, it is better to pay off all your bills and payments on time. You should remember that 35% of your FICO score is determined by your monthly payment history. Do whatever you need to do to stay updated with your payments. You can set up automatic payments, alert or note down the due date on a sticky note. If you still have problem with remembering the due date you can pick a payment date of your choice that sticks in your head. Most of the lenders and credit card issuer will allow you to change the due date as per your feasibility.
Avoid Taking Advantage Of Balance Transfer If You Are Already In Debt
One best feature of a credit card is balance transfer, especially if you are not happy with the current terms of your credit card. This feature will let you easily move your balance to another credit card issuer. Such balance transfer can help you to get out of credit card debts, but they can also cause problems at the same time. You should avoid making frequent balance transfers and also consider the fee associated with it.
Avoid Spending Too Much Of The Available Balance
Never spend more than 20% to 30% of the available credit limit. Credit card issuer never looks thoughtfully on borrowers who max out their credit card each month. The best trick is to use the credit card for recurring payments only so that you can avoid overspending.
Do Not Close Old Credit Cards
The length of your credit history determines fifteen percent of your credit score, which involves the age of your credit accounts. Thus, having a longer credit history will help you to improve your score. Closing a card will lower your available credit limit and you will risk increasing the credit utilization ratio. To avoid it simply keep your card open and use it to keep it active.
Redeem The Earned Rewards
Once you have found the right card make sure you use only 20% of your available credit and pay off the balance every month. You can also benefit from the rewards that you have earned using your credit card.