Credit Smarts

In addition to style, one of the focuses of this blog is money smarts. Today, I felt inclined to discuss credit smarts, why it's important and how to use it wisely.

There is no substitute for good credit. It's so important to pay bills on time, and not spend beyond our means. Often when companies are offering us a credit line, we are quick to jump at it, but we have to keep in mind that it's a loan that has to be paid back. Everyone knows that, but I don't think that we truely consider that in the heat of the moment. We will receive an offer saying 0% interest for 6 months to 1 year and immediately start conjuring up ideas on what to buy. Before you know it, that year is up, and the credit card payment becomes one more bill.

Don't be a slave to debt! When you have excessive debt, it's like you're working for free because your checks really don't belong to you. Having a good credit score pays in the end because you'll have no problems getting a loan for a house or car, and your interest rate will be significantly lower than one who has a poor credit score.

I'm not saying boycott credit because having no credit is like having bad credit in some instances. Two to three credit cards is a decent amount, perhaps one store and two major. Try your best to pay your balances off in full monthly to avoid finance rates. Even if you have the cash, charge a small amount to your credit card, and pay it off at the end of the month to establish a good payment history. Whatever you do, keep your balances below 50% on all of your cards. Anything more weighs negatively on your credit score.

Lastly, make your credit work for you! Often retailers and credit companies have some type of rewards program tied to their card. Your bank may even have a debit card with a points system that allows you to earn towards savings when you make purchases. Also, some retailers offer an initial discount for opening up a card. Macy's, for example, gives 20% off your entire purchase the day you open up an account and the day after. They also have frequent specials for cardholders to receive extra discounts when they charge their purchase to their card. Express mails coupons for similar offers. I advise getting a store credit card at places like Target, Walmart, and Macy's that carry a wide assortment of merchandise, or your favorite store so you can maximize your savings. Don't get carried away by opening up too many credit lines because this too can negatively impact your credit score.

Credit is nothing to be afraid of, it's actually something that you need! Don't run from it, just be smart about it, and you'll be just fine! :-)