Is Having Too Much Credit a Bad Thing?
Many people think that having an excessive amount of credit is actually a bad thing in the long run. For some people this may be true. However, for those who are able to manage their money and treat their credit cards as if they are cash then having an abundance of credit may not be the worst thing. The problem seems to be in relying so much on your credit that you wind up in severe debt. Unfortunately, this does happen to many people. The three reporting agencies, Equifax, Experian and TransUnion look at many different factors when assessing your credit score. It isn’t just about the debt you have on your report or how much you owe but also how your payment habits are. For example, do you keep your charging down to under 30%? Do you pay your credit card bills off in such a way that you stay under a specific percentage of debt?
How to Use Credit to Your Advantage
The first thing you need to understand is that having credit in today’s world is extremely important. However, you must also keep in mind that there are right ways to utilize your credit and then there are irresponsible methods of using your credit. A smart spender and someone capable of holding a large amount of credit, will be able to use credit to his/her advantage. What is the best way to do this? This is quite simple. First, you have to assess the amount of credit you have. Let us say you have $40,000 in credit, you spend only $4,000 of that and then pay it off promptly, you have kept your ratio down to 10%. This is very good in the eyes of creditors.
Making Major Credit Mistakes
One thing that many people do the moment they begin to build their credit is start applying for too much credit. Either they are so excited to have this new found credit or they are just overly enthused but one thing is for sure, applying for too much credit too fast looks very bad in the eyes of lenders. Why is this true? It is true for a couple of different reasons. First of all, any time you apply for new credit, your credit is pinged. This means that your score lowers just a bit for each ping. This makes you appear desperate and gives lenders the impression that you are about to take out a massive amount of credit that you will not be able to pay back. Not only can this cause your score to decline but it will also more than likely cause you a few denials.
It is always best to choose credit cards that have incentive programs attached to them. All of the major credit card companies offer cards that have special reward offerings. The best types of credit cards to apply for are the ones that offer the best perks. Many people who have high credit limits and multiple credit cards realise a number of benefits from frequent flier miles to discounts in hotels and restaurants. The more rewards your card comes with the better off you are. Having credit is a big responsibility and you want to be sure that you get the most out of whatever credit lines that are extended to you. Stay away from ridiculously high interest rate credit cards and try to stick to those that offer promotions in terms of lower rates for specific amounts of time. Doing this will help you to keep your credit in tact while saving you a significant amount of money.