While none of us want to have problems with debt, we nevertheless do need to be able to take out loans and to borrow money for certain purchases. For instance all of us apart from the extremely wealthy, will likely need to take out a loan in order to buy a home (this loan is called a mortgage of course) and many of us will need auto loans or even business loans at other points throughout our life. If we are in a lot of debt however, then this can be quite difficult as debt damages what is known as our ‘credit rating’.
Your credit rating, also sometimes known as your credit history, essentially is a number next to your name that indicates to lenders such as banks and auto finance companies, whether you have a history of paying back your loans on time. To a loans company you are of course an investment – the hope being that you will pay back their money with interest and so their wealth will grow as a result of having given you the money. So if they see that your history indicates you don’t pay back loans, then they will be less willing to invest in you by giving you a loan – and you won’t be able to buy a house.
Getting in debt then, essentially means that other companies won’t want to lend you money. The good news though is that there are ways to get your credit rating back in the green and one of the best ways to do this is by getting a credit card.
Now many of you reading this might be weary at the prospect of taking out a credit card when you’re already in debt – and indeed you should only do this if you have a good strength of will and won’t be tempted to use it. No instead what you will do is to use it only very slightly each month to pay for something easy and regular – say your petrol or your phone bill. Then you make absolutely certain to pay this money back off at the end of each month.
The reason this works is that your credit on your card is essentially just a loan and you are in debt until you pay it off. In other words then, by doing this every month you are demonstrated repeatedly your ability to take out a small loan and then pay it back and this says to companies that you can handle your debt and means that your credit rating will improve very rapidly.
My friend had a problem with bad credit. He was able to get a credit card to help him with this. He slowly worked his way up and now has decent credit. More places are willing to give him a loan if he needs it.
when I first moved out I needed a washer and dryer and was not able to get one. I had no credit established. Finally after getting a car loan, and paying it off with my payments on time, I got a credit card. It did help me get good credit for a while until I started to charge it all up. But that is another story.
It is true that credit cards can help you get good credit. Just be sure to use it only once in a while and pay off the balance right away. This makes you look responsible to others. And that will raise that score up.
Having a card can make it get you good credit. But like stated above it can ruin your credit too. It is just a fine line to cross. One has to be very very careful when they have a credit card and must pay it in full all the time to avoid getting behind.
I have a credit card that I use once in a while. I make sure to use it once a month for a small purchase and then I pay it back right away. It makes my credit score that much better. So I do not have to worry about it!
I have never thought about how a credit card can improve your credit history. But it is a great idea. I might get a loan next year, so getting a credit card is something that can help me. Thanks for the tip! I will be using the credit card when paying for gas.
Here is a great idea that you can use if you need to get good credit. Get a credit card. Once a month go to Subway and buy a $5 meal and use your credit card. Then pay it off right away at the end of the month. There you go you are building your credit.
Credit cards can improve your credit score. Yes that is so true. But they can harm you as well. IF you apply for too many I am pretty sure it goes against your credit score. Or atleast someone told me this once.
Rainer that is a really great idea. I could do this to get my credit rating to be better. Never thought of doing something like this. And it is so easy to do as well.