Credit Lessons Worth Learning

Credit Lessons Worth Learning

From early adulthood, you are told how important it is to monitor and maintain your credit. Sadly, most don’t fully understand just how crucial this is until credit begins to play a role in major decisions and life events. Below are a few credit lessons you will wish someone would have told you beforehand.

1. Interest Drains Your Wallet – If you have auto loans and credit, add up the balances. Now, add the balances with interest and look at the difference. Interest can account for a huge amount of your money every month. Consolidating down to one low-interest card is a good idea. You do not want to pay more interest than you have to.

2. Safest Payment Option – If you always stop at the ATM for cash or write checks wherever you go it is time to ditch these inconvenient payment options and just start using your credit card. You can always just pay the balance down to zero every month, and it will improve your credit rating.

3. Good Credit Takes Effort – If it were easy to achieve everyone would be walking around with a perfect credit score. The best thing you can do is make small purchases every month and pay them off right away.

4. Small Variations in Rate Make a Huge Difference – If you are watching mortgage rates go up and down, you may want to lock one in when you see they are low; even if you save less than a percent of an interest rate on your home this could make a huge difference in your monthly payment.

5. A 30 Percent Credit Utilization Rate is Recommended – This means that although you have a lot of credit available you are not actually using it. Lenders like to see less than a 30 percent credit utilization rate. There may be exceptions when you have unexpected emergencies arise, but do everything you can to get that amount paid back down.

6. Paying Bills Late Has Consequences – You probably know that credit card companies charge a fee for a late payment and if it goes beyond 30 days the late payment shows up on your credit report. What you may not know is that many utility companies, mail order sites, etc. report late payments, as well.

There are many benefits to understanding these credit lessons as early as possible. Learning from your mistakes in other aspects of your life is not a big deal, but you really don’t want to be forced to clean up a mess when that mess happens to involve something as important as your credit.