Credit can be a fickle thing and complicated to those who are unsure of how credit works. Credit is a billion dollar a year industry and while most of that represents debt that families and individuals are struggling to get out from under, it also represents the possibilities that credit can offer. When handled appropriately and with smart decision making, credit can be a great thing that offers opportunities and advancement to you. Most people think of credit as how you are able to get a house, a vehicle or other loans for items of value, but credit is also used to judge the character of a person when applying for a rental, a job or other life advancement.
Take the time to choose and create the right accounts to reflect good credit and then maintain those accounts to boost your credit rating and score for the ultimate level of possibility in the future. So, how do you know which are good accounts to have and which are ones to avoid?
There are many different types of accounts that can be obtained and many of them are offered with enticingly low interest rates or high limits. The first step in determining accounts that are worth your time is to read the fine print and see whether the low interest rate will balloon (increase) after a couple of months or whether the high limit will create a level of temptation you may not be able to avoid. Also, only work with banks or other companies you know and trust, try to avoid ones that are new, unstable or unknown. Besides being a smart choice for investing your time and money in, larger, more well-known lending companies are better to have on your credit report because they lend more weight when others are considering lending to you.
Good accounts should be smaller ones you can pay off in full before the due date and should be for things you need or reflect a starter account status. Starter accounts are those that are small or through trustworthy companies with slightly lower standards than other companies. They are often jewelry store accounts, store credit accounts, cell phone company agreements and other small accounts. These accounts are perfect for first time borrowers or for those recovering from bankruptcy that essentially have to start over with their credit building. Once you have been given the chance with a small account, it is up to you to be responsible with it and pay your payments on time and in full each month in order to keep them in good standing and avoid going into debt or financial hardship.
The longer a good account is in good standing on your credit, the higher it can push your credit rating and score. Large lenders, like real estate and car loans, like to see that you have a few good, solid accounts that you have had for years and never been late or defaulted on. This shows that you can not only make smart financial decisions, but that you can also maintain loans and budgeting over an extended period of time, which will help them feel they are making a smart choice by investing in you.
Regardless of the starter or small accounts you decide to go with, take the time to do some research and learn about how small and starter accounts can help you define your credit status and create good credit over time and through commitment. It is important to take the time to invest in your own future by learning about the financial world and how loans and credit work. They may seem intimidating and like something you do not understand, but with a little work and possibly a little help you can learn the tools and habits you need for a successful financial future. Aren’t you and your family’s future worth it?