Your Course in Credit
Credit is one of the most important factors of your life. It’s an important factor in that it determines both how much you can buy and what type of car you can get. It is used to determine if a store will allow you to buy something as well as how much that item is going to cost. The better your credit, the lower the interest rate you will be able to get.
In this article we are going to go over credit and when comparing the various details of credits from different companies. Creditloankr
Let’s look at a couple of different credit cards first.
One of the cards may have a small account set up fee, and the other has no. They both look the same with a maximum credit limit of $1000 so everyone will be the same.
Let’s say you have to decide between these two.
Which one does seem more enticing to you?
The answer is the one with the small set up fee. This is because you need a bit of credit in order to get a credit card account.
While this small fee may be cheaper financially, it may limit your purchases. Any material item that cost more than $1000 will cost more to buy with this card.
One last thing about this card is that they may use a different company than your other credit card company, and because each company knows you better.
This arrangement gives you more negotiating power when it comes to credit card deals, but with it comes increased fees.
Another credit card comes along with a lower interest rate.
Next, let’s say the interest rate on that card is Prime minus 2%. But we have to go past that interest rate to the actual terms you would be dealing with for this card.
This interest rate is on a yearly basis, but because you will be paying minimum each month, you may get lucky and end up with an interest free month. But watch out. You want to use this card as emergency only, or to fund some kind of damage insurance build in case something happens to you and you are not around to attend to emergencies.
This card is another great option since you can get a 12 month interest free period when you May sign up.
Now let’s say you were looking at both cards and decided you use the card you wanted for emergency only. Starting with the first card, you pay the minimum monthly amount, and watch as the interest adds on; this add on will add an additional monthly fee, the best rate is 15% on this card.
But remember, since you have $6,000 of credit available to you, you want to use only about 10% of that. This gives you great credit and can help you get other credit cards with a lower fee, or can use this as an emergency card, since your other card will not report to the credit bureaus. Once you go over 10% of your limit, there is a fee on it, soon you will be looking at paying very high interest rates on most credit cards because the credit card companies will take a risk on you.
Next, let’s look at the company who issued me this card.
They may give you a Visa for a certain amount of credit, which means that they will not look at the FICO score or your credit report when they make a credit decision on you, only your Visa.
This is a very good thing for you because you want the cleaned up version of your credit when you apply for a loan, but if they do pull your credit, they may do so from your most recent and cleanest credit report.
This is one of the ways they can show they have a high FICO score, but it also keeps your highest score on your credit report. This way you can still have a higher rate if you pay your credit cards cards on time and in full each month.
One last tip is to always look for no annual fee and no processing fees associated with specific cards.
Always shop for low interest rates and other perks which will help you keep more of your money in your bank account. Getting the right card is not that hard if you know what to look for, just make sure you ask before you sign up on any credit card.