Your credit score is really important in determining your interest rate on your home loan especially if you live on Long Island. Most of us have at least one credit card. For many people, credit cards are a necessary evil that allows us to afford purchases we otherwise might not be able to (whether that purchase is a splurge or an unavoidable emergency expense). Credit cards let us live beyond our means, which at times can be a good thing, but can become problematic if handled irresponsibly. Cliffco Mortgage Bankers has the top five ways you can be responsible with your credit cards.
Keep a Low or Zero Balance
The best way to make sure you don’t get into trouble with your credit cards is to pay off your balances as quickly as possible – ideally within the month. Since interest rates can be high and are compounded, they cause your balance to increase rapidly, which over time can be very difficult to pay off.
Set Up Automatic Payments
Millions of people find it hard to remember to pay their bills on time every month. That’s why financial institutions have established the Automatic Pay feature, which lets you set up your payments in advance to be made on a specific date each month. By taking advantage of this feature, you can avoid paying late charges and damaging your credit score.
Just Say No
We’ve all been there. You’re at the register paying for your items and the cashier tells you how much you could save by opening up a store credit card. It can be tempting, but beware! While you may save money on your purchase that day, over time you will more than make up for it in interest charges. Moreover, applying for too many credit cards could end up lowering your credit score. So keep it limited to one or two major credit cards and say no to any others that are offered to you.
Steer Clear of Cash Advances
Be strict about only using your credit cards to make purchases. Many cards come with a cash advance feature, but it can be a very slippery slope. Since cash advances are charged interest from the day you withdraw the money until the date you pay it off in its entirety, they accrue more interest than straight purchases, which typically have a grace period. In addition, cash advances are often charged a higher interest rate than purchases.
Maintain Open Accounts
It seems logical that if you don’t use a credit card, you should close your account, right? Wrong. Having open cards with zero balances is actually a good thing for your credit score, since it shows that you have available credit. To avoid having the credit card company cancel your card for non-use, make it a point to use your card once a year and pay off the balance promptly.
If you live on Long Island and have a history of bad credit, don’t panic! At Cliffco Mortgage Bankers, one of our licensed mortgage consultants can help you through the mortgage process. Contact us today for more information!