4 Key Facts About Credit Score
A credit card is a very powerful financial tool when used wisely.
The unfortunate thing is that there are many misconceptions that surround the card such that it's hard to separate the facts from the myths.
Here are 4 facts about the card that will help you with the understanding.
Fact #1: Applying for a new card affects you immediately Many people think that a new credit card does not affect them until they use it, which is untrue.
You need to know that applying for a new credit accounts for up to 10% of your credit score, even if you don't use the card; therefore, your credit score is affected the moment that you apply for the new card.
To be on the safe side you should avoid applying for the card unless you need it.
Experts recommend that you should apply for a new card when your limit is too low and you are not willing to lower your spending.
Fact #2: It's very dangerous to pay less than the total minimum payment In most cases, your credit card company will report late payment as missed payment which will hurt your credit score and as a result disqualify you for credit in the future.
To be on the safe side you should ensure that you pay the minimum amount on time in order to keep your account current.
If you have money it's recommended that you pay more than the minimum amount.
Fact #3: A high credit card limit is advantageous Many people feel that a high limit is disadvantageous, which is untrue.
Experts recommend that your debt-to-credit ratio should not be more than 30%.
This means that if you have a high limit you will buy more products while at the same time keep your balances low.
Although, a high limit can protect your good credit score, you need to exercise a lot of discipline in the way that you make your purchases.
One of the most important things that you should remember is to always keep your balances low.
Fact #4: Report thefts immediately The federal reserve's "regulation E" says that you should report any online banking thefts, debit cards, and ATM cards within two days.
This is in order to limit the liability to $50.
You should note that your liability jumps up to $500 on the third day and if you don't report the loss for more than two months, you are responsible for the entire loss.
The best way of identifying any theft is by keeping an eagle eye on the bank statements.
The unfortunate thing is that there are many misconceptions that surround the card such that it's hard to separate the facts from the myths.
Here are 4 facts about the card that will help you with the understanding.
Fact #1: Applying for a new card affects you immediately Many people think that a new credit card does not affect them until they use it, which is untrue.
You need to know that applying for a new credit accounts for up to 10% of your credit score, even if you don't use the card; therefore, your credit score is affected the moment that you apply for the new card.
To be on the safe side you should avoid applying for the card unless you need it.
Experts recommend that you should apply for a new card when your limit is too low and you are not willing to lower your spending.
Fact #2: It's very dangerous to pay less than the total minimum payment In most cases, your credit card company will report late payment as missed payment which will hurt your credit score and as a result disqualify you for credit in the future.
To be on the safe side you should ensure that you pay the minimum amount on time in order to keep your account current.
If you have money it's recommended that you pay more than the minimum amount.
Fact #3: A high credit card limit is advantageous Many people feel that a high limit is disadvantageous, which is untrue.
Experts recommend that your debt-to-credit ratio should not be more than 30%.
This means that if you have a high limit you will buy more products while at the same time keep your balances low.
Although, a high limit can protect your good credit score, you need to exercise a lot of discipline in the way that you make your purchases.
One of the most important things that you should remember is to always keep your balances low.
Fact #4: Report thefts immediately The federal reserve's "regulation E" says that you should report any online banking thefts, debit cards, and ATM cards within two days.
This is in order to limit the liability to $50.
You should note that your liability jumps up to $500 on the third day and if you don't report the loss for more than two months, you are responsible for the entire loss.
The best way of identifying any theft is by keeping an eagle eye on the bank statements.
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