After you get approved for a credit card what is the best way to maintain the credit card? Great question. Look let’s take the same example of when you got approved for the secured card with a $500 limit. First, I would like to take the time now to bust some myths:

  1. You do not need to use the entire limit to build credit. If you only want to use the card to buy gas then just buy gas. Use what you can afford. I cannot stress that enough. Live within your means don’t let a credit card take you outside of what you’re comfortable with spending. Whether you spend $60 a month or the entire $500 it makes no difference. Pro tip – pay off your card in full every month. You will never pay interest this way.
  2. Having your credit pulled/ran one time isn’t a big deal. However, many credit inquiries can have a negative effect because it shows lenders that this individual is constantly seeking credit because they are in bad financial times (that’s how it looks) meaning you look risky!
  3. Don’t let someone tell you need to carry a balance to build credit. If you hear this run for the hills. The secret to managing your credit card is to pay it in full every month. One reason is because you will not carry over balances into the next month and more importantly you never pay interest. When you first get approved for a card especially being a first timer the quoted rate can be very high, but that is only when you revolve your balance into the next month. If you owe $60 and pay $60 there is no interest added. Only when you pay the minimum balance and revolve the remaining into the next month is when you can expect to see interest added on the next statement. For instance, if your statement came as $60 total balance and $25 is the minimum. Technically if you just paid the $25 towards the $60 it would be a successful on time payment. However, the remaining $35 will have interest added on the next month’s bill. Building credit can be easy and rewarding if you approach it in a responsible way. The nightmare stories you hear about can be avoided if you spend within your means, pay off your debts on time, and limit your inquiries. When you have excellent credit interest rates are extremely low for you. When you have bad credit, lenders will not approve you, and the times that they do they will tack on high interest rates.
    Example: Buying a car is the most common thing an adult will do. Here is real world example of purchasing a new car: The car you want cost 25k and you have a credit score 675. 675 may just be good enough to get the loan but the interest rate on this car is 18%. Since you want to have a low car payment you opt to pay off the car in 6 years. But what does 18% for 6 years really mean? The (P)rincipal of the car is $25,000, times the (R)ate of the car is .18, times the (T)ime you will pay off the car in 6 years. This is otherwise known as (PRT).

$25,000 x .18 x 6 = 27,000. The interest on this car is 27,000! That’s on top of the 25,000 this car cost you. In total, by the time you are done paying for this car it will cost you $52,000! For someone with excellent credit of 750 and above this would be their scenario. They are purchasing the same 25,000 car. With good credit the rate is 4% and you take out the same 6-year term. $25000 x .04 x 6 = $6000. This same car after 6 years cost you $31,000. Having excellent credit saved you 21,000. What could you do with an extra $21,000?

What are some other ways poor credit can impact you?
If you’re moving into a new apartment. Water/light/ cable may ask for high security deposits.
If you’re looking to own a home credit is a significant factor since the loan will be hundreds of thousands so your credit history and worthiness is paramount.
Purchasing a cell phone – Cellphone companies will let you finance your smartphone. If you have poor credit, they may require high deposit or full payment upfront. Having poor credit can impact how much you pay in car insurance. These are just a few ways poor credit can impact you.

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