Everyone needs credit, unless you have an extreme amount of money that you can purchase everything with cash, but even then, if you wanted to rent a car, apartment, boat, or opening a checking account you need to have some sort of credit that shows you are able to pay on your debts.
Here are some tips to help you start to establishing credit:
These scores combine to create your FICO™ Score
A FICO™ score (Fair Isaac Corporation) is a number that is given to each person based on their credit history. Credit history is created by active loans, open lines of credit, insurance, and any other source of payment arrangements, as well as by payments made on time, or delinquent payments. A FICO™ score that is 700 or higher usually indicates that the person is very good about paying all of their bills on time. A lower FICO™ score 500 or below indicates new credit or bills have become delinquent and possibly gone to collections.
When deciding to use a credit card, make sure you can pay off the balance as soon as possible. Interest rates accumulate quickly. The table below shows how long it takes to pay off a pizza when using a credit card with 24.9% interest (the annual rate as of July 2015) and only paying the minimum balance. Let’s say the pizza is from Pizza Hut, and it costs $35.98 and with interest that payment is now $45.57, and the minimum payment is $10. This is how it will play out if you only pay the minimum amount until completely paid.
It is always better to pay as much as you can on a credit card if you are trying to build credit. It is a myth that paying off a credit card will hurt your credit.
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