COLUMN: Getting some credit isn’t going to kill you – I promise
As anyone who has read my last few columns knows I am very money conscious. I’m terrified of debt and interest charges that don’t get me anywhere. And as I’ve said before, I still don’t have a credit card.
That is a huge problem. Don’t worry; I’m in the process of applying for one right now. But I have missed a lot of years that I could have been building my credit score.
Wow, what an idiot.
I always thought I was doing a good thing and I wouldn’t get into financial trouble because I couldn’t spend on credit. Well, I was very wrong. The thing is, everyone needs to build their credit score. Hopefully this won’t hurt me when I go to buy a house. Thankfully my husband hasn’t been so stupid.
On the other hand, having a credit card and using it wrong can be just as bad for your credit. A few years ago, my friend was going to school, and she told me that every semester she would put her tuition on her credit card and then paid the minimum payments because that’s what she could afford.
She was so proud because she wasn’t graduating with any student loans. What she didn’t realize was that she did have student loans; they were just coming from her credit card company. It’s no mystery that credit cards have high interest rates. Paying 20 percent on a credit card doesn’t seem quite as nice as say, seven percent for a student loan.
School is one of those things that it’s OK to borrow money for. A fear of student loans is definitely understandable. People are often paying them off 15 years after they graduate, but unless you’re in medical school, it shouldn’t take you that many years to pay it off.
I’ve learned now that the best thing is to get a credit card, but use it right. There are so many things that can make your credit score go up and down. It’s important to know at least the basics, so in the future you won’t be turned down when you really need a loan.
*Only have one or two credit cards. Don’t get a credit card at every department store because you are getting 10 percent off your purchase that day. Having a lot of credit cards will hurt your credit score.
*Only use a fraction of your available credit. This means if your credit card has a credit limit of $4,000, you should never have more than $1,000 to $2,000 on it at a time. Even that is pushing it. You’ll be better off if you keep it under 25 percent and pay it off every month. When they calculate your credit score, maxed-out credit cards don’t help.
*Pay every payment on time. I’m sure it seems like a small thing, but that fine for an overdue library book or parking ticket could bring down your credit score if not paid on time. And here’s what is crazy, a single late payment of more than 30 days can bring it down as much as 100 points. Apparently if you have a good credit score, late payments hurt even worse.
Don’t make my mistake. Spending on credit isn’t the devil. It’s actually worse if you never do. So go get a card with a low interest rate and no annual fees, buy a few things and pay it off every month. Even if you want to be cautious, it is good to have a card for an emergency or when your car breaks down and you can’t pay for it.
Holly Mitchell is a senior majoring in print journalism. Comments and questions can be sent to hollyadams@cc.usu.edu.