Getting a new credit card always sounds like a good idea. With all the bonuses and perks you can avail of when you get a new one, who wouldn’t want to have two or three credit cards or more?
However, before you get a new credit card, it’s best for you to understand how using that innocuous piece of plastic can affect your credit score.
Know What You’re Getting Into
Before getting a new credit card, you have to be aware that many Americans have accrued a considerable amount of credit card debt, and you can be one of them. If you aren’t mindful of your expenses, you can quickly lose control and end up in thousands of dollars in debt. That is why we’re emphasizing the importance of knowing your limits.
A credit card can be a good thing if you know how to manage your finances properly. After all, having one and regularly paying it off is essential to develop a good credit history. When you have a history of healthy credit card usage, you can have leverage when applying for all types of loans, including mortgage and auto loans.
Being responsible when it comes to your credit card usage has a lot of benefits. Prospective lenders can immediately see that you actively take care of your financial health and set yourself up for successful approvals when it comes to significant future purchases.
Maintain at Least One Active Card
It’s best to have at least one active and open credit card. Even just one is enough for lenders to see that you can pay your bills on time and are responsible enough to keep up with your credit card payments. Your ability to pay bills on time proves your creditworthiness, which means you can keep up with mortgage and other loan payments for years to come.
If you are afraid of ending up in debt, use your credit card for minor expenses that you need to pay on a timely basis and pay the entire balance every month. Some examples could be grocery shopping or gym memberships. By completing these payments, you can build a good credit score without spending too much.
Know-How Much Credit You Use
Your ability to pay isn’t the only thing taken into consideration when determining your credit score. Your credit utilization, the amount of credit you use compared to what is available to you, will also be taken into account.
Having multiple cards increases the amount of available credit you can use, lowering your utilization rates. Some people do this because it’s a great way to improve their credit score if they’re mindful enough to avoid overspending.
For your benefit, it would be best to keep your balance less than 30 percent of the available credit in your account. You must also pay off any debt immediately since interest increases over time.
The bottom line is that opening new credit cards is beneficial, but you need to be sure to take responsibility and manage your credit correctly.
There is no right or wrong answer regarding the number of credit cards a person should own. After all, it will always depend on the individual. Regardless of whether you have one or three or even more cards, you need to be responsible for how much you spend and understand the factors that positively and negatively impact your credit score. At Good Neighbors Credit Union, we serve many members, including under-served people who want to build a solid financial foundation and individuals who want a high-quality, stress-free banking alternative. Our Buffalo credit union offers various products, services, and tools to help you manage your finances. For inquiries, contact us today.