October is Personal Finance Month at LifeSmarts where we focus on all things related to financial responsibility. Today, on Get Smart About Credit Day, it’s a great time to have a conversation about credit cards. With the holiday season approaching we have a teachable moment. It may be tempting to reach for a credit card to make holiday purchases, but watch out — don’t fall into the credit trap. Understand your rights and responsibilities when using credit, and how your use of credit impacts you now and in the future. how it will impact you. The credit habits you develop when you’re young could have a significant impact on how lenders view you in the future. Even if you don’t have a credit card yet, it’s a good idea to have an understanding of how credit works. Credit cards come with a tremendous amount of responsibility. Just like any loan, creditors lend money to borrowers with the expectation that they will be paid back on time and with interest. Each time you apply for a loan or open a new credit card account, lenders will look at your credit report to see what it says about you.
Maintaining a strong credit history and good credit score could be your ticket to get that new car, rent your first apartment, or even get a better job as you move into adulthood. On the flip side, demonstrating poor credit behavior, such as carrying large amounts of debt, making only minimum payments, and missing payments could signal to lenders that you are a credit risk. Treat your credit habits like you approach schoolwork. When you study and earn good grades, your report card reflects your hard work. Credit works in a similar way. Paying bills on time and keeping balances low usually results in a higher credit score, more favorable interest rates for new credit cards or loans, and the ability to get approved for big items like a mortgage loan.
Here are some important tips to remember when using credit: Use credit cards for small purchases or emergencies, keep the balance low, pay the bill on time every time, and pay off the balance every month or as quickly as possible. These tips will help strengthen your credit reputation.
Becoming credit smart doesn’t have to be daunting. It does take thought and planning. Get smart about credit now to take charge of your finances in the future. You’ll be better prepared to address any financial obstacles down the road. Check out our helpful credit education resources: