There are some out there that absolutely despise credit cards and say "I don't care about my credit". But I want you to look around, your credit is vastly important. Want to buy a car? you need credit. Want to rent an apartment that is not a roach infested dump? you need credit. Want to buy a house? You need Good credit! Hell, want a cell phone, credit or a massive down payment. Electricity for your home? credit or a massive down payment.
Credit is unbelievably important in every day life.
First thing you need to understand is, you don't have to receive a credit card with a $1000 limit, and use the entire $1000 on that account. This is exactly what you do NOT want to do. Understanding "Available Credit" will take you further than just about anything else I can advise. There are banks out there that will give someone with not so good credit, a credit card with a lower limit on it. I just saw one today (that sparked this post) that starts you out with a $600 credit line, and in 6 months if you have made all of your payments on time, will automatically DOUBLE your credit limit. Sounds great, right? Well yes and no.
Receiving a credit limit increase, in and of itself, is amazing for your credit score. You just gained FREE Available Credit! But most people are going to see it (and banks want you to see it) as "I can spend more money, I have more space on my card". This is where you start to get into trouble and the banks run all the way to... well the bank! If you max out your credit card, you now have to pay that off. If you spent more than you can afford, you will be paying on this for a long time. And the bank that issued your card will be raking in the money.
Take that credit limit increase and just let it sit there. Don't even put it in your mind that it's there. Having $20,000 in available credit will look way better than having $500 in available credit. I'm sure someone reading this just said to themselves "where did he get the $20,000 available credit?"... and the answer is, your available credit is everything combined that you 'can' spend. You see, banks look at your credit report and the first thing they see is, how long has this person had their credit (more on this in a minute), and how responsible is this person with their credit? The second part of that is your available credit. If you have a max of $20,000, and you have spent 98% of that, the bank see's you are living right at the edge and could fall over at any time. And when that happens, the banks lose money and they will just flat tell you NO!
The next huge credit boosting way is Length Of Credit. This is where I'm in trouble because I own NO credit cards, I don't even own a car anymore since I work from home, so I have nothing to pay into other than my mortgage, which is the only reason I have credit of any kind right now. My thinking back in the day is, "well if I have credit, I want to spend that credit and get cool shit". It wasn't until the last 5 years or so that I really sat down and started thinking about this. So I told myself that if I had no credit, I couldn't spend any of that credit, and I would not get in trouble. Which was a huge mistake because when I closed all those accounts, accounts older than my mortgage, I lost that length of credit history. Not only that, I lost my Available Credit! And these were 0 interest cards, not this bullshit that I'm having to go back with just to get that history back up so that I can get back to that point.
To answer the title of this thread:
The Good:
Credit can afford you the luxury of obtaining anything you want in life. Beit a new house, a new car, or just that awesome outdoor kitchen you have been wanting to build for years.
The Bad:
Fees, APR, Interest, late fees, living beyond your means to keep up with the "Joneses"
The Ugly:
Repossessions, foreclosures, bill collectors, denial of anything and everything you may NEED.
Keeping a good credit score is not just, "okay, I have a 680 credit score (random number, not my credit score), I can tear up everything and that will just say the same". You have to work at it. You have to first build your credit with a single card, car, whatever, and then KEEP that credit in good standing. Over time, build your available credit but keep your used credit under 30%. Use your cards for something simple (example below) and pay them off every single month! And as you build your credit and your available credit, at the same time, you will also build your length of credit history. Have all of those in good standing, and when you want to build that dream house, lenders will be asking YOU for your business, because they know you are not a risk.
Credit Building Example:
First thing you need to do is actually get a credit card. Now, if you are like me and you decided to destroy every card you owned leaving yourself with no available credit, and no history, you will have to get a card that has an annual fee and a higher than desired APR. Just take this as the cost to get good credit. This card is not permanent, and don't set it in your mind that it is.
Now, lets say you have a $1000 credit limit. Awesome, you were just approved for the card and you now have $1000 of available credit! But if you don't use it, 1. they can just flat close the account on you (fuck you sunglass hut!) or you just have it sitting there with no payment history paying that fee every year. Likely, they will just close the account and send you a letter that you will likely never read lol.
Instead, setup your Netflix account, Amazon Prime account and some other account that you ALREDY PAY FOR, and use your credit card to pay those bills. I can hear it now "why the hell would I use a credit card for something that just comes out of my bank".... CREDIT! That's why.
This is my plan. I will be using those two above, Amazon and Netflix, and I will be asking them to change my payment date to the 25th of every month. Then, I will be setting up auto pay on the 1st of every month and I will have my account set to pay the balance on that card.
I will use the card, I will actively pay off the card every month and I will sit back and watch my credit score go up while I'm doing it. Eventually I will start getting credit offers from other companies with lower rates, and once I have those, I will close that first card I received. Yes, it will impact the length of credit, but only slightly as this will only take 1-2 years max as long as you keep up with it.
Credit is unbelievably important in every day life.
First thing you need to understand is, you don't have to receive a credit card with a $1000 limit, and use the entire $1000 on that account. This is exactly what you do NOT want to do. Understanding "Available Credit" will take you further than just about anything else I can advise. There are banks out there that will give someone with not so good credit, a credit card with a lower limit on it. I just saw one today (that sparked this post) that starts you out with a $600 credit line, and in 6 months if you have made all of your payments on time, will automatically DOUBLE your credit limit. Sounds great, right? Well yes and no.
Receiving a credit limit increase, in and of itself, is amazing for your credit score. You just gained FREE Available Credit! But most people are going to see it (and banks want you to see it) as "I can spend more money, I have more space on my card". This is where you start to get into trouble and the banks run all the way to... well the bank! If you max out your credit card, you now have to pay that off. If you spent more than you can afford, you will be paying on this for a long time. And the bank that issued your card will be raking in the money.
Take that credit limit increase and just let it sit there. Don't even put it in your mind that it's there. Having $20,000 in available credit will look way better than having $500 in available credit. I'm sure someone reading this just said to themselves "where did he get the $20,000 available credit?"... and the answer is, your available credit is everything combined that you 'can' spend. You see, banks look at your credit report and the first thing they see is, how long has this person had their credit (more on this in a minute), and how responsible is this person with their credit? The second part of that is your available credit. If you have a max of $20,000, and you have spent 98% of that, the bank see's you are living right at the edge and could fall over at any time. And when that happens, the banks lose money and they will just flat tell you NO!
The next huge credit boosting way is Length Of Credit. This is where I'm in trouble because I own NO credit cards, I don't even own a car anymore since I work from home, so I have nothing to pay into other than my mortgage, which is the only reason I have credit of any kind right now. My thinking back in the day is, "well if I have credit, I want to spend that credit and get cool shit". It wasn't until the last 5 years or so that I really sat down and started thinking about this. So I told myself that if I had no credit, I couldn't spend any of that credit, and I would not get in trouble. Which was a huge mistake because when I closed all those accounts, accounts older than my mortgage, I lost that length of credit history. Not only that, I lost my Available Credit! And these were 0 interest cards, not this bullshit that I'm having to go back with just to get that history back up so that I can get back to that point.
To answer the title of this thread:
The Good:
Credit can afford you the luxury of obtaining anything you want in life. Beit a new house, a new car, or just that awesome outdoor kitchen you have been wanting to build for years.
The Bad:
Fees, APR, Interest, late fees, living beyond your means to keep up with the "Joneses"
The Ugly:
Repossessions, foreclosures, bill collectors, denial of anything and everything you may NEED.
Keeping a good credit score is not just, "okay, I have a 680 credit score (random number, not my credit score), I can tear up everything and that will just say the same". You have to work at it. You have to first build your credit with a single card, car, whatever, and then KEEP that credit in good standing. Over time, build your available credit but keep your used credit under 30%. Use your cards for something simple (example below) and pay them off every single month! And as you build your credit and your available credit, at the same time, you will also build your length of credit history. Have all of those in good standing, and when you want to build that dream house, lenders will be asking YOU for your business, because they know you are not a risk.
Credit Building Example:
First thing you need to do is actually get a credit card. Now, if you are like me and you decided to destroy every card you owned leaving yourself with no available credit, and no history, you will have to get a card that has an annual fee and a higher than desired APR. Just take this as the cost to get good credit. This card is not permanent, and don't set it in your mind that it is.
Now, lets say you have a $1000 credit limit. Awesome, you were just approved for the card and you now have $1000 of available credit! But if you don't use it, 1. they can just flat close the account on you (fuck you sunglass hut!) or you just have it sitting there with no payment history paying that fee every year. Likely, they will just close the account and send you a letter that you will likely never read lol.
Instead, setup your Netflix account, Amazon Prime account and some other account that you ALREDY PAY FOR, and use your credit card to pay those bills. I can hear it now "why the hell would I use a credit card for something that just comes out of my bank".... CREDIT! That's why.
This is my plan. I will be using those two above, Amazon and Netflix, and I will be asking them to change my payment date to the 25th of every month. Then, I will be setting up auto pay on the 1st of every month and I will have my account set to pay the balance on that card.
I will use the card, I will actively pay off the card every month and I will sit back and watch my credit score go up while I'm doing it. Eventually I will start getting credit offers from other companies with lower rates, and once I have those, I will close that first card I received. Yes, it will impact the length of credit, but only slightly as this will only take 1-2 years max as long as you keep up with it.