- Always compare credit cards, rates, fees, grace period, cycle dates.
Do not get confused about due dates and cycle dates. Some companies will trick you by not telling you that your statement cycle can include after the due date. So if you make a payment the day after due date, it might not go towards next month or next statement cycle and you could miss a payment by thinking you already paid your next bill.
- Know the difference between fixed rate and variable APR
Fixed rates never change, variable rates can change at any time with your score.
- Know the difference between APR% and effective rate %
Companies, especially car companies, only advertise APR%
- Understand compounded interest
Your original balance (principal + interest charges, fees, are calculated on top of original principal balance. If you owe $5,000, you pay off $4,000, you still owe interest on the $5,000 until the balance is paid off. Also, when you have interest charges added to your balance, it’s also being added into the original principal of $5,000, you are paying interest on the interest! The bank will never reveal this secret to you. Same thing with cash advances, interest will keep accruing until total balance is paid off even if you owe only $1, you will still owe interest on the $5,000 plus any interest charged on it. So your 20% interest on $1 balance is actually not 20% of $1 dollar, instead the $5,000+ interest (0.20 x 5,000 = $1000 for 1 month, 2nd month $5,100 x 0.20 = $7,200, even if your balance is $1.00.) *Compounded Interest*
- Understand credit utilization rates. Limit $5,000, your balance $2,500 = 50% limit utilized.
- Understand your credit score. Perfect score is 900, below 700 is not good credit.
- Longer *average credit history is important factor of score. Each time you open a new account, the average age your credit history is shortened. If you have a card for 10 years, you open a new one today, your average history is now 5 years.
- Dispute any issues on credit report
- Request companies like internet, phone, cable to report to credit bureaus
- Most companies do not send positive financial info without you asking
- Avoid any cards with rewards, perks, cashback or any other benefit schemes
- The lowest APR, annual fees Is more important than any perks.
- Utilizing over 49% of credit limit reduces credit score
- 75% credit utilization hurts your score significantly, Don’t let it happen.
- Understand soft inquiry and hard inquiry during credit checks. (Hard hurts score)
- Adding authorized user to card will boost their score and vice versa.
- Add your children to your credit cards if parents have good credit score, even if underage.
- Understand prime lending rate/bank rate/overnight lending rate/central bank, this is the “prime rate” that banks get when they borrow from the Central Bank of your country.
- Understand types of credit, line of credit, equity, secured, unsecured
- Applying to more than 1 credit card at a time can lower your score
- Everytime you apply for credit or hard inquiry, your credit score goes down
- Stay away from high APR% interest rates, find the lowest. 20% is too high. 6%-11%
- Read fine print, check insurance coverage and balance protection, it’s worth having.
- Read all the fine print, fees, atm fees, transaction limits, cash advance fees, etc
- Figure out what your grace period is and how long. 30 days better than the 21 days.
- It might be beneficial to get a credit card at a different bank than your own or vice versa.
- Always research, read fine print, read reviews online, check BBB, avoid Chase bank.
- Learn ways to build your credit, establish, or repair credit
- Avoid debt consolidation services, most of them will hurt you more
- If in a tough financial situation for several months, utilize promotional zero interest balance transfers on new cards that last 12 months, then don’t use again as they are usually high rates
- Increasing your limit can help decrease your credit utilization ratio, thus improving score.
- Credit scores fluctuate often, don’t be too concerned of credit karma emailing you weekly
- Never miss a payment, always pay more than minimum. Pay off balance each month if you can
- Never spend more than you have or make, setup automatic payments,
- Check free credit report, once a year, check too much hurts score, use credit karma, borrowell
- A great credit score can be achieved in 6 months to a year.
- You do not need more than 2 credit cards, usually, unless there is a reason.
Although, there is a man who has over $1.4 million in credit from applying for credit cards for over 40 years, it can be useful resource but it is still a liability.
- Do not close accounts, it will hurt your score
- If your credit card is being upgraded, make sure bank is not reporting it as a closed account.
- If you are in debt, try to find lower rates to pay off existing debt, balance transfers.
- Check out credit unions, they are usually easier to get loans and less interest.
- Understand that any loan or credit, is not an asset, it is a liability, which is why credit card companies usually wont let you pay one card with another, if you can, don’t do it, unless it’s a balance transfer to a low rate card. Understand the difference between Asset & Liability.
- Diversify your types of credit and also open a savings account, not necessarily the same bank.
- Take advantage if your bank has a program that does automatic payments to savings account, especially ones that can deposit money to your savings with every transaction, you will save money faster this way.