Good Credit Is Important in Life

Hello again.  I have been thinking a lot about debt lately.  I, like many of us, have some debt.  I have student loan debt, and I just bought a house.  Sometimes I feel like I will NEVER pay off my student loans.  However, I still have a pretty good credit score.  There are a few rules I followed to build a good credit score.

When I was 18, my parents allowed me to get a credit card- one card.  It was to be used only for emergencies, and I always paid off the balance right away.  A few years later I opened a credit card for more regular use.  The following tips allowed me to build enough credit to buy a house on my own when I was 30. 

1) Only use a credit card for things you would already buy.  For instance, I use my card for groceries, gas, co-pays at doctor's offices, etc.  But these are all things I could also buy with a debit card.  In other words, I have the money to pay for these things.  I just use a credit card in order to earn SouthWest points for flights.

2) Pay off your balance in full every month.  I never even look at the interest rates on my credit cards (I have two), because I pay off the balance every month.

3) Don't have more than one or two cards.  I open up a new credit card account from time to time to buy things like a computer or, most recently, a washer and dryer.  I do this because often there are deals like "no interest for 6 months," and I know I can pay the bill off in that time.  Now, I've heard mixed things about closing a credit card.  It supposedly affects your credit score, but I choose to do it anyway so that I don't have a bunch of cards open that I am not using (mostly I worry about identity theft).  Talk to a financial advisor or do more research before closing a card.

4) Pay on all your other debt every month.  Don't let loans go into default.  Student loans are easier to negotiate the payment amount.  You can even work out plans for many that are income-based.  Make an arrangement to pay an amount you can afford each month for all of your loans.

If you are looking for more information, there are plenty of online resources, advisors, and books on this topic.  We all know how important credit is when buying those large items.  If you are just starting out with credit cards these are good tips to follow.  If you already have credit card debt, there may be other important tips and hints to get out of debt.