First Time Credit Card Holders Need Special Advice

How you use that first time credit card is your number one step to building a record of payment that will reflect well on you. There are small actions that seem unimportant but will have a great effect on you credit rating.

That credit score is used to qualify you for car loans, mortgages, credit lines and also determines what rate of interest you will be charged when you apply for financing of any kind.

New changes in credit card laws will protect you from bad lending practices but only you can protect yourself in building a credit file that tells potential lenders you are a “good risk”. Some important steps to establishing yourself with that first credit card are listed below. The steps are simple yet many people don’t know the great difference it makes when you use credits card wisely.

Pay Those Bills on Time

Yes, you’ve heard that before and most of the time you will be able to pay on or before the due date. Keep in mind that just two late payments can lower your credit score.

Minimum Amount

The minimum amount due is only about 4% of the balance on the account plus interest charged for the month. Always pay more than the minimum amount due. It may not seem fair but though the amount due does pay the bill for the month, paying only the minimum reflects poorly on your credit.

Use Your Credit Card

Though you should not show a balance at any time that is more than 50% of your credit line, you must charge up to one third of the credit line for the card to help your credit. Just having an open line of credit you haven’t used does not help your financial picture.

Cash Advances

Stay away from cash advances on your credit card. These cash outs carry the highest interest rate. If you take cash from your card in order to pay the bill due for that card, you aren’t fooling the lender or the credit agencies.

Establish Your Payment History

By adding charges and making over minimum payments you will begin to establish a payment history that shows you as a person who can be trusted with money. This information is not broadcast by institutions that issue credit cards yet this is the type of information used by credit card companies to establish you as credit worthy.