Build and Manage Credit The Smart Way

Smart Credit Management

At face value, building and managing credit can seem simple. This may be especially true for someone new to the credit world. After all, as long as one pays off their credit balance each month, they should have no issues maintaining good standing, right? While this may be true, there is a bit more nuance to building and managing credit than that. It can take a surprising amount of attention and foresight, in fact. Luckily, there are many ways to obtain or work with those attributes.

For Beginner’s Consideration

Before anything, take heed to the balance’s suggestion: be sure to choose the appropriate credit card. Every card comes with different pros and cons. Those with minimal credit history tend to receive offers with higher interest rates, or even offers that are saddled with annual fees. These cards will come with perks or rewards which are meant to draw attention away from said rates and fees. There are a few routes one can take from here.

  • Rather than going with a traditional credit card, look into applying for a secured card, which is backed by a deposit made prior to card access. These cards are perfect for building credit, as well as offering users much needed experience in managing credit.
  • For those who would like to select a traditional credit card, be sure that the perks are worth the risks brought on by the higher rates, or potential annual payments.
  • Be sure to shop around. Don’t just accept the first offer which graces your mailbox.

Understanding Interest And How To Avoid Accruing It

As described by Nerdwallet.com (, the amount of interest charged is based not on your remaining balance after the monthly payment due date, but instead on your average daily balance. To determine interest charges, you will need to calculate what your average daily balance is, multiple that number by your periodic interest rate, as well as the number of days within the month in question. Or, instead of going through that whole ordeal, you could simply be sure to pay your balance each month. Sometimes this is easier said than done, but there are certainly ways to achieve this feat.

  • Never settle for paying the minimum balance.
    • Though you will maintain good standing on credit reports by always paying the minimum balance, interest will accrue each month. Sometimes it’s unavoidable, but repeated use of this feature will lead to debt faster than you can blink.
  • Account for credit use in your monthly budget
    • It should go without saying, but it’s highly recommended to have a monthly budget. Make sure credit use is built within that budget. Limit this usage to less than the total income for maximum responsibility.

Building For The Future

By this time it’s likely become clear that the biggest risk in terms of credit card usage is allowing your account to gain interest. Even when paying the minimum balance, eventually interest will catch up and you will find yourself buried in financial ruin. There is no way to build credit on such a rocky foundation, either. However, when it comes to building credit, there are even more aspects to take into account.

  • Number of credit accounts recently opened
    • The more credit accounts you have opened within a short period of time (2 years generally), the more apprehensive establishments will be when it comes time to ask for loans, or better credit offers.
  • Age of oldest credit line
    • Even once good credit has been established, lenders are interested in just how long you’ve managed your credit.
  • Available credit
    • This may seem like not such a big deal, that is if you think you can handle keeping your available credit around the maximum for your account(s), but if the total available credit is small to begin with, you may need to request a larger credit line or (carefully) open new lines to increase the total.

Building credit is all about patience. If you can establish good relationships with creditors, then lending opportunities will continue to come your way. It’s just a matter of viewing credit in a healthy way. Credit needs to be respected, it’s just that simple.

While some view it as a game to be won or lost, it is more so a key to future prospects. Misuse this key and the prospects evaporate. Utilize it to the max capabilities, and the key will open more doors than ever imagined.

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