[youtube https://www.youtube.com/watch?v=fw9erwPkBpw]Americans are notorious for their heavy use of credit. This should make us all experts, right? Not so fast. Here is a look at a few basic questions the average credit user might ask, as well as answers from a financial professional:
- How Many Credit Cards Should You Carry? – More than one, for sure. But after that the answer is really an individual’s preference. It is important to carry a card with rewards for your everyday spending. After all, you would spend this money either way, so why not get some perks back for free? In addition, make sure you carry a second card with a low interest rate for emergencies.
- Does Carrying a Balance Improve Your Credit Score – Carrying a balance doesn’t actually improve your credit score. Making timely payments each month – at least the minimum payment – is what improves it. Carrying a balance will likely make your creditors like you more, however.
- Should I Pay Off the Highest Interest or Highest Balance Card First? – Always pay off the highest interest rate card first. Why? The more these balances are lowered, the more your payments begin to reduce principal directly. It’s simple math.
- Should I Co-Sign for Friends and Family? – It depends, but most professionals would discourage this habit. The problem is that the co-signer never actually sees the bill and must assume the primary borrower is making timely payments. Usually if the borrower runs into financial trouble, by the time the co-signer finds out it’s too late.
- How Often Should I Check My Credit Score? – You should check your credit as often as you possibly can. In the past you had to pay for access, but with today’s plethora of apps and websites offering free access to your credit report, take advantage of it and beat any would-be scammers at their own game.