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Posted March 31, 2011 | Leave a comment
Use credit wisely, instead of not at all
From time to time I hear people say that because of their bad experiences with credit, they want to pay cash for everything and never borrow again. This may seem like an admirable goal. but in reality, a life totally without credit can actually reduce your financial stability. Even if you never plan to borrow again, a poor credit history can:
Instead of avoiding credit entirely, a better goal is to begin using credit wisely.
Reasonable use of credit puts positive information in your credit report to offset negative information from the past. It allows you the convenience of a credit card or loan, without the burden of too much debt.
One way to keep your use of credit within reason is to never use a credit card unless you will be able to pay off the bill at the end of the month (never carry a balance). You set up a recurring expense (like a phone bill or water bill) to be paid each month with a credit card. Then, you can set your on-line banking to pay the credit card.
Since these are expenses you would have to pay anyway, you will be building your credit automatically without buying things you can't afford.
Another idea is to save up for larger items, like furniture or electronics, take out a small loan to buy the item, and then use the savings to pay the loan over several months.
Using the savings to pay a loan builds your credit history, but ensures that the money will be available to make your payments.
Some specific guidelines to help you use credit wisely include the following:
If you would like to learn more about this topic, contact us for information about our free Managing Your Money series, which is offered continually in localities throughout the Northern Shenandoah Valley.
Call me at 540-459-6140, e-mail me at email@example.com, or call your local office of Virginia Cooperative Extension.
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