9 Common Questions and Answers About Credit

credit cards

Credit is complicated. There are many myths out there, and people that are trying to improve their credit often don’t know how to separate fact from fiction. If you’re trying to reach a better credit score, or you just don’t want to hurt the high credit score you’ve worked so hard to achieve, it’s important to know a few key facts about how credit works. The following most common questions and answers about credit will help get you on the right path and obtain, or keep, your glowing credit score.

How Many Credit Cards Should I Have in My Name?

It’s a known fact that having a credit card or two in your name can help boost your credit score. However, having too many could hurt your score. As such, it’s important to find the perfect balance between having just enough cards in your name and having too many. Unfortunately, there is no magic number of cards for everyone.

To determine how many credit cards you should have in your name, determine how much credit you’re likely to use. The percentage of credit you will use is the most important factor, as getting another card can lower your usage percentage. However, also consider that the more cards you have, the more likely you’ll be tempted to use them and get further into debt. Be realistic with yourself as to whether or not you can pay off the cards every month and determine how many cards you should have in your name based on that.

Is it Necessary to Have a Credit Card to Improve My Score?

Many people have heard that you must have a credit card in order to improve your credit. The reasoning behind this theory does make sense. You can’t improve your credit score if you don’t have any credit to pay off every month. However, you don’t need a credit card to do this. You can apply for a line of credit or even a car loan. If your credit is so poor that no one will give you a loan, simply start making payments on your utilities and other bills every month. This will slowly improve your credit score to the point where you can take out credit and increase your score even more.

How Can I Check My Credit?

You can’t improve your credit if you don’t know where you stand with it in the first place. Fortunately, checking your credit score is very easy, and it’s free. TransUnion and Equifax both offer free yearly credit reports. Simply sign up for yours and you’ll take an important first step in increasing your credit score.

What’s the Ideal Credit Usage Percentage?

Your credit usage percentage is the amount of credit you use compared with the amount of credit you have. Ideally, your credit usage percentage should be zero, or as low as you can go. However, it’s also important to show that you can responsibly use your credit to boost your credit score. Although you shouldn’t use so much credit that your usage percentage skyrockets, keeping that usage at around 30 percent will help your credit score while any more than that is likely to hurt it.

What’s the Ideal Debt-to-Income Ratio?

Your debt-to-income ratio is the amount of debt you have compared to how much income you have. Lenders look at this ratio to determine how well you could handle any changes to your income. If this ratio is too high, it means you’ll have trouble paying down your debt if your income level suddenly falls. At a minimum, your debt-to-income ratio should sit around 40 percent. Once you reach this level, try to get it as low as possible.

How Can I Boost My Credit Score Without Going Into Debt?

Although taking out credit cards, lines of credit and loans can help boost your credit score, these methods will also put you further in debt. If you’re trying to increase your credit score, this is likely something you want to avoid. Luckily, there are ways you can do this. A secured line of credit or a secured credit card is one of the best ways to do it. This is still considered credit in the eyes of the credit reporting agencies. However, you have to put money on the card first before you spend it, so you’ll never spend money you don’t have. This is also the fastest way to improve your credit score.

Should I Pay Back Debts or Save Money?

Repaying your debt and saving money are two very important aspects for getting your life back on track financially. If you pay down your debts first, you’ll save money in interest that won’t accumulate. Repaying your debt will also increase your credit score. However, if you wait until all of your debts are paid off, you may never save money.

When you’re in this situation, one of the best things to do is save a bit of an emergency fund and then start paying off your debts. Once you have your emergency fund in case anything ever happens, you can then figure out what portion of your debts you want to pay off and how much you want to save every week, month, or every paycheck.

Why Is My Credit Score Not Improving?

Often, you’ll feel as though you’re doing everything right but you still don’t see your credit score improving. This could be due to a number of factors. The only way to really determine why you’re not seeing a difference is to check your credit report. This will tell you what debts are still dragging your score down, and how much credit you’ve recently applied for, which can also pull your score lower.

Can a Florida Debt Defense Lawyer Help Me?

If you’ve gotten so far into debt that a creditor or debt collector is now suing you, it is time to speak to a Fort Lauderdale debt defense attorney. At Loan Lawyers, we will check your credit report, determine if the debt is valid, and prepare a defense to give you the best possible outcome. If you’re facing a lawsuit, call us today at (954) 523-HELP (4357) for your free consultation to learn more about how we can help.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation and find out more about our money-back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.