good afternoon fellow steeminas and friends;
in this installment we will be covering having multiple forms of credit, and a few you should avoid. This installment is rather short because there isn't really much to be said on the subject aside from how it affects your credit score. With that said, let's get into it below shall we?
It is becomming increasingly important to creditors to see how you handle different forms of credit. This means mortgages, car loans, credit cards, installment loans, etc... This is because not all forms of credit carry as much weight as the next, nor are they all handled in the exact same way. a credit card is pretty straight forward, and is primarily used for day to day purchases. While a mortgage is used for real estate and has a tangiable upside in the event you default, whereas your day to day purchases do not. A car loan on the other hand falls somewhere in between the two. When you purchase a car, it has a high rate of depreciation much like a purchase made with a credit card, and does not keep it's value like a piece of real estate. Yet a car certainly has much more capital than the dinner you bought last night on your credit card. I point this out to show how not all credit is equal in the eyes of the lender, consumer, and rating houses. Creditors want to see exactly how you manage between different types of credit. Can you make consistent on-time payments? Can you handle multiple forms of credit efficiently? Do you struggle when given another loan? these are but a few questions that creditors look at when determining credit worthiness.
I want to talk now about forms of credit you should stay away from. The first on this list is known as "payday" loans. These are loans made that you pay back on your next payday, at a usually high rate of interest. These should be avoided at all costs. The reason being is that you are in essence robbing peter to pay paul, or in other words...you are stealing from your own pocket by paying the high interest on the loan that all but ensures that you wil have to repeat the process. Another form of credit comes in the form of proprietary cards, or "store" credit cards from the likes of Lowes, JC Penny's, Kohl's, etc... Store specific credit cards are almost worthless forms of credit. They do very little to help build your credit. Next up are "fuel cards", you know...BP, Exxon, Esso, Marathon and the likes... both store specific and fuel cards usually have a higher than average interest rate, and do very little for your credit. Why limit yourself to a store/fuel specific card, when a regular Visa/MC, discover, AMEX card is so much more versitile ,and are usually lower in intrest rate, and equally accepted at a specific store/fueling place? just something to think about there.. well that's about all on this topic. if you have questions feel free to ask and i'll try and respond in a timely manner.
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