Are You Using Revolving Credit Correctly?
Welcome to our Hoyes Michalos Debt Free Digest where we round up personal finance topics from around the web to help you live, and remain, debt free.
Revolving credit is things like credit cards and lines of credit. This month, learn about the benefits and risks of revolving credit and how you can use it to improve your credit safely.
The Benefits & Risks of Revolving Credit
Revolving credit can be really helpful for making purchases and building a credit history. But it can also be risky if you’re not careful.
In this post, Doug Hoyes outlines how revolving credit works, the types of revolving credit, and its connection to your credit score.
Good Reads From Around the Web
Are Credit Cards Right for Credit Repair?
We need good credit to get things like an apartment, a cell phone, or qualify for an affordable loan.
Tune in to this discussion to learn how you can use credit cards safely to improve your credit health, what types of credit cards exist, and the dos and don’ts of credit rebuilding.
How Much Available Credit Should You Have?
From our experience, you should only have access to the amount of credit you could comfortably repay in full if you were ever to borrow the maximum amount.
You may sometimes receive an offer to for a pre-approved credit limit increase but while these are tempting, we recommend only having access to the available credit you actually need. This is to prevent getting into too much debt and risking your financial health.
There is also a relationship between how you use revolving credit and your credit score. Credit utilization is the second largest item in your credit score calculation. Your credit utilization ratio is the percentage of total credit you borrow from the total credit room you have available. It’s recommended that you use only 30% of your total available credit room every month to maintain a healthy credit score and to show your lender that you can manage credit responsibly. If you are regularly reaching the maximum limit, this will have a negative impact on your credit score.
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