5 Positive Uses for Credit

Whether you are trying to establish new credit or want to rebuild damaged credit, knowing what types to apply for can be a challenge. Building credit involves more than applying for the first credit card offer that comes in the mail. These five positive uses will help you focus on the benefits that credit provides and help you learn to use it responsibly.

If you have no credit history, opening your first credit card offers you the opportunity to start your rating off on the right foot. With no credit, your options for getting a credit card may be limited, but they will improve if you can show steady employment and a healthy bank account. To improve the terms and fees involved with your credit card, as well as your chance of being accepted, start by applying for a credit card through your local bank or a department store that you visit often. Build your credit score by using the card regularly and making on-time payments.

Part of your credit score is determined by the mix of credit that you have. By having different types of credit, such as an auto loan, a home mortgage and a couple of credit cards, you can potentially improve your credit score. While you should not open new lines of credit just to improve your mix, you should take into account your mix when planning to open new accounts or take out new loans. For example, if you are considering getting another credit card to help with home improvement purchases, you may want to consider taking out a home equity loan or line of credit with your local bank or credit union instead.

Having a credit card provides a feeling of security. When things get tight, a credit card may help put food on the table or keep the lights on. By not charging your card to its limit, you will have money available in the case of an emergency, such as an unexpected car repair. Credit cards also come with fraud protection, which covers your losses if you are the victim of a scam, and often allows you to create a special one-time card number to keep your real credit card information safe when you make purchases online.

Some credit cards offer rewards, such as airline miles, cash back for purchases and special discounts. For example, if you apply for a credit card at a local gas station, you may be able to save a few cents whenever you use the card at that gas station. Look for credit cards that offer rewards for everyday purchases, such as buying groceries, and commit to using those cards only in places where you receive maximum rewards.

Credit cards from many of the major credit card companies can be used throughout the world, which makes traveling with credit cards a better option than traveling with cash. A credit card will help you book a hotel room, rent a car and keep you from worrying about converting money to the local currency when traveling to a foreign country. In addition, when you travel with cash, if it is lost or stolen, you are out that money and may have trouble getting more. With a credit card, you are not responsible for any purchases made if the card is lost or stolen, and most companies will be able to overnight you a replacement card.