Personal Finance on Yik Yak | okay I want to start budgeting so I was thinking about taking cash out and only using that but ur credit scarier goes down if u don’t use ur credit card. So what do I do?

Yik Yak

Download

Join communities on Yik Yak Download

Personal Finance 1w

okay I want to start budgeting so I was thinking about taking cash out and only using that but ur credit scarier goes down if u don’t use ur credit card. So what do I do?

Anonymous 1w

A lot of people including myself make all their purchases using credit cards to get cashback/points and pay the statement balance each month. You have to be disciplined and only spend the money you currently have tho This doesn't negatively affect your credit score - the most important things are payment history and how much of you credit limit you're using (the lower the better generally)

Anonymous 1w

You could get a second credit card with a significantly lower credit limit and exclusively use that. Total credit utilization will actually decrease bc you’ll be adding a little bit to your limit. Just make sure to use your original credit card occasionally in order to keep it

Anonymous

#1 1w

I’m sorry I really don’t know that much about finances. What does total credit utilization mean? And also doesn’t get another credit card bring your score down?

Anonymous

#2 1w

Okay ty!

Anonymous

OP 1w

So first off credit karma is a good app for viewing a breakdown of your credit score. Different agencies take into consideration different aspects of your credit history and weigh them at different percentages. Some of the most common are credit utilization (what percent of your total credit limit you spend in a given month), payment history (on time vs late), hard credit inquiries (credit check when you apply for a loan), age of accounts, and more.

Anonymous

OP 1w

Your credit limit is a combination of all loans and credit accounts you have open under your name. So if you have say a $3000 limit card and get a new credit card with a low credit limit, let’s say $250, your total credit limit is $3250. Increasing your credit limit means you can spend more in a pay period and keep your credit utilization down. The utilization is only based on the amount shown on your monthly statement, so if you spend $300 through the month but pay off $150 before the report

Anonymous

OP 1w

You will then have only $150 of credit utilization reported. Your goal should be to keep the percent reported at the end of each month as low as possible. Different credit bureaus have different days that they report so timing is a little tricky which is why I suggest making many small payments through the month to ensure you keep it down. Consistent low utilization and making on time payments is the fastest way to increase your credit score.

Anonymous

OP 1w

If you can control yourself and your spending, it’s very advantageous to increase your credit limit by obtaining additional credit cards and requesting increases every 6 months. Assuming you keep your lifestyle/spending the same before and after credit increases, your utilization % will naturally decrease without any extra effort.

Anonymous

OP 1w

But to answer your question, yes applying for a new credit card can temporarily decrease your credit. A hard credit check is needed to apply for a credit card. It’s a temporary ding though and it will rebound within a few months. You’re typically advised not to apply for credit cards and loans more than twice a year if you can help it. Increasing your credit limit is good though. Lenders like to see that you have self control with your spending habits and won’t spend the full line of credit