Do you flinch at the thought of the words “fiscally responsible?” Does your head spin every time the cashier asks if you have a Nordstrom/Gap/PacSun card? Do your nightmares consist of dollar bills flying out of your wallet and into a pool of Wall Street-looking business men? Relax! If you’re new to managing your own finances and establishing credit, we’ve got you covered. Here are a few basic things that all credit card noobs should know.
What’s a credit report?
A credit report shows all of your credit history, including public info like whether you’ve been involved in a lawsuit, filed for bankruptcy, or just had a nasty breakup via Facebook. (Okay, maybe not that last one.)
What’s a credit score?
Your credit score is a rating that lets potential lenders know how big of a risk you pose when borrowing money. The higher your score, the better your interest rates could be and the more likely you are to be accepted for a credit card (or a loan, or any other form of borrowing money). Treat it like a game of Mario Kart; winning is the only option. Not sure what your credit score is? Head on over to ApartmentSearch’s Moving Resource Center. There, you can check your credit score and even apply for a credit card.
What’s a credit inquiry? And why are they hard and soft?
An inquiry is when someone looks at your credit, but there are two different types: hard and soft inquiries. A hard inquiry is when it’s specifically checked after you apply for a credit card. A soft inquiry is when your credit is checked for anything else, such as renting an apartment, or even taking out a loan. Soft inquiries can happen whether you give permission or not, but they don’t actually affect your credit score. Hard inquiries, however, may have an affect on your score, so apply carefully! That being said…
Does applying for a credit card hurt my credit?
Ok, let’s say you’re applying for a random card because the clerk at Macy’s convinced you to; you’ll save 10% on the spot. Sweet! What’s not-so-sweet is that simply applying could cause a slight decrease in your credit score. Don’t let it cause you too much stress, though, especially if you’re going to actually use and pay off the card every month. Even if you don’t, your score should be back to normal in around three months, give or take. Just be aware of other factors in your life, like…
Should I open a new line of credit before I buy a car or a house or a yacht?
Yacht? Unless you’re filming a 90’s music video sometime soon, skip that last purchase. Anyway, the answer is no. Most experts advise not opening a new line of credit within six months to a year of an important loan, like one for a car or house. That’s because simply applying could drop your score below a threshold that a lender is looking for. For example, if your credit is at 800 and you apply for a new card, it could drop your score to 775. If your lender was looking for a score of at least 800, they could decline your request for a loan. We recommend playing it safe.
Can I use a credit card to pay rent?
Yes! Well, sometimes. A lot of smaller apartment complexes may not allow you to, but your credit still has an impact on whether or not they’ll let you rent, which is why it’s so important to maintain a good score. If your apartment complex does allow you to pay with a credit card, they may charge you an extra processing fee. Others will let you do it with no fees. On the plus side, if you choose to pay your rent with a credit card and are able to pay your bill in full every month, you could actually be raising your credit score. Win!
So, congrats! On getting your new credit card, that is. Now that you’re establishing credit, how about gearing up for your first apartment? Use ApartmentSearch.com to find your new home (and read about other fun, adult-like tips at blog.apartmentsearch.com).