Obtaining a credit card is relatively easy, even for young adults. In fact, as of July 2016, the amount of revolving debt for American families totaled nearly $970 billion, according to the Federal Reserve. Virginia residents might be interested in reading about the good and bad features of credit.
Being in debt is not necessarily a bad thing, but problems can arise whenever those debts get out of hand. In the first place, some debts can be helpful. Low cost debts that feature tax advantages, such as equity lines of credit and home mortgages, are good examples. Even college loans can be looked at as beneficial, since they may eventually lead to a high-paying career.
Examples of bad debts are high interest credit cards and automobile loans. However, while these loans can get out of hand, people who have them can use them to their advantage. When it comes to using low interest credit cards that have no annual fees, people can use them to raise their credit scores by making payments on time, keeping the balance low and limiting requests for higher credit. In fact, one of the most important ways credit card users can improve their credit scores is to make each monthly payment on time. Making timely payments accounts for about a third of a person’s credit score. Therefore, even a partial payment made is better than no payment, as long as it is on time.
Sometimes there are circumstances that can cause people to lose control of their debts. A sudden job loss, serious illness or a catastrophe can leave people without a way to pay off their mortgage and other lines of credit. People in similar circumstances might want to speak with an attorney who could offer solutions for relief from overwhelming debt.
Source: The Huffington Post, “Ask Carrie: Credit and Debt: Ten Questions Everyone Should Answer”, Carrie Schwab-Pomerantz, Oct. 25, 2016