A single mother trying to get her finances in order often struggles over the decision on what to do about credit cards. The convenient pieces of plastic come in handy in financial emergencies, but the interest rates and associated fees are an added burden to a struggling budget.
We all have friends who have closed all of their credit card accounts and make all of their purchases using cash. But just because we envy those people when we make monthly credit card payments doesn’t mean the cash only way of life is the best solution to our budget problems.
The financial goal in many households is to pay off the credit cards and be done with them once and for all. But, but before you close those store credit card accounts you should take into consideration how it will affect your FICO credit score.
A FICO credit score is calculated using the data in your credit report. This includes payment history, the amounts owed, the length of the credit history, new credit and the types of credit that the consumer uses.
Building good credit necessitates that you borrow money and pay it back on time. A credit card helps build a credit history.
The credit available on the credit card is added to the overall credit available to you by other financial institutions. This available credit is a factor in determining your FICO credit score on a credit report.
The credit score also takes into consideration how long these accounts have remained open in addition to payment history. The longer the account has been open, the higher the credit score.
Once you close a credit card account, the amount of credit available to you on that credit card is gone, lowering the overall amount of credit that is available to you. This will have an impact on your credit score.
Credit cards are used differently by each consumer. Each person has to determine if how they use the credit card is damaging or beneficial to their own situation. It’s important to be honest when examining how the use of the credit card affects your financial situation.
Like all other decisions the single mother makes in life and family management, decision about what to do about credit card needs to be addressed with factual information.
If you decide to keep the credit card accounts open to benefit your FICO credit score, there are important steps to take so that you don’t undermine the benefit:
For more information please visit www.singlemomfinancialhelp.com/