Credit Cards Are Not the Enemy – Millennials May Shortchange FICO Scores With Debt Avoidance Skip to main content

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Credit Cards Are Not the Enemy – Millennials May Shortchange FICO Scores With Debt Avoidance


Credit cards

Millennials may hurt their credit score by not using credit cards

Image Source: Flickr CC User Sean MacEntree

The good news is that Millennials across North Carolina are gun-shy about taking on debt because they’ve seen their parents struggle with finances. The bad news is that debt avoidance, particularly when it comes to credit cards, can cause these Millennials to have lower FICO scores than they should. Here’s a look at how credit cards can help your finances, if used wisely.

#1 Credit Cards Can Help Your Approval Rate for Other Credit You Want

You may not want credit cards because you think they will just lead to trouble. But having credit cards and using them responsibly can help you get a loan that you do want – such as a mortgage or auto loan.

Having and using a card responsibly demonstrates that you are able to control your finances, leading to a higher credit score and the ability to get loans. The only way to show a home or auto lender you are credit worthy and able to pay your bills on time is through your FICO score.

#2 Credit Cards Don’t Have to be a Debt Trap

Just because you have credit cards in your wallet doesn’t mean you’ll end up in a pile of debt. First, don’t carry them in your wallet – except for one for emergencies. This helps you avoid the temptation to become overly reliant on them.

Second, do still use the cards occasionally and responsibly to build credit without building debt. Using your credit card for, say, your Netflix charges and to pay bills ensures your cards will show positive activity – and you'll still be able to afford to pay them off each month. Just don’t use credit for something that you cannot afford to pay off in cash that month.

#3 Credit Cards Don’t Have to Incur Interest Charges

Most people think that if they use their credit card, they’ll be charged interest. But that’s not true. If you pay off your balance in full before the credit card statement is issued, you should have no interest charges. So, how do you pay the bill before it comes?

That’s easy. Monitor your credit card on your card issuer's website and make a payment a few days (or even a week) before the statement closes for the month and you’ll have a statement issue with a zero balance and no interest charges even though you used the card.

#4 Credit Cards Can Help Your Credit Score and Lower Other Costs

Many other expenses in life depend on your credit score. Natural gas providers run credit checks and often determine the rate they charge based on your score. Auto and home insurance providers also run credit checks and set rates from credit scores.

Building and maintaining a good credit score can save you money – and credit cards are one of the fastest ways to improve your score. As long as you don't use more than 30% of your available balance and make sure to pay off in full prior to your statement date, you can easily boost your credit score.

#5 Credit Cards Can Make Life Easier

Sometimes, credit cards can really help you out. If you have an emergency auto repair that you can’t afford to pay out of pocket right away, a credit card can get you through a crunch. Similarly, if your fridge or oven bails on you, a credit card can get you out of the scrape.

When you travel, if you don’t have a credit card (versus a debit card), you may also have problems renting a car. Car rental agencies often block off hundreds of dollars as a security measure when you rent with a debit card – if they rent to you at all.

The bottom line is that Millennials can benefit from having and responsibly using a few credit cards. Your credit score matters for many reasons.

Of course, if you’re drowning in debt and don't have access to credit cards because lenders keep turning you down, you may need another solution. In this case, filing bankruptcy is often the best choice. Bankruptcy offers you a financial fresh start by wiping your slate clean of unmanageable debt and giving you a second chance.

Contact the Law Offices of John T. Orcutt today to find out more about how Chapter 7 and Chapter 13 bankruptcy can help you begin rebuilding your credit.

Call +1-919-646-2654 now for a free North Carolina bankruptcy consultation at one of our offices in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington. Get the financial freedom you deserve today.

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