In an effort to promote the use of their credit cards, companies offer all sorts of incentives. It can be cash back, points/loyalty programs, Air Miles and other travel reward programs. While enticing, there can be a down side.
In trying to take advantage of all the benefits the cards are offering, some consumer apply for too many credit cards. Depending on the frequency of the applications, it can lower your credit score, as each application will result in a credit inquiry. Also lenders may view this as a scenario for possible irresponsible use of credit.
However, this is not the worse scenario. Some families will have one primary card and have everyone else added as authorized users. This will pool the points and benefits into one account and reduce the time it takes to get to certain point thresholds. This allows the points and benefits to be utilized faster; however, everyone of the authorized users will not have a credit history because credit record is only reported to the primary user’s name.
Without credit history, it very difficult to get a loan whether to buy a car or a house. Some lenders will use alternate proof of credit by reviewing rent, utility and cable payment records. Not all lenders will and for the ones that do, their rates and terms might not be the best.
The best thing to do is to eventually get two credit cards with limits of $5000 or higher and use them regularly and responsibly. Keep the balance below 50% of the limit. This will give you a strong credit score and allow you access to the best possible terms and rates.
