Professor Susan Hume Featured in WalletHub Article, “Credit Cards for Bad Credit”

Susan Hume, Professor of Finance, was recently featured as an expert in an article, “Credit Cards for Bad Credit.”

The Good, the Bad and the Ugly – Using a credit card to improve your credit score.
With my humble acknowledgement to Clint Eastwood and his epic Western, let’s tackle this question of using a credit card to reduce your debt.

For the good news – Academic research suggests that credit card use can be an effective tool for improving your poor credit, particularly a secured credit card. But note – use this card responsibly. Some ways to use your secured card are:

1. Pay on time and consistently and work to reduce debt. When you do this, you are establishing and improving your credit history. This suggests spending less. Use the 3-day rule: make a list of wants vs. needs and revisit this in 3 days to see if you should spend for that purchase. Buying less is great for your wallet, shows excellent financial literacy and is environmentally friendly.
2. Keep credit utilization low – look at the credit limit of your card and keep the monthly outstanding balance below 25%. This low credit utilization will improve your credit score in both the short term and long term.
3. Work on your financial literacy. Take a course on Financial Education- it can empower you! This understanding has been shown to improve credit outcomes, with studies demonstrating increased credit scores and lower delinquency rates.

Now for the Bad news –

1. Risk of Debt: There is a risk of accumulating more credit card debt if not managed carefully. Do you overspend? Individuals with a history of overspending should exercise caution.
2. High Interest Rates: Secured cards usually have higher interest rates than traditional credit cards. This makes them more expensive.
3. Potential for Negative Impact: Missing payments or exceeding credit limits can negatively impact credit scores. This is the opposite of what you are hoping to accomplish by using a secured credit card to improve your financial health.

Knowing these good and bad outcomes can help you manage your credit score and prevent the Uglies of unnecessary expenses and financial burdens! More power to you as you work on your lifelong financial journey.