Managing Your Credit

Maintaining Healthy Credit

Today it seems almost too easy to get credit. Credit card companies will make it easy for you to use their cards. If you are not careful credit can become a trap. When you are in a hole the first thing you must do is stop digging. Here are some suggestions to help you manage your credit and use debt as a vehicle to achieve your goals.

Identify Your Credit Goals

Establish a few short- and long-term goals. Seeing a “light” at the end of your financial tunnel may make it easier to stick to your budget. Do you want to save for vacation? Purchase a home? Buy a car? Knowing why you are budgeting your money can really help you stay on track and not get discouraged.

Create a budget that includes your monthly and yearly expenses like rent, car payments, etc. Don’t forget to include annual expenses like insurance premiums and taxes. Getting it all down on paper is the first step towards establishing a budget that is realistic and viable for the long haul.

Once you’ve established your budget, don’t open new credit cards or apply for other loans unless they “fit” with your overall budget plan. Remember that numbers don’t lie, so if your monthly budget is $3,000, and your expenses are using up all of your disposable income, taking on another loan will definitely not help you reach your overall financial goals. Live within your means, not beyond them.

Use your credit cards only for things you can truly afford, and make sure you pay your bills on time, every month. Try not to “max out” your cards. A good rule of thumb is not to let your credit card balances exceed 20 percent of your annual income (or 10 percent of your monthly income). Try to resist impulse buying.

There is No Quick Fix for Credit Problems

Beware of credit “repair” agencies who promise to boost your credit score! They may use a variety of tactics that may increase your score temporarily (enough time for you to be fraudulently approved for that car loan you want), but they cannot permanently “erase” any credit problems you may have. Getting involved with some of these companies can be trouble. As always, steer clear of companies who make promises that sound too good to be true!

Be careful when transferring your balances to another credit card. Card companies promising lower APR rates may not guarantee those rates forever, and you could wind up paying more in fees and interest down the road if the terms of the offer call for a hike in your interest rate after you’ve transferred your balances.

Try to pay more than the minimum balance due on your credit card bills each month. Paying even $10 more can really save you a lot in finance charges and interest in the long run.

Pay attention to the interest rates on your credit cards—the lower the rate, the better. Shop around to secure the lowest rate.

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