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Most people don't set out to be careless with personal credit, but that is exactly what happens. They find it encouraging that they are getting credit card offers and most of us have a get it now and pay for it later exposure. It can be difficult to see others having those things you really want to have too. One rule of thumb to live by is if you can't pay off your credit cards at the end of the month you shouldn't make the purchase unless it is an emergency. This means you don't want to take a nice vacation and they have to pay for it over the next year. You need to be responsible enough to keep a close eye on the credit you do have. Limit it to essentials such as two credit cards and the loans you have to have. Do you really need a new car right now? If not, keep the one you have and put the money you would spend on a monthly payment into savings. When the time comes that you have to buy a new car you will have a nice down payment ready to offer. Using your credit wisely means you don't access it just because you have it available. It also means you don't apply for credit that you don't really need. Some people have eight or ten credit cards in their wallet. Why? If they are only to be accessed for emergency purposes then there is really no need for them. The problem though is too many people in our society depend on their credit cards to fulfill their wants. You should be able to pay for your needs on your income. Fight to secure credit that comes with a good rate of interest. Too many consumers focus just on the fact that they want to establish some credit. You may have a car loan with a 10% interest rate while your friend has one with a 5% interest rate. This means he may be able to afford a more expensive car than you and his monthly payments will be less. The key is to look at the whole picture - what is the cost of that credit really going to be when you add the amount plus the interest you will pay over the life of it? The best way to ensure that you keep your credit history on track is to pay all of your monthly obligations on time. Keep track of when they are do and get them in the mail early. You don't want to be paying late fees because you left them sitting on your desk. There is no reason for these late fees to take up part of your spendable income. Take a close look at your savings versus your spending. You need to have enough money in savings to cover your bills for at least two months. Cut back on your extra until you have this covered. You never know when you might get sick or lose your job. Many people find themselves in those circumstances and it drastically affects their ability to maintain good credit. It does take some education and some self control to be responsible with personal credit. Parents need to really teach their children about this because credit card companies often target college students even though they have no income. In a very short period of time they can have a pile of debt accumulated. Some parents are able to jump in and save them but many can't. Some students don't inform their parents about it until it is too late because they are embarrassed. Be very careful with predatory lending as well. There are plenty of credit card companies and lenders that prey on those that are in need of credit. They charge them ridiculous processing fees, high interest rates, and even fees for paying off the funds that were extended to them early. Avoid getting yourself involved with these types of agencies as they are going to cost you money and maybe your good credit as well.
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About the author: Robert Bain writes about the complicated world of credit. He comments on credit cards, debt relief, personal credit repair, credit ratings, bad credit cards, home equity loans, travel rewards, cash back offers, business credit and personal finance.
