Good Credit Practices

Regular use of good credit practices can help keep you out of a financial black hole. With wise use of your credit, you can build a strong credit history which will serve you for many years to come. The end result: you will be able to qualify for a variety of loans at reasonable interest rates. These might include a mortgage for your dream home, an auto loan for your new ride, personal lines of credit for remodeling or emergencies, and credit cards for everyday use. Below are some relatively easy steps that can help you achieve this.

  1. Shop for the best interest rates and terms available when choosing a credit card or loan. This will save you a lot of money in the long run.

  2. Pay your bills promptly (and before the due date) to help you avoid late fees and keep finance charges to a minimum.

  3. Always try to pay more than the minimum amount due each month to decrease the total amount paid and the length of time that it takes to pay it off. For example, if you only make the minimum monthly payment on an original balance of $2000 and are charged 18% interest, it will take you over twelve years to pay it off. If you include the interest you pay over these 12 years, your $2000 purchase will have cost you $4230.83; therefore always pay down your debt quickly to maintain good credit practices.

  4. Only carry the cards that you think you'll need most regularly so you don't run up balances on all your cards.

  5. Leave your cards at home if you're a compulsive shopper. If you're really bad, freeze them in a block of ice. While the ice melts, you have a chance to decide whether you really want to make that purchase.

  6. Use a debit card instead of a credit card. The purchase may not be so tempting if you have to take the money out of your checking account.

  7. One premise of good credit practices is to limit the number of credit cards you have to two or three, preventing you from maxing out more than you can pay.

  8. Keep a file for your charge receipts. This allows you to compare store statements to credit card statements. It also gives you documentation if you need to dispute anything with the creditor.

  9. Memorize your personal identification number (PIN). Don't keep your PIN number in your wallet or written on the back of your credit card. Tear up carbons to prevent credit card fraud.

  10. Keep a list of all credit cards, including account information and phone numbers in a safe place so that you can report a lost or stolen card quickly. Better yet, scan and copy both sides of every credit card.

  11. Limit the amount you pay on credit cards and general loans to 10-15% of your gross income, and your rent or mortgage to no more than 30%.

Are you over your head in debt? If you feel overwhelmed because your credit cards really are all maxed out, you need help determining what your options are. For more information on good credit practices, check out the following sections:

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