Credit Dos and Dont's
Credit is not just something that comes in the form a little card that you use to buy things you need, and even things you want. It’s like a portable bank, where you make deposits and with-drawls. It has the ability to grant you certain financial freedoms when handled with care, and also has the ability to put a screeching halt to having a healthy credit score, if you handle your credit poorly. The best defense when dealing with credit is to be an informed borrower and consumer. So where do you start? What are the in’s and out’s of maintaining a healthy credit score?
Let’s start with some key “Do’s”
DO know the power of credit. This is a big one, because banks evaluate your credit history very closely when making the decision to extend you credit. If you maintain a positive credit history it will allow you to take advantage of loans with low interest rates, rent your first apartment, buy a car, finance a house, and maybe even get your dream job.
DO start small. When first starting out, get a small loan or credit card with a low limit. Do not hesitate to ask your banker or creditor questions. Be informed and aware how even small loans or low lines of credit will impact your credit.
DO shop around. It may sound unfair, but some companies prescreen to look out for potential customers that would be considered “good” risks. Well, you need to do the same, make sure you research credit companies and banks that have strong reputations and offer reasonable rates. Choose a card that best suits your lifestyle.
DO put your full legal name on all applications and be consistent. Don’t leave out your middle initials or suffixes like, “Jr.”
DO read the fine print on the credit application. Remember, that application is a contract. It is legally binding you to honor it. Read all about their credit limits, grace periods, annual fees, and terms and conditions. Also be aware that the introductory rate and grace period can change in the future.
DO understand the Annual Percentage Rate or often referred to as, APR. The APR is the interest rate or the measure of cost for your credit. Creditors tack on the APR to your balance to calculate the interest. So when you see that little thing they call “Finance Charge” on your monthly statement, that is the APR.
Do set a budget and stick to it. Buy a journal, or an app on your I-Phone, whatever it takes, just create a budget, track your spending, and stick to it. Be realistic and look for ways to help you pay down your debts the quicker the better.
Do open your bill as soon as it arrives in the mail. Make sure you compare the bill to your receipts and that they match up. That can be your first line of defense to protect yourself again identity theft, and unauthorized charges.
DO pay at least the minimum amount that is due. The last thing you want is to pay late fees and see a rising APR on your monthly bill, and if at all possible, pay more than the minimum to pay off your balance quickly.
DO contact your creditor if you have trouble making payments. If you are in a bind and are not in the position to make a payment, let them know ASAP. They may be able to work out a reasonable payment plan with you, and it will prevent your account from going into collection status.
DO keep your credit card in a secure place. If you do not need the card that day, store it under lock and key. Leave it at home. But it would be wise to store your creditors contact information in your phone or glove compartment in your car, in case your credit card gets lost or stolen.
DO order a copy of your credit report annually. Remember, you have the right to know what credit agencies have on file for you and your credit history. This is even law, The Fair Credit Reporting Act, requires that the three major credit agencies can provide you with a free copy of your report every year if you elect to request it for your personal files.
And of course we can’t forget about some major “Dont’s”
Don’t feel pressure to get a credit card. If you are living your life without a particular card, then pass on that offer. Additionally, if you are receiving heavy solicitations from credit card companies, you can “opt out” of this unwanted contact. Just simply call, 1-888-5-OPTOUT (1-888-567-8688) or visit: www.optoutscreen.com, for more info.
Don’t open numerous credit accounts within a short period of time. As appealing as it may seem, this can have a negative impact on your credit. Creditors will look at your existing balances/limits, and wonder why you are seeking additional credit.
Don’t spend more than you can afford. Don’t forget about your credit card being a loan essentially. If you know that you reasonably can’t afford a purchase, don’t buy it. Putting it on credit can cause financial strain down the line, because you still have to pay for it plus interest.
Don’t pay your bills late. Late payments will reflect poorly on your credit rating and increase your overall balance (because of added interest and late fees). If you for-see being late on paying your bill, let your creditor know promptly.
Don’t ignore the warning signs of credit trouble. There are several ways to get into credit trouble, from paying your bill late, paying the minimum balance, getting cash advances for daily living expenses, or not paying at all, will come back to haunt you and cause further financial hardship. Seek advice from financial professionals, get financial counseling if needed.
Don’t share your credit card number. This may seem obvious, but all too often people are too trusting of others with sensitive information such as credit card account information. If you did not give the “green” light for a transaction then you could be a victim of identity theft or a phishing scam. If you suspect that you have been a victim of theft, file a complaint immediately with the Federal Trade Commission. The FTC handles such claims. They can be reached by dialing, 1-877-ID-THEFT (1-877-438-4338) or visit them on the web at: www.ftc.gov/idtheft.