6 Credit Rules to Follow

Credit & Debt, Living & Spending
on October 10, 2012

Credit is difficult to establish and easier to harm. Every consumer should follow these six rules to keep their credit score healthy:

1. Keep an Eye On Your Credit Score
Review your credit report annually to check for inconsistencies or errors. You must always consider the impact of obtaining new credit on your credit score. Check your credit before applying for a new card or loan, as this will allow you to remove or correct any issues before the application process. The key to favorable credit and low interest loans is to maintain a high credit score. The higher your credit number, the lower the interest you will pay.

2. Make Timely Payments
Pay your bills on time. A late payment of even one day will negatively impact your credit score. Your credit score is made up of a number of factors, your payment history is the largest component of your assigned score. One late payment has the ability to drop your credit score up to 100 points. Late payments create fees from the lender that will result in higher interest rates or larger payments due.

3. Read and Understand Terms and Conditions
Every lender has different terms and conditions. It is vitally important that you read and understand each individual credit card or loan companies’ conditions. If you do not agree with the companies’ terms, do not sign up for the card or the loan. Do not allow a lender to rush you through the fine print of the agreement. Take your time and thoroughly read the entire document. Notate any questions that you have, and have them clarified before finalizing the loan agreement.

4. Know What Your Budget Is Able To Handle
Every savvy consumer should have a working monthly budget. You need to know how large of a payment you can realistically pay every month. Do not take out a loan or credit card that will push you over the edge of your budgeted comfort zone.

5. Do Not Pay Annual Fees
Do not carry a credit card that charges an annual fee. If you currently have a credit card that mandates a fee, call the company and ask them to remove it. Most credit card companies do not charge annual fees any longer, and the ones that do are usually willing to remove it when asked. If the company is unwilling to remove the annual charge, switch to a card that offers you credit without paying this fee.

6. Stay Away From Your Credit Limit
The second biggest criteria that companies use to determine your creditworthiness, is how much of your available credit that you actually use on a regular basis. This is called the credit utilization ratio. Credit experts advice that you do not use more than 25 to 33 percent of your available credit at any one time.

If you follow these six credit rules, you will achieve a large improvement in your credit score and a decrease in the amount of interest that you pay for your credit cards and loans.

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