The Dos and Don’ts of Good Credit Behavior
Credit cards, loans, debt, credit histories and scores, overspending, balances, interest rates, repayments – these are all words in the dictionary of credit. It’s easy today to buy anything you want, without having to pay a single cent – the catch, you’ll pay later, literally, for your indiscriminate spending, usually through your nose. Most people find themselves with large debts that snowball into un-repayable amounts thanks to whopping interest rates, and as a result, with poor credit histories that affect their chances of securing loans or applying for further credit. This situation is largely due to the lack of credit awareness among the general public – not many people are savvy when it comes to managing their money matters. Wising up to the dos and don’ts of credit will help significantly in improving your relationship with money and boosting your credit score.
DO…
- Live within your means
- Shop around and read the fine print before you get a credit card.
- Keep just one credit card for frequent use and bring out the others (just one or two more maybe) only when absolutely necessary.
- Pay your bills on time, in full. Outstanding balances increase the interest you have to pay.
- If you have more than three credit cards, cancel those that you do not use at all or ones that you use rarely. You may be paying annual fees on such cards. Also, because you do not monitor your usage details, such accounts are ripe for identity thefts. If the accounts you’re closing have balances left to be paid, ask your credit card company to disallow any further activity on the card and pay back the balance as soon as you can. Check with your lender for associated fees before you close accounts.
- Compare your bills to your receipts and report any discrepancies immediately.
- Call your creditors if you’re going to be running late on a payment for whatever reason, even if it’s just by a day. They’re usually generous when you explain the circumstances to them. Some creditors report payments that are late by even a few hours, so read the fine print about payment schedules on your application before you sign up for a card.
- Check your credit reports frequently to keep track of late payments, large outstanding amounts and unusual activity on your accounts. Call the bureaus if there are any discrepancies.
- Be careful when using online banking facilities credit cards and ATMs – lurkers are waiting around to steal your pin numbers and passwords.
- Sign credit card receipts immediately and score out blank spaces in the expenses column.
- Pay off old debts that creditors have given up on – just because no one calls to collect, it’s not erased from your credit history.
- Pay off debts with higher interest rates or those on secured loans first.
- Seek professional (free) advice before you enter a debt management program.
- Keep your credit cards and other personal documents safely to prevent identity theft.
- Report stolen cards immediately.
- Change your online banking passwords and ATM pin numbers randomly.
DON’T…
- Use your credit card for regular purchases like food and gas.
- Pay just minimum balances on your bills – you end up paying a lot more in interest in the months to come.
- Cancel cards that you’ve held for a long time as this could affect your credit score. If you absolutely have to cancel because of high interest rates, make sure you maintain good credit habits afterwards – pay your bills on time and pay back more than just the minimum balances.
- Throw away old cards before you ensure that your accounts have been certified closed. Shred them to bits before you dispose your cards.
- Use your credit card to make purchases that you cannot afford with cash – remember, when you use a credit card, you’re borrowing money at exorbitant interest rates.
- Spend more than 30 percent of your credit limit.
- Use your credit card to withdraw cash from an ATM – the interest rates are extremely high.
- Use easy-to-guess passwords for your bank accounts or store your passwords where they can be stolen.
- Respond to spam emails asking for your bank details.
- Click on links in emails that originate from unknown senders.
- Lend your credit or debit card.
- Overdraw your bank account.
- Give out your credit card number over the phone or Internet unless you’re sure the transaction is secure.
- Co-sign for loans and accounts – any activity by either account holders will show up on both their credit records.
- Pay a surcharge for using your credit card
- Apply for new credit cards even though the mail overflows with pre-approved offers
- Trust people who offer to repair your bad credit history with something equivalent to a magic wand.
By-line:
Sarah Scrafford is an industry critic, as well as a regular contributor on the subject of money management. She invites your questions, comments and freelancing job inquiries at her email address: sarah.scrafford25@gmail.com.