10 Simple Steps to Manage
Your Credit
By far the greatest invention the banks have ever come up with came out
in the 20th century. Also the new field of Credit Management was born
with the invention of the credit card. It is the most available out of
any financial product out there. In fact more than 80% of the U.S.
households have at least one credit card. If you want to consider
yourself as the "Average" American then you have about 8 credit cards
burning a hole in your wallet right now. To make sure that you don't
get yourself in any trouble (again) try and follow these 10 Simple
Steps for Credit Management.
1. Ignore the bank's/lender's rule on what is an "acceptable" level of
debt. Your debt-to-income ratio, as they like to call it, is how much
debt you can carry to the amount of money you bring make. Depending on
how well you have managed your credit in the past it can fluctuate
quite a bit. The average is about 25%. The ideal number is of course
ZERO but for starters work on getting it down to 10-15%.
2. Remember what a credit card is...A Credit Card. Just because they
have waved their magic wand and sent you your "Pre-Approved" Card
doesn't mean go out and use it. The bank does not know your situation
or your lifestyle all they look at is the number that you should be
able to pay off using most of your "extra" money. They will keep you
paying them for the rest of your life if you let them.
Which brings me to the next point...
3. Don't pay just the minimum balances, unless of course you like
paying 400% or more in interest. A typical Credit Card debt of $4,500
would take you about 44 YEARS to pay off! And you would end up paying
about $17,000 total by the time you are done. When you stop and think
about it, does that sound like a good deal to you'
4. Play the Game- Remember that you are the customer and "the customer"
is always right. When it come to annual fees and higher interest rates
ask for a lower rate. And if you slipped up and got a late fee ask to
get it waived (make sure you promise never to do it again...well at
least for six month) Remember that it is a lot more cost effective for
them to keep a customer happy than it is for them to go get another
one. Your $29-$35 late fee does not come close to the money they will
have to spend to get a new one of you.
5. While you are playing the game don't get blindsided by the fees. The
banks have come up with some very creative ways to make money at your
expense. They have the ones that everyone knows like over the limit
fee, late fee, and extra card fee. However, they also have the less
obvious fees like account transfer fee, and a fee for talking to a live
person instead of a recording. Make sure you look at your statement and
check out all the charges. Some of them may surprise you.
6. Know how you stack up- BILLIONS AND BILLIONS of dollars are charged
annually to consumer on mark ups in interest rates. That's a lot of
money when you look at your share. Your credit information is something
you should look at and make sure it is accurate. About 25% of all
credit reports have erroneous information contained in them. Make sure
your information is accurate and keep an eye on it regularly.
7. Know you limits- When you know you will have a hard time paying even
the minimum balance STOP charging. It may sound simple but for millions
of Americans it is very hard to do. Of course the easy way Hind sight
20/20 don't get in the situation.
8. If you are one of those people that are disciplined enough to pay
off your balance at the end of the month then make sure you are getting
some bonus for being such a great user. Get the free stuff that you can
use. Some extra Flying miles, free gifts, Cash back reward (my
favorite). If you are going to use it might as well get something for
your efforts.
9. Only have what you need- You Should have 2 cards, one for what you
use regularly and pay off every month and the other for emergencies or
business. When you start trying to take advantage of all the deals out
there the only one who gets taken advantage of are you. Overkill on
your credit cards are not necessary, but being really good at managing
a couple of cards is.
10. The statistics are in and they are mind boggling. Bankruptcies are
at record numbers and the consumer debt for the U.S. is over 1.7
Trillion dollars! Teach your kids now to not make the mistakes that you
did. Financial Literacy is a must for the next generation as we are
heading into a cashless society. It's harder to manage what you cannot
see. Make sure they understand that the credit card is what pays for
food on the table and gas in the car as well as the play station games
they love.
About the Author
Mical Johnson is affiliated with Rock Financial, Inc., a
Licensed Correspondent Mortgage Lender, Florida Department of Finance.
Mr. Johnson hosts Home Buyer's Seminars which are open to the public
each month in the TampaBay area in Florida. To obtain a free copy of
Mr. Johnson's Home Buyer Handbook contact him at www.TampaMortgageGuy.com
He is also a contributing author at www.Debt-Free-Personal-Finance.com
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