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How to Manage Your Credit

Feb 11, 2008
The hardest part of achieving financial success is understanding that your credit is everything. Once you realize that you more borrowing power and can secure loans with great interest rates because of your credit, you will never stop working on managing and improving your credit.

There are millions of suggestions on how to eliminate debt and increase you credit score, and it can all get pretty complicated. There is nothing better than keeping it simple. Follow these simply rules below to help you manage your credit in a healthy manor.

The first key to managing your credit is to manage your debt. Now we are not talking about high interest credit cards just yet. We are talking about debt that is unavoidable, like a mortgage loan.

Not many people can afford to pay cash for their first house, so they borrow and that's okay. For some, even student loans are unavoidable, so we'll count those as acceptable too. When you are financially stable enough to make all of these payments on time, and maybe even a little extra, you are ready to take on more credit, if you need it.

Before you open a credit card account at every store you shop at, take a minute and think about what type of credit card you really need. Try to keep the total to two credit cards, one for regular use and the other for emergencies. In order to manage your credit wisely, you must pay off your credit card bill in full each month.

If for some reason you are going to use a loan or a credit card to make a big purchase, shop around for the best interest rate. You wouldn't want to buy furniture with a high interest rate credit card if you can use a personal loan with a low interest rate.

Before you take out more credit, or a loan, you will want to examine your debt to income ratio. When you divide your total amount of debt (excluding your mortgage debt) by your annual income minus taxes, you will have your debt to income ratio. This ratio will be a percentage that you will need to keep under 15-20 percent.

If you get into trouble with credit cards, you have to stop using them. There is no other solution, especially for an addictive spending habit like credit cards. Lock up your credit cards until you have eliminated any credit card balance you have.

Another key to managing your debt is to keep an eye on it. Find out where your credit score stands and then check up on it once every year. If your score is struggling and keeping you from borrowing, learn to make better financial decisions to increase your borrowing power.

A savings account will not affect your credit score or rating, but is essential if you are going to borrow money at all. This way you have a back up plan if you cannot pay your credit card or mortgage bill.
About the Author
Court is an internet marketing consultant and helps people to learn about internet marketing.
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