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Use Your Credit Wisely


Whether you know it or not, your credit history as indicated by your credit score is the most widely used indicator of your financial health. How you use and maintain credit can determine whether you're able to buy a home, start your own business, or even get an ATM card.

 How to use credit wisely

Once you establish a credit record, building and maintaining it is equally as important. Use these simple tips to ensure your credit history is a good one.

Pay your bills on time.

All the time. Even if you're having a difficult month, be sure to make at least the minimum payment on loans and credit cards. Don't forget to pay utility bills, rent, and other monthly obligations.

Keep your credit card balances low.

Use your credit cards only when you really need them and try to pay off the entire balance owed each time you receive a statement.

Don't shuffle debt.

While transferring balances from credit card to credit card might seem attractive, the fact that you're not paying debt down or off on a regular basis raises questions as to your ability to repay credit accounts and has a negative affect on your credit score.

Apply for credit only when you need it.

Just because there's an attractive offer in your mailbox or at your local retailer, chances are you'll find you don't really need the account. Your credit score dips a bit each time you apply for credit and if you do it too often, it'll show. Plus, having too much credit available can prove overwhelming for some.

Check your credit report regularly.

Review your credit report to make sure accounts and activity are accurate and up to date. Notify creditors and credit bureaus of any errors, inconsistencies, or suspected fraudulent activity.

If you fall behind, get back on track right away.

Contact creditors immediately if you're having trouble making scheduled payments. Inquire about alternate payment options. If you're having difficulty with several accounts, consider contacting a reputable credit counseling firm.

Live within your means.

Never spend more money than you bring home. Don't use credit cards or lines of credit to finance daily needs like gas or groceries if you can't pay off the amount owed every month. Draft a monthly budget and stick to it.

By understanding the factors that make up your credit history and managing your accounts and credit obligations in a disciplined manner, you'll be well on your way to establishing a strong and positive financial reputation.