Don’t Neglect Your Credit
When we hear the word “credit” two things come to mind: credit cards and credit limits. Both dictate prudence and self-restraint.
Experience shows that individuals don’t manage their credit wisely. They also are not aware of what can happen when they abuse credit. One negative effect could be a bank refusing to extend a loan.
During a conversation with our banker the other day, he said that he was appalled to learn that those who were negligent with credit are top professionals like physicians, lawyers and successful entrepreneurs. These are the privileged few who obtain high credit limits, giving them carte blanche to use credit in whatever way they deem fit.
Someone once said that it’s the low-income person who pays his bills on time.
What kind of lessons can we learn from responsible spenders like that poor man who pays his bills on time? In what way do we spoil our credit and our reputation?
Having too many credit cards in your wallet. Is it so hard to say no each time a store clerk waves an application at you, inviting you to obtain a credit card? He or she will often say that it won’t take too much time, and that you’ll even receive a token of the store’s appreciation. It’s called grabbing a share of your wallet. Stores are aware that if you have their credit card, you’d most likely be unable to resist the temptation of buying on credit;
Not making payments when they’re due can get you into trouble - not only with your bank but also with the credit bureau. People get into the habit of waiting until they receive their next pay check, and they think that a missed payment or two won’t adversely affect their credit report. They should re-think this because every missed payment leads to more missed payments in the future. That’s the sure way to damaging one’s credit history.
Going beyond your credit limit whether it’s your credit card or your bank line of credit. If you temper your spending, you will be able to set aside some cash for when you have an emergency. Think of credit as something that can tide you over, not as something to use when you need a “picker-upper.”
Frequent requests for increasing credit limits - this habit is just as bad as the preceding one we discussed. It’s a cause-and-effect phenomenon. People are maxed out, and when the shopping bug hits them again, they call their credit card company requesting an increase in their credit limit. There’s nothing wrong with asking for an increase - provided you urgently need the funds and make more than the minimum payments required.
Inability to stick to a budget. Without a budget, you throw out money out of the window, leaving you with no resources you can tap should you need. Don’t fall into the debt trap. Draw up a budget!
Using Credit Intelligently
Always remember to practice restraint with credit. Don’t go into an “application spree” and apply for every credit there is. Don’t compromise your financial health.
Here are some tips for managing credit the smart way:
One, keep and maintain a maximum of three credit cards and make timely payments
Second, don’t seek additional credit if you can help it. Don’t live a “celebrity-like” lifestyle.
Three, review your credit report at least once a year. Challenge any inaccuracies you read in the report
Fourth, instead of skipping a deadline payment, why not try to make some sort of payment, even if it’s under the minimum payment? This is a lot better than not making any payment.
Step 5: The popular saying is “don’t leave home without it.” Well, we’d rather you left home with cash, not with your credit card.
Sixth: discipline, discipline, discipline! This is of paramount importance. Forget what’s in the stores.
About the Author:
Steven J. Talrechi has written about credit reporting and credit reporting practices for over 10 years. His expertise is in assisting people obtain a 2nd chance checking account and 2nd chance bank account when they have been turned down by other banks.
