credit trouble

How to Handle Credit Responsibly

Staying in control of your credit is the key to a healthy financial future. Follow these important tips to maintain a good credit history.

Manage your money right from the start. Visit the Practical Money Skills for Life site for a compilation of the best financial resources available on the Web.

Don’t ignore the warning signs

Late payments, borrowing on one debt to pay for another, calls or letters from credit agencies, and denied or cancelled credit—they’re all signs that your credit record may be in jeopardy. To avoid the trouble:

• Know your credit limit. (This cannot be stressed enough.)
• Always keep a mental running balance of your approximate current charges. Stop or reduce card usage well before you reach your max.
• Remember to save some credit for emergencies.
• Keep in mind that a bad credit rating can have serious negative consequences down the road. But if you can’t make your payments, don't panic; just contact your creditors immediately. They’ll want to work with you, and together you should be able to plan a realistic payment schedule.

Weigh all your loan options

If you want convenient and ready credit, credit cards are the way to go. But when making larger purchases that require many payments over a long period, you might want to look for a traditional loan with fixed payments that fit your monthly budget.

Be aware that traditional loans require collateral and/or a co-signer. And the loan process is much more complicated and time consuming than applying for a credit card. Consider how much you can afford to borrow, and then use your best judgment.

Ask for help

Don’t ever hesitate to seek help with your credit management. To find assistance, start with these additional Credit Resources.

Beware of “quickfix” claims

Credit mishaps such as late payments, foreclosures, and repossessions stay on your report for up to seven years. Bankruptcy information, up to ten. Some companies claim that they can “fix” your bad credit history—but don’t fall for it. It is legally impossible to alter an accurate credit history. If you get into credit trouble, revisit your budget and work with your creditors to reestablish a good credit rating.