Managing credit correctly requires a certain amount of discipline. If you let your spending get out of control or take on too many loans, you could face big money troubles. That’s why, when it comes to borrowing, it’s important to have some guidelines. Here are five rules every consumer should follow so their finances and their credit score remains intact.
1. Make payments on time
Image: SquiffyEye
Stellar payment histories are key when it comes to establishing a good credit score. They account for the largest percentage of all components used to calculate most credit scoring models and one missed bill will certainly cost you. As this FICO study illustrates, a recent late payment can cause as much as a 90-110 point drop on a FICO score of 780 or higher. Missed bills can also do big damage to your wallet since balances are typically subject to penalty annual percentage rates and late payment fees.
To avoid both pitfalls, it’s a good idea to set up auto pay on car, student or home loans so you don’t miss a payment. In terms of credit cards, while it’s always a good idea to pay off everything you owe, make sure at least minimum payments are made before the monthly bill’s due date.
Additionally, “if you have problems paying bills on time, don’t get a credit card,” says Karen Carlson, director of education for non-profit agency InCharge Debt Solutions.
[Free Resource: Check your credit score and report card for free before applying for a credit card]
Next: Don’t bump against your credit limit »
Jeanine Skowronski Personal finance reporter and credit expert, Jeanine's work has been featured by TheStreet, Newsweek, Business Insider, Yahoo Finance, MSN, Fox Business, Forbes, CNBC and various other online publications. She has previously served as the managing editor of a small personal finance blog for Xanga.com and an editorial assistant at Maxim Fashion magazine. @JeanineSko
Follow Us
