Managing Your Credit

Credit Card Debt Management

Credit is a wonderful and powerful tool that comes with benefits and responsibilities. Establishing credit and your subsequent credit history and credit score will allow you access to credit cards, private student loans, auto loans and will eventually affect the size of the house you will be approved to purchase. That's why it's imperative to take proper steps towards credit card management and you can do this on your own or with the help of a debt management program. Knowing how to manage your debt will help you increase your credit score and will make financial opportunities available to you. And it all starts with the FICO score.

Your annual credit report gives banks your FICO score, which is a numeric value that indicates how reliable you will be as a borrower. Your score will be affected by your credit activity, including how much you spend, how much you pay back, how often you pay your bills, and how many credit cards you open up. Prudent credit card debt management is an easy way to boost your FICO score.

A good credit rating is so important because it can either save you money or cost you money. And how you manage your credit card debt directly affects your credit score. A good credit score indicates to banks that you are a reliable borrower and can be trusted with loans. It is also the key to obtaining the best interest rates possible for credit cards and loans of all types. An individual who has a good credit score will get a much lower interest rate than someone with a questionable or unfavorable credit history. And when you're dealing with big-ticket items like student loans, auto loans, or mortgages, a lower interest rate can mean thousands of dollars. Need helpful credit card debt management tips? Follow the steps Student Finance Domain has outlined below to start building your credit history the right way.

Five Easy Steps to Credit Card Management

Keeping your credit card debt in check is easy once you know the facts. The seemingly little things that you do with your credit can actually make a huge difference with your credit score.

First off, you should limit the number of credit accounts you have open at any one point. It's easy to lose track of how many accounts you have when every retail store you walk into entices you with 15% off your purchase for opening an account. While that may save you a quick $15 or so, it might have a detrimental effect on your credit report. Because when many companies check your credit within a certain period of time it sends a red flag to other creditors that you might be in financial straits and headed for deep credit card debt.

The second thing you should avoid is the 0% interest balance transfer game. While you can save a great deal of money if you carry a hefty credit card debt and transfer your balance to a card that doesn't charge you interest for a year, constantly switching indicates that you may not have the ability to pay for what you've already purchased. And that is not a good signal to send. You also need to read the fine print and see if the transfer fees you will most likely incur will be more or less than the interest you will be saving. The bottom line is that 0% interest deals can be a good decision, if used wisely and infrequently as part of your overall credit card debt management plan.

The most important step you can take to manage your credit and credit card debt wisely is to pay your bills on time. You should be paying at least the minimum payment amount every month. If you are late with a payment your creditor can report it and it will be noted in your credit history. This can have a snowball effect that increases interest rates across all of your accounts, so avoid this at all costs. If necessary, you can call your credit card company and ask for an extension. Most times you will not be granted one, but occasionally you might find a nice telephone rep who is in a helpful and giving mood. It never hurts to ask. And on the occasion that you have a little extra cash to pay your monthly bills, and you have balances on more than one card, be sure to send the additional funds to the card with the highest interest rate. That's a credit card management tactic that will always save you money.

It may seem like a contradiction to what you've just read, but paying your credit card bills in their entirety each month won't do much to build your credit either. Although it's wonderful to have the ability to pay your bills in full, it doesn't show that you can handle the responsibility of having credit. Because when you pay your bills in full, you're not really using the credit you've been extended. And let's face it, the credit card companies don't make much money off consumers who don't amass any credit card debt, so it's not really in their best interest to grant high lines of credit to those consumers. Your best bet to build credit is to pay the most that you can afford each month, while leaving a small balance on your account to help boost your credit score.

If you follow the credit card management steps above, you should be well on your way to establishing a healthy credit history. But like your own health, it's important to check the health of your credit at least annually. And since the federal government has now mandated that the three major credit reporting agencies provide consumers with one free credit report per year, there's no time like the present. The free reports from Equifax, Experian and TransUnion are available at www.annualcreditreport.com. It's important to note that you will not receive a free report if you contact the agencies directly. When you receive the reports, be sure to examine them thoroughly and correct any mistakes that are listed, close any accounts that you no longer use, and look for activity that could indicate that you've been the victim of identity theft.