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Creating Good Credit

It’s good to think of consumer credit as a privilege—one that will be granted judiciously in your early adult years and then will expand over time as you demonstrate that you can handle it responsibly.

  1. angelic advice - use it wisely
  2. on time and on budget - punctuality is a virtue
  3. the minimum maxim - words to live by
  4. keep in touch

  1. The beauty of budgeting
    Take time to establish a monthly budget for yourself, one that in- cludes realistic figures for card payments. Monitor your bills and compare them to your budget every month, making spending adjustments when necessary.
    To avoid overextending yourself, keep your monthly debt obligation below 10 percent of your monthly net income (after taxes). For example, if your net income is $800 a month, your monthly loan payments shouldn’t be over $80. That includes your credit card payment, because your card is a loan, after all.
    Preparing for planned and unexpected expenses is the best way to guarantee that your credit history remains strong and unblemished over time.
     
  2. Be ontine, every time
    When a bill or Visa® card statement arrives at your home, the most important item to notice is the payment due date.
    Whether you choose to make the minimum payment or pay the total outstanding balance, your payment must reach the financial institution or business by the payment due date. Otherwise, it is considered a late payment and will probably appear as such on your credit history. Late payments can also be more expensive, incurring penalties, extra fees, or additional finance charges.
    If an account due date consistently falls at an inconvenient time of the month (a week before payday, perhaps) contact the organization to see if they can change your billing cycle. Or adjust your budget accordingly.
     
  3. Learn the minimum maxim
    The minimum payment shown on your Visa statement is just that—the minimum that the lending institution will accept for that specific month.
    Always be prepared to make at least the minimum payment.
    If you wish to reduce your finance charges, or plan to make a number of additional purchases in the coming month, consider paying a larger amount.
     
    Limit your limit
    The credit limit shown on your statement is the maximum amount that the institution that issued your card is prepared to lend you, based on your income and credit history.
    Avoid spending to your limit. It’s a good idea to set aside a portion of your available credit so you have it for emergencies like car repairs or unplanned medical costs. Although many lenders will consider increasing your limit upon request, a roadside garage is not the most comfortable place to make this call.
    Spending over your limit is usually considered a violation of your account agreement and may incur additional fees or penalties, or the freezing or cancellation of your account.
     
  4. Keep in touch
    If you change your name, address, or job, notify your lending institution immediately. Your payment could turn into a late payment in the time it takes for a statement to be forwarded to your new address by the postal service. Send your updated information before the fact, not after.
    Also, contact your lender if you cannot make a payment on your account for any reason. Special payment options or agreements may be arranged that will satisfy both you and your lender, while keeping your good credit history intact.
     
    Use your credit
    How you handle your bank accounts and other responsibilities may affect your credit- worthiness, so the best way to establish a credit history is to actually “exercise” the credit already given to you.
    Use your credit responsibly. And be especially sensitive to the payment agreements you made when you established your accounts.

 


Since December 1999 - last modified: February 22, 2012