The first place to start with being credit smart is to draw up a budget of your monthly income and expenditures. Establishing good habits from the start will determine how you end financially.
We all know, it’s not how you start, but how you finish!
Knowing the limitations of your income and spending within your means is crucial to credit health. Be smart about the way you use credit and keep a record of your spending habits. Decide how much you need to spend for monthly items and establish a weekly budget in the beginning.
Live within this budget until it becomes a habit and you are likely to minimize financial stress in this respect.
Tips to Keep a Healthy Credit Record
If you haven’t developed good budgeting behavior previously, now is the time to start. As a credit card user your first task is to obtain a credit report.
This report will provide a breakdown of your debts, who you owe, how much you owe and whether your repayment status is healthy or not.
Do this at least once a year. Your credit record will also show your score indicating how safe or risky it is to loan you money. A complete and accurate credit record is important for both you and financial entities.
This means that you need to provide information that is consistent when applying for credit, whether at your bank or a general store. Supplying the same address, identity information, contact details and employment information is necessary to maintain credibility.
If you have changed any of these details, then update all your creditors to avoid raising suspicions.
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Use Credit Facilities with Care
You do need to open credit facilities but do this sparingly and with caution. Open only a few accounts of different varieties. These may include a credit card, clothing store, car purchase and so forth.
Be sure to keep the balances low. Pay your bills on time and the full installment every month.
Having too much credit will also start to raise eyebrows as this will mean you are possibly living above your means and will pose a risk.
This type of risk will increase the interest rate at which you will be afforded credit. It is also advisable to close accounts with care as this may up your utilization rate.
If you have a credit limit of $3000 for example and you have used $1500, your utilization rate is 50%. Closing an account therefore needs to take this rate into account as it can affect your credit score.
The Foundations of Being Credit Smart
Stick to the simple rules of budgeting, opening and closing accounts with caution. Pay the full installments on your accounts as required.
Spend sparingly with credit facilities and preferably settle your credit card every month. Live within your budget and use your credit for emergencies only if at all possible.
This is how to maintain a good credit record and remain credit smart for a lifetime.