Managing Your Money Better

Your good credit is like your good name. You need to protect it carefully. A bad credit history can follow you for years, making it difficult for you to borrow money when you need it.

You can best protect your credit by paying your bills on time. This means creating and living within a budget.Your credit history is contained within a credit report. You can obtain a copy of this report to insure the information contained on it is correct.


9 Rules for Protecting Your Credit


Rule1: Pay your bills on time.

Rule2: Establish a budget and live within it.

Rule3: Limit the number of credit cards you have.

Rule 4: Don’t apply for too many credit cards at the same time.

Rule 5: Be careful if you must borrow to get out of debt.

Rule 6: Shop around for the best deal.

Rule 7: Don’t increase your debt burden to pay off debts.

Rule 8: Don’t pay a finder’s fee to get a loan.

Rule 9: Don’t call 900 numbers to get a loan.


Late Payments


One of the fastest ways to screw up your credit rating is through late payments. First of all, if the late payment is on a credit card, you’ll suddenly find your interest rates going up. Don’t think the credit card company can do it? Check the fine print on the credit agreement they send you from time to time with your credit card bill. You’ll discover it’s all there in the fine print.

But that’s only the start. Credit card companies report to the Credit Reporting Agency when you account goes more than 30 days in arrears. Any other creditor looking at your report may raise its interest rates on your card. Their justification? That if you’re in trouble with one card, you may soon be in trouble with theirs.

It doesn’t’ stop there. Next your auto insurer gets in the act. The statistics show that people with poor credit ratings are more likely to get in accidents. As a result, auto insurance underwriters consider them greater risks. The result: your auto insurance goes up – or you may find it harder to get insurance.


Here’s how to reduce your chances of a late payment:


Pay bills immediately – the minute they arrive.

  • Write out a monthly payment schedule. List of all of your accounts. Mark in their due dates, minimum payments, current balances and credit limits.
  • Keep track of all accounts carefully. Pay attention to when balances and minimum payments are going up. This is especially important during the holiday season and on vacations, when credit card spending is often higher than usual. Monitoring where you’re at now prevents you from having a nasty shock later.
  • Look at your cash flow. Your cash flow is the amount of income you have coming in at any one time to cover the amount going out at the same time. If there’s not enough money to cover an account’s bill when it falls due, call the issuer and ask them to change the due date to a time of month when cash is not tight.
  • At least once a year check your credit report. Report any errors to the Credit Reporting Agency and have them corrected.


Re-Establishing Your Credit


You’ll see an occasional ad promising to fix a bad credit history. Don’t be misled by this scam. There is no way to repair a bad credit history. Only time and 7 years of paying your bills promptly will fix your credit.


Wise Loan Shopping


Not all loans and credit cards are alike. Remember, if you take out a loan for $1000 you will not have to pay back just the $1000. You will also have to pay back all the interest over the term of the loan. So total cost of the money you borrowed will equal the original $1000 plus all the interest payments you made as well.

The amount of interest you pay, the size of your payments, and the length, or term, of your loan can make a big difference how much the loan costs you in the end.

When you borrow, shop around for the best deal.How Your Monthly Payment Is Determined

Four things influence how much the money you borrow costs in the end:

  1. Annual Percentage Rate The amount you pay to borrow is quoted in many ways. But the only one that matters is APR. This is the true amount of interest you’ll pay per year, plus any fees divided by the term of the loan.
  2. Length (Term) of LoanThe longer it takes to pay off a loan, the more interest you will pay.
  3. Size of Payment The larger your monthly payment, the faster you’ll eat away at the principal of the loan-and the faster it will be paid off. The faster it is paid off, the less total interest you pay.
  4. Original Amount Of The Loan Even if all the terms are highly favorable, the more you borrow, the more you’ll still end up paying. It costs more in cold cash to borrow $100,000 than it does $1000.


Smart Loan Shopping Tips


Tip 1: Limit your borrowing to the amount you really need. Save for what you want, rather than borrowing to have it now.

Tip 2: Pay off your loan as rapidly as you can.

Tip 3: Select the highest monthly payment you can afford.

Tip 4: Choose the lowest APR you can find