Get Your Credit Cards and Credit Score Under Control!

Debt . An ingenious substitute for the chain and whip of the slavedriver.
~Ambrose Bierce, The Devil's Dictionary, 1911

Credit card debt for even those of us lucky enough to remain employed can be a massive financial yoke around our necks in the present and a destroyer of wealth for those you would leave something to as inheritance.

Managing your most expensive type of debt is the first step is to attacking any debt challenges you may have. Remember driving down your debt helps to give you access to lenders who see you more favorably and are more inclined to give you a lower interest rate.

Contact www.AnnualCreditReport.com and get your free annual credit report. The three bureaus are Equifax, Transunion, and Experian. Review all of them for correct reporting and any errors.

MyFico or Truecredit will also provide this information on an ongoing basis and will cost about $15 or 16 monthly.

Steps to Take Charge

Pay Your Bills on Time.

Most companies you do business with will not report your overdue bill to ratings companies BUT the collection agencies they hire will. I found this out the hard way, so I'm speaking from personal experience as a disputed $150 bill drove my score under 700. It took some concentrated work on my part to get it corrected.

Don't Max Out Credit Lines.

Keep your credit card balances below 50% of your available limit. If you are a good steward of your finances but for business reasons have to occasionally go beyond 50%, then apply to your lender for a higher threshold so you stay below 50% but are still able to pay on time and not get behind.

The best strategy of all is to make small purchases and pay the entire bill each month. This improves your credit score dramatically.

Keep Old Credit Accounts.

Have open accounts you don't use? Destroy the card but don't close the account. It adds to your "stable" credit history by showing well managed and existing credit.

Limit new inquiries for other credit cards, loans, cell phones, or anything that your credit can be checked for. Your credit doesn't take a "ding" if you use MyFico or TrueCredit to check for yourself.

ControlYourCredit.gov is a website that can counsel you on debt management strategies. There is a long video intro that you can access to play a credit game (yes, it is true). You can skip the video after you get to the black and white screen and go to the information only section.

More Credit Card Management Strategies

• Frequently check BankRate.com for bank and credit card interest rates as well as excellent advice on any type of debt management and credit issue. You want the lowest rates available. But exercise due diligence. Credit card and loan
  interest rates are changing rapidly so you need to make it a point to check your cards each month to be sure that your interest rate is still what you think it is.
• The Credit Card Act of 2009 is intended to protect consumers and is vigorously opposed by banks and lenders. This is a sure sign it is good for consumers. Yahoo Finance has a great section on credit cards and the rules under their Banking and Budgeting section. CNN Money also has a good explanation. If you really want to drill down go here to read the entire bill. In addition you can use The Library of Congress website for advanced research if you really want and need to know what is going on in the credit world.
• Send extra payments when possible to accelerate debt reduction on high interest cards. Once those cards are paid off, quit using them.
• Enter credit card charges in your check register or other record. Don't just stuff your receipt in your wallet and think that you will record the amount when you have time. In other words make sure you are keeping a record of what you spend even if it is credit card and treat it like a checking account instead of "free money". You will find yourself being more conscious and careful of how you spend each month.
• Benefit from credit card rewards. Buy what you need and pay off your balance in its entirety every month. This is a great way for the disciplined money manager to get travel points or other rewards linked to some cards.
• Protect yourself from problems by reporting bad merchandise immediately and ask the credit card company to withhold the transaction until the matter is resolved. I have found American Express to be the best at this.
• Choose your card wisely and only charge what you can pay for in full when the bill is due.
• Manage your transactions electronically and use a money management program such as Quicken .
• Use protections available for your credit cards so you are not liable for fraudulent transactions. Ask the card issuer or bank what your rights are.
• Don't swipe your card anyplace that looks suspicious and always double check your purchases if you use your card frequently in places such as restaurants where it is taken out of your sight to be processed. I check my transactions regularly online don't wait for the statement to come. Don't forget you have only $50 liability with a credit or charge card but all of your cash can be accessed through a debit card. It just takes one moment of inattention to have your bank account wiped out or badly depleted, depending on the amount of time the card has been in somebody
  else's hands.
• I only use debit cards to withdraw money and never give it to someone who will take it out of my sight for processing. Use common sense logic with your debit and credit cards.

© 2009 THJ & Associates, LLC