Using credit in unthinking ways can be devastating to your finances for many years after the initial action has occurred. A minor credit mistake can cause a significant drop in your credit score, causing you to be charged more for a wide variety of financial products, including credit cards, loans, and insurance. If your credit score falls far enough, it can affect your ability to get a job, obtain a promotion, or get an apartment. It is important to always use credit wisely to ensure that your finances are protected and you are not paying more than necessary for financial products. Here are some tips for using credit wisely.
Only Obtain Credit Cards And Loans When Necessary
Many people make the mistake of applying for nearly every financial product that is offered to them. From mailed offers for car loans and credit cards to shop clerks asking you to sign up for store credit cards when you check out, people with decent credit encounter offers for more credit every week. Applying for additional credit that you don’t need can hurt your credit more than it helps. Your credit score will drop a few points for each application you submit and the new credit products may come with fees and interest rates that cost you a significant amount of money. Even a loan against structured settlement payments has fees associated with it. It is much better to count your pennies and take a loan only if needed.
Check Your Credit Report Regularly
Another thing that people should do more often to safeguard their credit is check their credit report on a regular basis. Checking your credit report will show you any negative or incorrect information that has been added to your credit history by creditors. It is estimated that nearly 25 percent of us have errors on our credit reports. If any incorrect information is found, you can have it corrected by calling the creditor or the credit bureau that issued the report and stating your case. Every person can obtain one free copy of their credit report annually from each of the three major credit bureaus by going to www.annualcreditreport.com and filling in your information.
Only Charge What You Can Afford To Repay Quickly
Carrying a balance on your credit card is a great way to spend hundreds of dollars on interest payments every year. In many cases, people pay much more in interest than the original item cost to buy because they only pay the minimum on their credit card and carry a balance for years. To ensure that you do not waste a ton of money on interest payments or accumulate large amounts of credit card debt, you should only charge what you can afford to repay within a month or two of making the purchase.