Using credit wisely can go a long way toward allowing you to keep more of your money in your pocket. Here are some handy tips to help you stay in control of your credit and financial life:

  • Don’t pay extra for a gold card, or platinum card, or any other type of card if you’re not likely to utilize its special features. You certainly don’t need waste money (sometimes, quite substantial money) trying to impress your family or friends with the color of your credit card.
  • Interest rates on unpaid credit card balances are generally quite high when compared to the rates of other credit sources. If at all possible, don’t run up large balances on your card. If you have money in a savings account, it’s more financially advantageous to pay off those high-interest balances than to draw low interest earnings in savings.
  • If you normally pay the full balance of your credit card each month, you are in actuality receiving an interest-free loan from the card issuer (assuming that you have a grace period). Purchasing larger-ticket items a day or two after your card’s billing ending date can give you 50 to 55 days before you’ll have to pay for them.
  • Don’t apply for credit at several different sources within a short period of time, especially if you’re anticipating a major purchase soon (such as a home or car). Each creditor will access your credit report, causing an inquiry to be entered in your file. If rate shopping for a mortgage or car loan, concentrate your search within a 14-day period (the new FICO credit-scoring formula has extended that time to 45 days, but creditors can choose to use it or the old 14-day formula); all such inquiries are counted together as one inquiry.
  • Credit reports are use by employers to evaluate job applicants as well as by creditors evaluating loan applicants. It’s therefore worthwhile to check the contents of your credit file for accuracy even though you don’t plan on applying for credit in the near future. It’s also useful in pinpointing any signs of identity theft.
  • Cut down on your inventory of credit cards. The more cards you own, the more likely you are to end up using them and falling into a large credit hole. It’s also much more difficult keeping track of all of your spending.
  • Lenders are required by law to inform you of the cost of credit (interest and other fees) and the terms of repayment before you borrow any money. Make sure that they adhere to this rule; know what you’ll be responsible for paying.
  • Except in unusual circumstances, it’s wise to avoid the purchase of credit life insurance when you borrow. This insurance is generally very expensive for the coverage that you receive and is seldom (though not always) a bad deal.
  • If you live in a community property state, be aware that a creditor may consider your spouse’s credit history even if you’re applying for credit in your own name.
  • Arrange for financing before the time that you’ll actually need the funding; in other words, get a preapproval. Having a creditor’s loan commitment allows you to shop for the best deal on whatever it is that you’re buying. Conversely, being in a hurry to obtain a loan because you need to complete the purchase may cause you to accept whatever loan terms the lender offers.
  • (as a bonus) If you’re having trouble meeting your loan obligations, contact your creditors immediately. Most will be more than willing to work out a payment restructure that will allow you to fully repay your loan.

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