Sun. Oct 24th, 2021
How to Manage Credit effectively

Managing credit should supposedly come naturally if individuals know how to manage their money. However, a credit.com survey revealed that 50% of the people who have access to their credit reports, either have never read it or have not kept up with it for over a year.

Managing Credit Report

Credit reports are supposed to be the basic brickwork of financial literacy. In order to be a responsible consumer of credit, you need to be knowledgeable about where your money is going.

If customers have their credit reports on hand, they can understand where they fit into the credit system. Remaining unaware about your credit report might lead to surprises later. Customers who lack this awareness might find their application for credit being denied or be charged a higher interest rate to cover their bank’s risk.

In addition to this, keeping up to date with your credit report can help you spot credit discrepancies regularly and reduce the risk of identity theft.  But, what other steps should you take to manage your credit? Here are 5 easy tips to easily manage your credit.How to Manage Credit effectively

Tip 1: Spend Only a Small Portion of Your Available Credit

Banks are unpredictable and fussy. Using more credit from the banks would mean that your activities are being noticed by a higher number of creditors. Usually, spending above 35% of your available credit raises a red flag with the bank. Thus, it is advisable to limit your spending to 10% below the credit available to you. Ensure that you have an updated track record of your credit statement available with you always. The MyAccountAccess portal can be utilized to manage your statements and stay up to date.

If you have a tendency to max out your card, it is advised to fix this habit at the earliest possible. If your spending stays close to your credit limit for longer amounts of time, then your credit source is affected in inverse proportion with the same intensity.

Tip 2: Frequently Use Online Banking Tools and Reports to Monitor Account

Most consumers who are victims of identity theft are the ones who rarely bother to check their credit statements. Scammers are always on the lookout for gullible people who are unaware about their credit statements. Consumers who thoroughly read their credit reports are less likely to fall for identity thefts.

It is tiresome to read the credit report line-by-line and witness the high interest rate charged on unnecessary purchases. To reduce getting too close to your credit limit on your credit card accounts or worse reaching zero balance, open a bank account to keep some amount safe. Consider it a financial fund, where you do not touch the deposited money.

To make the financial fund work, you can deposit 10% of your salary every month in that account before doing anything else. You can buy essential items and pay off any debts with the leftover amount. Lastly, you can buy whatever you want from the remaining amount if you must but the financial fund should remain untouched.

Tip 3: Carefully Read Emails About Your Credit Card Statements

It should be a given that you open and read every mail you receive about your credit card. However, most of us may find it monotonous and dreadful. Counter that instinct and make it a discipline to read each mail regarding your credit card, with a special emphasis on the fine print.

Legally, banks and credit card companies are obliged to inform you if there are any changes or charges associated with your account. Though, the responsibility of being aware about those changes rests entirely on you. If you claim ignorance regarding the same, it might end up costing you a lot.

Tip 4: Treat Your Credit Portfolio Like an Investment Portfolio

Consider your credit limit with the same importance as you would an investment portfolio. Those with good credit risk have to pay less interest to their banks. This is because the bank considers the perceived risk associated with individuals having good credit scores to be less. Hence, they can be trusted more with the banks money. As a consequence, if you mess up your credit portfolio, chances are you’ll find it more difficult to deal with the bank.

Tip 5: Remember Credit Impacts Every Aspect of Your Life

Obtaining credit is a double-edged sword. If you mismanage it, you might end up incurring heavy losses and recovering from it might be an uphill battle. However, paying attention and maintaining a good credit will definitely make life smoother.

The Bottom Line

In the contemporary world, credit affects each aspect of our lives, be it buying a house or applying for student loans. In one way or another, all such decisions are affected by credit. Furthermore, even your insurance rates are influenced by your credit report. Better credit will allow you to pay low for various premiums, Higher credit score means a more trustworthy consumer. Thus, managing your credit well is a necessary life skill.

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