Understanding the ins and outs of credit is easier said than done, but following some basic steps can get you on the path to success. Use this list of credit dos and don’ts to help you get started.
- DO know the power of credit. Creditors look at your credit history as an indication of your future financial behavior. by using credit wisely, you can build a good credit history — making it easier to get loans with low interest rates, rent an apartment, purchase a car or home, and may even help you get a job.
- DO read the fine print on credit applications. An application is a contract, so read it carefully before signing. Credit card companies are very competitive, so interest rates, credit limits, grace periods, annual fees, terms and conditions may apply.
- DO pay at least the minimum due on your bills and contact your creditor if you have trouble making payments. This will help you avoid late fees and a rising APR (annual percentage rate). To pay off your balance more quickly, pay more than the minimum due. If you are unable to make the minimum monthly payments, let your creditor know so they can work with you to create a more manageable payment plan.
- DO be wary of anyone who claims they can “fix” your credit report. No one can legally remove negative accurate information from your credit history. The only thing that fix a credit report is time and a positive payment history.
- DO order a copy of your credit report annually. You have the right to know what is in your credit report. The Fair Credit Reporting Act requires each of the three major credit bureaus to provide you with a free copy of your credit report at your request each year. Your credit reflects upon you as a borrower and needs to be accurate.
- DON’T spend more than you can afford. Credit is a loan and has to be repaid. It is your responsibility to manage your debts and to keep your commitment with lenders. Avoid reaching your credit limit or “maxing out” your cards.
- DON’T be late to pay your bills. Late payments can affect your credit rating and increase your balance. If you are unable to pay the minimum monthly payment, let your creditor know to see if adjustments can be made to your payment plan.
- DON’T ignore the warning signs of credit trouble. If you consistently pay only the minimum balance, pay late, use cash-advances to fund daily living expenses or transfer a lot of balances, you might be in the “credit” danger zone. Talk to a financial counseling organization to regain control of your finances.
- DON’Tshare your credit card number. Never give out credit card or personal information if you have not initiated the transaction. Be aware of identity theft and phishing scams that ask for credit card numbers. If you suspect that your identity has been compromised, file a complaint with the Federal Trade Commission.
These tips are provided by Iowa State Bank in partnership with the Iowa Bankers Association. If you have specific questions about the use of credit, contact your local banker at Iowa State Bank. Iowa State Bank is an Equal Opportunity Lender. Member FDIC.