Credit tips & warning signs
When you use credit wisely, you prove your financial responsibility.
If you pay your bills on time, you'll build a good credit history - which will
make it easier for you to borrow again in the future. But if you don't pay your
bills as your creditors require, you could face credit problems for many years to come.
Build a credit history
- Establish a steady work record
- Pay all bills promptly
- Open a checking account and don't bounce checks
- Open a savings account and make regular deposits
- Apply for a local store credit and make regular monthly payments
- Apply for a small loan using your savings account as collateral
- Get a co-signer on a loan and pay back the loan as agreed
Avoid credit traps
- Know your income and expenses
- Make and use a spending plan
- Avoid spending more than you earn
- Make credit payments promptly
Ask before you take on credit
- What is the total dollar amount?
- How much is the monthly payment?
- What is the annual percentage rate?
- Are there insurance fees?
- Other fees?
- What is the total dollar cost of the credit?
- What will happen if I cannot pay?
- Can I afford this debt?
If you cannot pay
- Talk with your creditors
- Postpone further credit purchases
- Reduce living expenses
- Seek help from a non-profit Consumer Credit Counseling Services to develop a realistic budget and debt repayment plan
- Consider ways to increase income
- Use bankruptcy only as a last resort
If you're married
If you're married but do not have credit in your own name, write your creditors and
request it. Under the Equal Credit Opportunity Act, creditors must report credit history in both names when accounts are shared.
Credit danger signals
If you can answer "no" to the following questions, your credit's in excellent condition!
If you answer one or two questions with "yes," your credit behavior is pretty good, but
has a little room for improvement. If you answer "yes" to three or more questions, you may be headed for financial problems.
1. I do not know how much I owe.
2. I get a new loan to pay off an existing loan.
3. I would have an immediate financial problem if I lost my job.
4. My expenses have grown faster than my income.
5. I regularly dip into my savings to pay regular bills.
6. I spend more than 20% of my take-home pay on non-mortgage debt.
7. I pay only the minimum balance on my credit cards.
8. I keep moving debt from one credit card to another.
9. I am often notified by bill collectors or threatened with legal action on my debts.
If you're having difficulty making payments to your creditors, try adjusting your spending plan
by reducing your expenses or increasing your income. If you just don't see a way to do either, contact
your creditor to work out a solution.
You may also want to take advantage of consumer credit counseling services, which can help you work out a repayment
plan with creditors and work to improve your financial situation.
Call the Financial Insider Network Customer Service Center toll-free at 1-800-510-7033. HOURS: weekdays 7:00 A.M. - 8:00 P.M. (CST).