Living with credit, Protecting yourself, Shopping

Fantastic credit advice you’re not following (but should)

Erica Sandberg

As a longtime credit expert, counselor and writer, I sometimes feel as if  I’m just wasting my breath. Do this, do that; don’t do this, don’t do that. And then what happens? Radio silence.

Look, I get it. Some credit tasks are boring (reading card agreements) or annoying (creating and sticking to a budget), but these tasks are important. If you just do a few simple things,  you’ll get the most out of your money and credit cards.

I challenge you to become an outlier. Be that rare person who takes the fantastic advice below and puts into practice. OK, let’s go! Here is a five-step plan to a better credit score and healthier bank account:

1. Read your credit card agreements.
A paltry 26 percent of cardholders actually read the contracts that they signed, a 2016 study found. That’s madness.

Imagine you’re a prospective tenant and the building owner hands you a lease agreement. Surely you would read it to find out when the rent is due, if you’re allowed to paint, what you are responsible for regarding repairs, etc.

It’s the same with your credit cards. You need to know what you’re getting into, because if you’re approved, you accept those terms. After you get your card, there’s little you can do about it if things go awry.

Review the application carefully. If you have any questions regarding the contract, contact the issuer and ask for clarification before you sign up for the card.

2. Develop a credit-healthy budget.
Not quite a third of Americans understand how much money is coming in and going out of their lives, a 2013 Gallup survey found.

With no handle on your finances, when a shortfall occurs, you may turn to your plastic when youre out of cash. Instead, develop a livable budget.

Budgeting doesn’t have to be difficult. You can create a complicated spreadsheet, but the paper and pencil method is just fine.

Right now, jot down how much is coming in on a monthly basis (after all taxes and deductions). Then list all the things you pay for regularly (mortgage/rent, insurance, cellphone, groceries, gas, etc.) Subtract your total expenses from your income to see where you stand.

If you’re in debt, a budget helps you to see why you’re never getting ahead, so you can craft a plan to pare expenses and pay off bills. Adjust your income or expenses so you greatly reduce your chances of getting into debt again.

3. Redeem rewards points to get out of town.
The majority of people who get rewards cards claim they wanted to use the points for travel, Yet only 7 percent used the points for any part of their last vacation, the American Institute of CPAs says.

What a waste! If you could pay less for your next great vacation by using your rewards points, why aren’t you?

This is an easy problem to fix and a simple strategy to adopt. Consider all the places you have longed to visit, make a decision, and then use the points or miles you’ve accumulated on your credit card to reduce the cost.

Another reason not to hoard your points? Credit card rewards programs change. You don’t want to find that you’ve stashed a ton of points that have lost value in the wake of some merger of hotel or airline partners.

4. Don’t overspend on the holidays.
Every year experts warn against spending more money than makes sense during the holidays, and every year we blow our budgets.

An astonishing 78 percent overdo it, according to TD Bank’s Holiday Spending Survey, and the extra shopping usually translates into bigger than anticipated credit card balances.

You don’t have to have a holiday credit hangover this time next year. Listen to those who promote financial prudence, as well as your own inner voice that says, “Stop! You’re done spending!”

Act now. With just under a year to go to plan how you will curb your holiday expenses and stick to your holiday budget, you likely will be in a better financial position when 2018 rolls around. You can do this!

5. Understand how credit scores work.
The good news: As recommended, most consumers are checking their credit reports, TransUnion says. The bad news: They’re wrong about key points regarding scoring because most consumers are stuck on persistent myths.

For example, if you erroneously think that holding high balances on your credit cards will help your credit score (as long as your payments are on time), you’re in the majority.

Just over half of Americans are confused about credit scores, Bankrate’s Money Pulse Survey found, even though the right information is here on (and elsewhere, of course).

To understand how credit scores work – and how to boost your score, study up on credit so you can pump up your scores.

I don’t know why so many of us ignore fantastic credit and financial advice. I assure you, though, that each of the above tasks is simple and requires surprisingly little time. The end result is you’ll be on your way to less debt, more savings, a dream vacation that cost you less, and a credit score that’s climbing.

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