1. Choose a card with a fee, high interest rate and poor customer service. Everyone uses credit differently. Those who pay off their balances at the end of each month may benefit from a rewards card with a reasonable annual fee. For those who plan to carry a balance from month to month, a low annual-percentage rate and no annual fee would probably work best. Shop around for the right credit card for you.
2. Make your payments a day late. The fastest way to lower your credit score is to make late payments on your credit accounts. It is important to come up with a system of paying your bills so that all payments are received on or ahead of time. Remember that your payment must reach your creditor before the due date and many do not post credits after 1 p.m. Late payment fees for credit card accounts are as high as $39 and add up very quickly.
3. Pay only the minimum payment. A mistake often made by consumers is that they believe they are doing OK with their credit cards as long as they can make the minimum payment. For anyone who has not done the math, paying the minimum is not OK. As an example, a credit card balance of $5,000 at 15 percent APR with a minimum payment of 2.5 percent would take more than 21 years to pay off and the amount paid would be $9,757.98. That is almost double the original balance!
4. Accumulate all the cards you can. The more cards you have, the more difficult it is to keep up with timely payments and how much you owe. Department and gas cards are convenient and often offer incentives for signing up such as an immediate discount or discounts on future purchases. However, one or two bank cards such as MasterCard or American Express are all that most people need. They can be used most places, offer better APRs and don't use up your credit availability.
5. Spend today; worry about how to pay it off tomorrow. The convenience of buying now and paying later sometimes gets the better of us. It may not seem like a $500 purchase when you hand the sales clerk a credit card as much as it does when you place $500 in cash on the counter. Be aware of the temptations of credit and ask yourself how you will pay off that $500 purchase. Have a plan in place to pay off purchases in no more than 90 days. To avoid impulse purchases, tell yourself that you will have to work for X number of days to pay for the item.
6. Use credit as additional income. Most of us get in trouble when we try to keep up with the Joneses. Do not purchase $200 tennis shoes for your child because they want them if you can only afford $50 tennis shoes. Having credit is not the same thing as having more income. Credit is only another way to spend the same income you already have! Live within or even below your means.
7. Share it with a friend who has none. This is not kindergarten lunchtime. If someone you know has no credit, don't share your cards with him or her for any reason. There is probably a real good reason why the person has no credit, like they don't pay their bills or they are chargeaholics! You share, you pay, don't do it!
8. Use cash advances from one card to pay another. It's hard to believe that people still do this, but it remains a big problem. This should be a wake up call that you are in serious debt trouble and need to seek help.
9. Hide debt from your spouse. After all, if your spouse doesn't know about it, it really doesn't exist! The very act of hiding something says you have made a mistake and are trying to cover it up. Money is in the top five list of things about which couples fight. If you are concealing a credit card balance from a spouse for whatever reason, come clean and discuss the debt and how you plan to pay it.
10. Ignore the problem. If you really want to foul up your credit, whistle in the wind and pretend the problem isn't there. It will only get worse the longer it is ignored. Credit counseling agencies are available to help you set a budget, manage your debt and educate you on money management skills. Remember it's not the person calling you to collect a balance who has a problem ... you do! Don't put it off, call today!
2. Make your payments a day late. The fastest way to lower your credit score is to make late payments on your credit accounts. It is important to come up with a system of paying your bills so that all payments are received on or ahead of time. Remember that your payment must reach your creditor before the due date and many do not post credits after 1 p.m. Late payment fees for credit card accounts are as high as $39 and add up very quickly.
3. Pay only the minimum payment. A mistake often made by consumers is that they believe they are doing OK with their credit cards as long as they can make the minimum payment. For anyone who has not done the math, paying the minimum is not OK. As an example, a credit card balance of $5,000 at 15 percent APR with a minimum payment of 2.5 percent would take more than 21 years to pay off and the amount paid would be $9,757.98. That is almost double the original balance!
4. Accumulate all the cards you can. The more cards you have, the more difficult it is to keep up with timely payments and how much you owe. Department and gas cards are convenient and often offer incentives for signing up such as an immediate discount or discounts on future purchases. However, one or two bank cards such as MasterCard or American Express are all that most people need. They can be used most places, offer better APRs and don't use up your credit availability.
5. Spend today; worry about how to pay it off tomorrow. The convenience of buying now and paying later sometimes gets the better of us. It may not seem like a $500 purchase when you hand the sales clerk a credit card as much as it does when you place $500 in cash on the counter. Be aware of the temptations of credit and ask yourself how you will pay off that $500 purchase. Have a plan in place to pay off purchases in no more than 90 days. To avoid impulse purchases, tell yourself that you will have to work for X number of days to pay for the item.
6. Use credit as additional income. Most of us get in trouble when we try to keep up with the Joneses. Do not purchase $200 tennis shoes for your child because they want them if you can only afford $50 tennis shoes. Having credit is not the same thing as having more income. Credit is only another way to spend the same income you already have! Live within or even below your means.
7. Share it with a friend who has none. This is not kindergarten lunchtime. If someone you know has no credit, don't share your cards with him or her for any reason. There is probably a real good reason why the person has no credit, like they don't pay their bills or they are chargeaholics! You share, you pay, don't do it!
8. Use cash advances from one card to pay another. It's hard to believe that people still do this, but it remains a big problem. This should be a wake up call that you are in serious debt trouble and need to seek help.
9. Hide debt from your spouse. After all, if your spouse doesn't know about it, it really doesn't exist! The very act of hiding something says you have made a mistake and are trying to cover it up. Money is in the top five list of things about which couples fight. If you are concealing a credit card balance from a spouse for whatever reason, come clean and discuss the debt and how you plan to pay it.
10. Ignore the problem. If you really want to foul up your credit, whistle in the wind and pretend the problem isn't there. It will only get worse the longer it is ignored. Credit counseling agencies are available to help you set a budget, manage your debt and educate you on money management skills. Remember it's not the person calling you to collect a balance who has a problem ... you do! Don't put it off, call today!
