Advice and Help for Credit and Debt

The American society has been inundated with credit and debt instruments for so long that as of January 2010, Americans have approximately 1.2 billion bank and retailer issued credit cards. Many Americans are able to manage their debt in a responsible fashion; others, however, seem to be unable to handle credit and debt instruments responsibly.

Create An Emergency Fund

Emergencies are a major reason that credit cards are used. From unexpected car repairs to unplanned health care expenses, emergencies seem to present people with a financial dilemma. Personal finance guru Dave Ramsey recommends that people create an emergency fund of at least $1,000. This recommendation helps people pay for emergencies with cash instead of using a credit card. Preventing credit use is the most effective way of managing credit and debt. The ideal emergency fund will be comprised of at least three to six months of expenses.

Pay Off Credit Cards

Many people use their credit cards extensively but only pay the minimum payment. Cardholders are not able to gain traction in paying off their account by paying only the minimum payment, as the credit card company has designed the minimum payment to scarcely cover the interest charged on the account. People should make the goal of paying off their credit card a priority to better manage their credit and debt levels.

Avoid Pay Day Lenders

People often visit pay day lending businesses when they have a short term cash flow issue. A pay day lender is a company who lends small amounts of money at high interest rates up to 460 percent annually and with outlandish service fees. People who are serious about managing their credit should stay away from these companies, as the cost of credit will most likely outweigh any short term benefit the pay day loan may provide.

Check Credit Report

People should check their credit report on a regular basis to ensure that all of their credit accounts are reported accurately. Most credit reports will rate the account holder as to their history and ability to pay their debt. This rating, known as a credit rating, or FICO score, is often used by lenders and credit issuers when making a decision to extend credit. Items that are reported incorrectly can have devastating effects on an individual's credit rating, hampering that person's ability to manage their credit accounts. Most people in the United States can obtain at least three free credit reports per year.