Techniques for Credit Management

Credit can be a blessing or a curse. You can make purchases without cash and pay for them over time when you have a high credit score. Unfortunately, you may overuse credit. You can quickly sink into debt if you overuse credit and destroy that high credit score. Wise credit management techniques can keep that from happening.

Don't Carry Balances

Spend only as much as you can pay in full each month. You won't pay any interest if you don't carry a balance on your credit cards. Instead, you use the bank's money for up to a month before repaying it. This strategy is especially effect if you use a rewards card that gives you redeemable points, frequent flier miles or cash rebates whenever you use it. The bank ends up paying you to use its money.

Reduce High Balances

Focus on your highest credit card and loan balances if you cannot afford to pay off all your credit cards each month. Bank of America advises paying as much as possible over the minimum monthly payment. This increases the amount that goes directly toward reducing the balance rather than simply paying the interest charges. Refocus your attention on your next highest balance once you completely pay off an account.

Limit Credit Card Use

Don't use credit cards just because you have them. Use only one or two cards regularly. Choose the ones with the best rewards if you pay them off every month, or the lowest interest rate if you plan to carry a balance. Don't close your other accounts because that can lower your credit score. Financial expert Clark Howard advises using each card twice a year for small transactions to prevent the banks from closing accounts for inactivity.

Make Big Down Payments

Bank of America states you should save as much money as possible before taking out a loan to buy a car or another big-ticket item. Use the funds for a down payment to reduce the financed amount. This will reduce your interest payments and allow you to pay off the loan more rapidly.

Be Organized

You bring down your credit score every time you miss a payment or send one in late. This can happen even if you have enough money to pay your bills. College Recruiter warns that you might misplace statements or overlook due dates if you are not organized. Set up electronic payments if your bank allows you to do so. Otherwise, set up an organized system for paying bills on time each month.