Criteria for Credit Management

Mismanaging credit card accounts can impact your finances for several years. For example, negative information regarding late payments can remain in your file for seven years and lower your credit score. People who have poor credit histories are usually given lower credit lines and charged higher interest rates because they're considered to be a greater financial risk. Managing your credit responsibly can save you money and headaches.

Interest Charges

Make a payment plan for your credit cards to avoid paying interest charges over a long period if you can't pay off the balances each month. The U.S. Credit Card Accountability, Responsibility and Disclosure (CARD) Act requires credit card companies to issue statements to customers that show them how long it would take to pay off their accounts if they just made the required minimum monthly payments. A U.S. Federal Reserve Board website provides this sobering example: A cardholder who has a balance of $3,000 with a 14.4 percent interest rate and makes a minimum monthly payment of $90 will need 11 years to pay off the balance if no other purchases are made with the card. Furthermore, the cardholder will pay $4,745 in interest over the 11-year period.

Fees

Get a handle on fees by making credit-card payments on time. Late-payment fees can run as high as $35 if one of your last six payments to your creditor was late. Opt out of allowing transactions that will take you over your credit limit. The CARD Act requires credit card companies to let cardholders decide if over-the-limit transactions will be allowed on their accounts. Your creditor has the right to charge you a fee if you allow such transactions and exceed your credit limit.

Credit Utilization

A "Kiplinger" magazine article titled "Boost Your Score" recommends using less than 25 percent of your available credit line on all of your credit cards. That's because about 30 percent of consumers' credit scores are based on how much debt they've accumulated, and large amounts of credit card debt can lower your score. The amount you charge on your cards in any given month could impact your score, even if you intend to quickly pay off the balances.

Considerations

The length of your credit history also can affect your credit score. The longer you maintain credit card accounts in good standing, the better it is for your score. Opening several new accounts in a short amount of time will lower the average length of time you've had all of your accounts. About 15 percent of consumers' credit scores are based on the length of their credit history.