5. Smart Steps to Avoid Credit Trouble

  • Set up a household budget to monitor and guide your spending patterns. Look at your total monthly income and expenses. If your expenses are too high compared to your income, it's time to find new sources of income, cut your expenses…and sometimes both.
  • Build an emergency fund. Keep three to six months' worth of expenses in a money-market or savings account that you can access easily. Having that extra money available can help you avoid building up high-interest credit-card debt if you end up with unexpected expenses. Keep this money separate form your checking account so you don't raid it for your regular bills.
  • Correctly prioritize your payments. Pay your rent or mortgage and high interest rate balances first. If possible, transfer a balance from one credit card to another card with a lower interest rate.
  • Make extra payments whenever possible. Extra payments can dramatically shorten the time it takes to pay down a balance, and will save you money on interest charges.
  • Cut back extra expenses. Be honest with yourself and identify the things you are buying that might really be ‘discretionary,' and then commit to a personal plan to eliminate them or trim them back. Over a span of weeks and months, those amounts can add up to a considerable amount.
  • Automate your payments and/or set up monthly reminders. [See above Tip]
Next »