7 Most Important Credit Rules
- Don’t Even use it! If possible, save for a purchase instead of using credit. Avoid credit unless it is absolutely necessary.
- Ensure that your Total Debt Service (TDS) ratio is manageable. TDS is the percent of your income needed to cover all of your monthly debts. Most credit institutions set limits of around 40% of net income for TDS. For example, if your gross income is $2,000 a month, monthly payments on your loans, credit cards, and mortgage or rent should not exceed $800 a month.
- Get Prepared: If you think you will be needing credit in the future, try to prepare for it in advance. If you wait too long, your flexibility will be reduced and you will probably end up paying a higher interest rate.
- Try A Loan: Get a bank loan instead of credit, if you think it will take you more than a few months to pay of your credit card debt.
- Look Closely! Read the terms and services of your credit card, and look out for hidden costs, such as credit card fees and prepayment penalties. Find out what each creditor offers and find the best option for you. Remember that each lending institution is trying to sell you a service.
- Make Your Payments On Schedule! If you are not able to make your payments on time, contact your creditors and try to come to an arrangement. This way, your credit rating will not be so greatly affected.
- Keep It Simple! Do not apply for multiple sources of credit, this can lead to over borrowing and you can find yourself in over your head!