10 things you can do to manage credit
10 things you can do to manage credit
Financial Health
October 12, 2015

10 things you can do to manage credit

For national Get Smart About Credit month, Wells Fargo’s Gary Korotzer shares his tips on how you can manage credit.

Think of the last time you bought a cell phone. In today’s technology climate, it probably wasn’t long ago. Before they handed you that shiny new device, chances are they ran a check on your credit history before the sale was approved.

This is just one example of how credit plays an important role in everyday life. But how do you learn how to manage credit?

At a young age, I learned from my mom when I should borrow and when I shouldn’t. I also learned about the consequences when I couldn’t pay bills on time — lessons I’m now passing on to my own children. These include 10 simple tips to manage credit and get smarter about credit management no matter what stage of life you’re in.

10 things you can do to manage credit
  1. Monitor your credit regularly – Make sure you stay on top of your credit history and check all three credit bureaus annually.
  2. Know your credit limits – Avoid being close to or maxing out your credit limits, which may negatively affect your credit score.
  3. Know that good scores equal good rates – Remember: Better credit scores may get you better credit interest rates.
  4. Don’t make late payments – Pay on time. The first missed payment has the largest impact on a credit score, so don’t miss payments. If you are late, don’t be 30 days late, and if you have difficulty, call your lender.
  5. Know your debt-to-income ratio – Since lenders look at the amount of debt you have compared to your monthly income, try to keep your debt-to-income ratio under 35 percent.
  6. Start with a college or secured credit card – If you need to establish credit, consider a secured credit card or a college credit card, which may be a good way to start.
  7. Pay down highest interest rates first – When trying to pay down your debt, pay down your debt with the highest interest rate first.
  8. Live within your means – Set a budget and live within your means to avoid using credit and overextending yourself financially.
  9. Pay more than the minimum – As much as you can, pay more than the minimum due on your credit card, which helps you pay down debt faster and can improve your credit score.
  10. Set up account and autopay alerts – Set up email and text alerts, as well as autopay, to help ensure that you pay your bills on time and build a positive credit history.

One of my favorite parts of working at Wells Fargo is that I have the opportunity to help people build their credit knowledge and confidence in a smart way. There are a lot of benefits to having good credit. By practicing good habits and learning about credit, you can reach your financial goals.

It’s important to start early to develop good credit habits. That’s why, when our oldest son was a senior in high school last year, we got him a credit card: He needed to know how to use one responsibly before going off on his own.

At first, he didn’t understand how to use it or how to read his monthly credit card statement. So we sat down with him for a couple of months after he opened the account, read through his statement together, and explained interest charges and the importance of making payments on time, among other things.

I recommend that other parents do this, too. All too often we hear stories of kids who go to college, open several credit cards without understanding how to responsibly use them, then end up in serious debt. Sitting down with your kids to talk about credit is crucial – it’s a teachable moment to ensure they have a solid understanding about credit and how to use it wisely.

While I use my son as an example, I realize credit issues and questions exist for every generation, which is one reason Wells Fargo supports Get Smart About Credit Month – a time we focus on conversations about credit in the communities we serve.

For more information about ways to establish or improve credit – or better manage debt – visit Wells Fargo’s Smarter Credit™ Center online or take the courses available from our free Hands on Banking® financial education program.