Credit Do's and Don'ts

Image courtesy of USA Today (Click to enlarge)
Moody’s Investors Service, said credit card charge-offs rose 48 percent in August, on Friday. And according to USA Today, Tighter credit standards are forcing many car buyers to put down more cash up front to get a loan. The average down payment last month was $3,108, up 42% from $2,194 in the same month two years ago as reported by Edmunds.com.

Image courtesy of Union-Tribune (Click to enlarge)
Here is some tips from Jennifer Davies and John Wilkens that suggest to the gentle readers what should be done and not be done as credit standard is being more tightened meanwhile consumer spending is getting squeeze :

1. Do keep your monthly credit card balances below 50 percent of your credit limits. Thirty percent is even better.


2. Don't be late on your credit card payments. If you are even a day late, it can damage your credit score in these tough economic times.


3. Don't hastily cancel bank credit cards. Fewer credit cards mean a lower credit limit, which could hurt your debt-to-credit ratio and shorten your credit history. The longer your (good) credit history, the better.


4. Do play hardball with credit card companies, pushing for better rates and higher limits. Threaten to take your business elsewhere (if you really can) to get the best deal.


5. Don't tell credit card companies you lost your job or have other hardships. “They don't care, and anything you say can and will be held against you,” says Scott Bilker, founder of debtsmart.com.


6. Do pick a credit repair company carefully. Most credit fixes you can do by yourself, but if you want the extra help go to ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm for some tips on how to steer clear of potentially shady credit repair companies.


7. Don't take a 401(k) loan to pay down debt or make new purchases. If you get laid off, for instance, you'll have to pay the entire debt immediately. Plus, the funds in your 401(k) are protected from creditors but once you pull out cash, it's not.


8. Do lower your expectations when it comes to car loans. You may not be able to get a brand new BMW but you could qualify for a pre-owned Honda Accord.


9. Do file the free application for student aid at fafsa.ed.gov to find out your eligibility for student loans through the federal government as a first step.

Image courtesy of Union-Tribune (Click to enlarge)
Related Posts :

1. 10/17/2008 Market Recap - Another Extremely Volatile Trading Session (Update 1)
2. The Next Meltdown: $950 bn Worth of Outstanding Credit-Card Debt—Much of it toxic

Sources :

1. USA Today: Car dealers demand more cash for down payments, October 17, 2008
2. The Union-Tribune: Credit squeeze literally hits home as card limits, equity lines pared, October 12, 2008

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