Credit Card Debt Management

You know your spending limits and your financial boundaries. You understand whether you are a responsible credit cardholder, so the decision to get more credit cards can only be yours to decide. But there are some definite reasons why you should consider getting several. Yes, too many cards could possibly ding your credit, but a demonstrated history of responsible card management will help balance that out in your creditors’ eyes.

More credit cards can help you be prepared in case of financial emergency and rewards cards can help you earn flights, gifts, cash-back and a host of other perks. Of course, cash can do all that, too.

One of the biggest reasons a person would take out an additional credit card is specifically for business purposes. This eases the task of tracking business spending and can provide more tax-deductible options as well.

It is also a good idea for consumers to keep credit cards from several different companies (Visa, MasterCard, American Express, etc.) Especially if a person travels a lot, this can guarantee their ability to use credit cards to pay just about anywhere.

So when it comes to applying for more credit cards, you may shudder at the thought. But be savvy, be responsible, and shudder no more.

You are Mr. (or Ms.) Popularity. All the credit card companies want to be your friend. You get at least one credit card mailing every day, but in this age of mailbox tampering and identity theft, is this really a good thing? How does one approach the problem of credit card offer overload?

1. Don’t use it as a basis for assumptions about your credit score.

Some people with bad credit believe that more credit card mailings equal a credit score that is on the mend. This is not true. If anything, it indicates that the credit card companies smell an easy buck, someone who may not pay on time or will take out cash advances or any number of other things that would allow the lender to jack up the interest rate.

2. Opt out.

Even if you do have good credit and your offers are targeted more at things like low-interest balance transfers, you shouldn’t be flattered. This mass of mailings is still posing a risk to the safety of your identity and your financial future. You can opt out of receiving these mail offers by calling 1-888-OPT-OUT or by visiting OptOutPrescreen.com. For more information, visit the Direct Marketing Association’s tips for “How To Get Off A Mailing List.” Of course, the Federal Trade Commission has similar detailed information on its site.

When it comes to credit cards — and all marketing materials for that matter — it pays to know your rights. Make it as difficult as possible for strangers to obtain your information or gain an opportunity to apply for credit under your name. If you do receive credit card offers in the mail, remember to use a shredder as a precaution. You might just be stopping yourself or someone else from becoming the victim of identity theft, the fastest growing crime in America.

No more pins and needles. Your life will be a lot less worrisome if you have already been practicing good money management habits, like paying bills on time and spreading debt around without overextending your debt-to-credit ratio. Fair Isaac Corp., that baffling company responsible for the FICO score, is adding a little bit of leniency into the system it uses to determine a person’s credit score. Here are some of the most significant changes, according to Money magazine:

Isolated late payments are less damaging: Any time you make a habit of paying bills late, it’s going to be ugly. However, if you’ve done that only once or twice a while ago, but are in good standing otherwise and have a lengthy credit history (10+ years), you’ll probably be in the clear. “In fact, you could see a one-time boost in your score with the new formula,” Walecia Konrad writes in Money.

Multiple credit inquiries are less damaging: Within a 45-day window, you can undergo several credit inquiries with little or no effect on your credit report. “The change is a reflection of the fact that the average person has more credit accounts and loans today than in the past,” Konrad writes.

Multiple debts? No problem: Rather than determining how many accounts you have, what will be more significant to your credit score is how close those accounts are to being maxed out. Accounts that are nearly maxed out will drop your score by several points, but successfully managing (and not maxing out) a mixed bag of loans and lines of credit will boost your score. Therefore, Konrad recommends spreading debt over several credit cards to keep debt-to-credit ratio down.

At the risk of appearing overly suspicious, are these changes a subtle way to try to boost the economy and lenders’ profits? At any rate, no complaints here. It will be nice to see that late payment on the Kohl’s credit card from 2003 finally drop off the credit report!