5 Ways You Can Take Control of Your Credit

Credit. That word can strike fear in the hearts of men and women alike. Many people don’t truly understand what credit is so they usually don’t know how to control it. Regardless if you have good, bad or average credit, if you don’t know how to manage it, your credit status can easily change. Controlling your credit doesn’t necessarily mean that you need to go out and hire someone to help you do it. There are some things that you can do yourself to gain control of your credit.

1. Don't be so quick to close old accounts.

Many people think that closing credit card and loan accounts is a good way to improve and control your credit. Wait before you close those accounts! Closing credit card accounts is not always the best way to improve your credit. Keep those old accounts open, regardless of the interest rate. The interest rate affects you but it's not something that creditors will necessarily look at, especially if you aren’t carrying a balance in that account. Having old credit accounts shows creditors that you have a long term credit history.

2. Bankruptcy is an option but should be considered carefully.

There was a time when people treated bankruptcy like a quick fix to get rid of large debts and start fresh with a “clean slate” of new credit. This has never been the case. Bankruptcy is a way to get rid of large debts. There are two different forms of bankruptcy. Chapter 13 Bankruptcy is when your debts are consolidated and you can pay off your debts in monthly payments. The benefit of this bankruptcy is that your creditors are still paid, even if it’s less than what you owe. It also offers you a more manageable way to pay off your debts. Chapter 7 Bankruptcy is when all of your debts are wiped completely away. You don’t have to pay any of your creditors. Although both of these may seem like a great way to get rid of debt, bankruptcy will stay on your credit for up to 10 years. While it is possible to rebuild your credit after a bankruptcy, it should be a last resort and researched carefully before you decide to do it.

3. Pay your bills!

This one may seem like a no-brainer, but paying your bills on time is a great way to improve and maintain your credit. Depending on the amount of debt you're in, try to pay more than just the minimum on your credit card and loan balances.

4. When you get credit, get more than one kind.

When most people think about credit, they think about credit cards; however there is a variety of credit out there. Credit cards are considered revolving credit. Revolving credit doesn’t have a fixed number of payments. A car note is an example of installment credit. Installment credit has a fixed number of payments. A mortgage is a loan on a house, condo or townhouse. It’s very similar to installment credit but it’s usually for a really large amount that is typically scheduled to be paid off in 15 or 30 years. It’s good to have a variety of credit. It makes you look better to creditors.

5. Get credit counseling.

Sometimes you need to get the help of a third party to get control over your credit. It’s ok. Don’t be afraid to ask for help. A good credit counselor can work on your behalf to negotiate with your creditors to get control of your debt. These people can be better equipped to convince your creditors to work with you even if your debt has gotten out of control. A word of warning, an irresponsible credit counselor can also cause your credit situation to worsen. Before you enter into a relationship with a credit counselor, do your research. The best way to find out if a credit counselor is good is to talk to people who have used the company. If you don’t know anyone personally, do some research online.