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Credit Scores

Keep Firm Control of your Unsecured Debt

Credit card debt severely impacts on an individual’s credit score. Figures suggest than in the USA consumers have generally failed to keep control of their spending. What more evidence do you need than the fact that the average credit card debt is over $6,000 and that includes users who always pay off their balances in full each month? If those people were deducted the figure shoots above $15,000.

There is more than one implication in running an unsecured debt like this. Of course the first is that it needs to be repaid at some point. Too many people seem to be only making the minimum payment the credit card company requires before interest at a fairly high rate is applied. The result is that the balance outstanding does not fall to any significant extent. This form of credit is bad news and expensive. If you see yourself in that position and are in full employment with a regular pay check you should investigate a cash loan to pay it off. Installment repayments over a fixed term will gradually reduce and finally eliminate the problem.

Another implication of a large credit card balance is the impact it has one your credit score, especially if you have missed any payments on the due date. That will have a negative impact on your score. In addition if the ratio between what you owe and the available credit you have left isn’t good you will be marked down as well.

Your credit score is used in a number of ways:

  • As an idea of your credit worthiness if you are seeking a mortgage
  • Almost as a reference if you want to rent real estate or take out credit agreements
  • As part of the process if you are applying for a job

Multiple Cards

There is nothing wrong in having credit cards as such, even three or four. It is one way to keep a record of your spending with perhaps one for your general household spending, a second for business expenses and a further one for travel costs. Some will be the advantage of keeping separate accounts though they will need an organized mind to do it. If you can use credit cards responsibly and avoid debt then everything will be fine. If you can establish a good credit history by managing things like this there may also be rewards and promotions from the cards which you will be eligible for.

Indeed if you are able to analyze your regular spending into various categories you will know fairly quickly whether you can benefit from a particular card when a rewards program is announced. As long as you are certain that you will always pay the full statement account at the end of every accounting period then the chargeable interest rate that a company applies to balances become an irrelevance in your selection of a card; you can take the highest if there are other benefits elsewhere.

The Dangers

The dangers of having more than a single card are purely about you and your ability to be organized and self-disciplined. The question you must ask yourself is whether you can keep track of different payment dates because the impact of missing them on a few cards would have a very serious impact on your credit score. It would take a considerable time to repair because credit history entries stay there for seven years though their impact lessens with time.

Where you need to make payments at different times of the month you must be certain that there will be money in your bank checking account to do that.

Temptation is a problem. Just because you have credit it does not mean you have to spend it. You will be in real trouble if you do then find you revert to making minimum payments. Temptation can be controlled by not having so much credit available but if you close accounts that in itself harms your credit score because of that debt-credit availability ratio. The answer is to be aware of yourself and your personal habits. You want to avoid getting into the level of debt the average American faces and if you are already there you must do something about it for your medium to long term well-being.

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Erin Thompson

Erin Thompson spent years managing her own blog about budgeting and debt. Because of that, she has great insights not only about managing spending and borrowing but also about running websites profitably. When she's not writing articles for us, she's traveling and looking for new types of wines to try.
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The content on is for informational and educational purposes only. It is not financial advice and we are not certified financial advisors. strives to keep its information accurate and up to date, but it may differ from actual numbers. We may have financial relationships with companies listed on our site. We may receive compensation for the placement of sponsored products or services. We work hard to write authentic and accurate articles.