Managing Debt

Managing Debt

Use credit intelligently

Good and bad uses for credit

Managing your credit rating

Signs that you owe too much

Use credit intelligently

70 percent of Americans carry a balance on their credit cards

Average balance is over $1,500

Average interest rate is over 16 percent

This is too high!

Try to pay off all credit card purchases by the end of the month - no excuses!

Good and bad uses for credit

Don't use credit for perishables

• Food
• Clothing
• Vacations

Acceptable to use credit for durables

• Autos
• Large appliances
• Home repairs

Fine to use credit for investments

• Education
• Small business
• Home

Use maturity matching when you borrow and invest

Food soon disappears --> pay off all charged perishables by end of month

Autos last a few years --> finance durables over three years or less

Homes last many years --> don't worry about taking out a 30 year mortgage

Managing your credit rating

Check your credit rating with the following large firms

• Equifax 800-685-1111
• Trans Union Corp. 800-916-8800
• Experian (formerly TRW) 800-392-1122

If you find errors in your credit report, the Fair Credit Reporting Act gives you rights to protect and improve your credit history

Signs that you owe too much

• Having any ongoing balance on your credit cards
• Making the minimum payment on credit cards
• Most of your pay goes to debt service
• Using cash advances to pay off other debt
• Receiving calls from collection agencies