The Quiz
Which group of the following statements best describes your use of credit?
- I always pay all my bills, in full, by their due dates.
- I frequently receive letters from financial institutions offering me pre-approved credit cards.
- I own a house and have a mortgage.
- I keep on top of my mortgage payments, even if it means I don't pay my credit card bill in full once in a while.
- I have never declared bankruptcy.
- I always try to pay off at least the minimum amount on my credit card bill.
- I sometimes spend up to the upper credit limit on my credit card.
- I've applied for a two or more credit cards within the past six months.
- I consolidated all my debts into one debt consolidation loan and am paying it off.
- I am up-to-date on my income taxes and other debts, but am struggling to pay off my student loans.
- I use one credit card to pay off the minimum balance on another.
- I have been turned down for credit within the past two months.
- I frequently use credit to pay for things I can’t afford to buy with cash.
- My bank just raised the rate it's charging me on a loan, based on a credit report issued by a credit bureau.
- I recently declared bankruptcy to help me start all over.
The Answers
If statements one to five describe you best, you're on the right track.
If statements six through 10 describe you best, you may have had a problem, but are acting to correct it:
Paying off at least the minimum on your credit card reassures potential lenders that you're committed to debt repayment. You should aim to pay more than the minimum to save money on interest.
Spending to the upper limit on your cards can affect your credit score, so try not use more than 50 percent of your available credit.
Applying for multiple credit cards within a short period of time may affect your credit report and score negatively. You're better off applying for cards as needed, and really, why do you need so many cards?
Prepaying a debt consolidation loan is a good signal to creditors that you are taking your debts seriously.
If statements 10 to 15 describe you best, you should consider changing your habits.
A plan will help you to take control of your debt. Start by tracking where your money goes, and then prioritizing what to spend your money on. You may have to make some tough choices to cut back on expenses in order to put more of your income towards paying off your debt.