How to Manage Debt and Your Credit Score

USAmeriBank Branch Manager Christina Dickson offers tips on managing debt, improving credit rating, building credit for young adults, and purchasing responsibly.

Whether your New Year’s resolution is to improve your credit score or pay off some debts, now is a good time to take a look at your finances. 

Your credit is your financial reputation and it’s important to your financial future that you pay attention to your credit, and show that you can successfully handle your money obligations.

With that in mind, here are some questions we often get from our customers about their credit and how to manage debt:

Q: How much debt is okay to have?

A: Your monthly personal debt payments or revolving credit lines – such as your mortgage, car payment, and credit cards – should not total more than 36 percent of your gross monthly income. By keeping your debt below this level, you will have sufficient funds for day-to-day needs, along with the ability to generate a savings plan both for emergencies and for long-term needs.


Q: What are a few ways I can improve my credit rating?

A: Your payment history makes up 35 percent of your credit score, so paying your bills on time is vital. Consider using online bill pay and auto-pay options to ensure they are paid on time.

Work on getting your credit card balances below 50 percent of what you have available, or pay them down as often as you can. Consider only having one or two, and no more than four cards, but keep the older cards to show history with a lender.

Visa, MasterCard, Discover and American Express are always preferred over store and gas cards by the credit bureaus. Always pay more than the minimum payment for credit cards, and try not to pull your credit score and the details that make it up very often, but do pull it once a year to look for identity theft.


Q: How can students and young adults build credit?

A: For students and young adults, it’s important to build a financial record before thinking about qualifying for such things as a home mortgage. An excellent way to start is to get a secured credit card independently or with a guarantor – where another person, such as a parent, agrees to be responsible for your debt under a contract if you fail to pay.


Q: How can someone take the right steps toward making a big purchase?

A: When thinking about making a big purchase, such as a house, it’s helpful to first see a mortgage advisor, as that person can help you prepare months to years in advance. They’ll give you advice regarding what home you can afford and go over the requirements for obtaining the loan. They can also work with you on a pre-approval, which will make looking for a house much more focused and will make your contract stand out against other offers.  

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

David Hardingham January 28, 2013 at 07:09 PM
The first rule of credit is never put more on a credit card then you have cash you put aside to pay it off each month and you do want a few cards but not to many to start for me I have one that I use for gas one for one for amazon one for best western hotel stay one for overstock which gives me free shipping and 7% back at overstock all have zero annual fees and as we pay then all off each month so no interest either. In fact the only cards we ever ran a balance on was with zero interest. also one way to build credit fast even from a bankruptcy is tying your bad credit to some that really good credit but most people like me are very leery on sharing there good credit as it just as easy to lose you good rating if the person with the bad credit does not change their ways. And credit is so important these days as effects the price of rent your car insurance car loans also well as the ability to buy a house and get zero interest loans.
StopDebtCalls February 20, 2013 at 10:24 AM
If you are getting debt collectors calling you day after day. Go to http://www.StopDebtCalls.org
michael mirra February 20, 2013 at 07:54 PM
I work customer service for a major Amex Company. You would be amazed at how many people miss payment dates by a day or two. There are no grace periods anymore & if people mail it before, or set it up before on the Internet & it gets in after midnight on the due date, they are late. People move & never update the address & when they don't get their statement, they think it's our fault. If people want someone to front them $ to buy their stuff, they had better pay when it's due, or they will lose their credit. If they are more than 30 days late, it gets reported to the credit bureau & then 3-4 years later when they need a mortgage, it's 'our fault' that they didn't meet their financial obligations to pay their debts in a timely manner. When they are three days past due, they have a collection code slapped on the account & the collection dept. in India begins the high pressure calls, non stop till they collect the $. If I get a call from a customer with a collection code, company rules are that I am not permitted to work the acct & MUST immediately transfer the call to the collection department so they can hammer the cust for the $. Pay your bills & don't buy things you can't pay for & you won't get collections up your butt. You also won't screw up your credit score, which can lead to 'other' companies closing down your availability for what's called 'outside credit'
michael mirra February 20, 2013 at 08:05 PM
Don't contact these stop debt calls type places. We can't even talk to them, as they are not legally on the acct. If they get a payment in after 11:59 PM on the due date, it further screws up YOUR credit & YOU get the late fee. These companies are just another middle man skimming $ off the money that changes hands. They don't work for free & they need to get their profit someplace. Believe me, the credit card company isn't giving THEM any $. & isn't settling for less because these vultures are trying to pick your bones. We aren't going to call you any less is you are in collection. The way to stop collection calls is to pay your acct to current, removing any past due. Then you won't be in collections & collections will take your number out of the que.
Alex Standt April 10, 2013 at 09:20 PM
This article was awesome!! Thank you. Being fairly new to the credit repair and credit score arena I am constantly trying to gather as much information as possible to try and keep myself headed in the right general direction. Spending some time on this post has actually given me a lot of great points to think about. In my recent research I have also been able to find some useful information related to this topic when I Googled the credit locker university. This was helpful as well. Thanks again!


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